Health On The Hill Transcript: With State Fiscal Pressures Mounting, Medicaid Battle Looms

As state fiscal pressures mount, governors are asking Washington to allow them to reduce their Medicaid rolls, something that’s barred under the health care law. Democrats generally prefer to give the states more federal money to help with Medicaid costs, but House Republicans are unlikely to support that, citing deficit concerns.

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JACKIE JUDD: Good day. This is Health on the Hill. I’m Jackie Judd. Tensions are escalating between many states and the federal government over Medicaid, with governors arguing the program has simply become too expensive. This comes at a time when more people are in need of coverage, and additionally millions more will begin joining Medicaid beginning in 2014 as part of the health care reform law.

Here to discuss the pressures the states are facing and the possible response of the administration and Congress are Julie Appleby and Marilyn Werber Serafini, both of Kaiser Health News. Welcome to you both.

Julie, describe generally first the kinds of pressures that the states are facing in these economic times from Medicaid.

JULIE APPLEBY: The states have had a rough couple of years, as you know. Because of the recession, the revenues are down, and some folks say now that they are facing the worst year since the Great Depression coming up because they not only have lower revenues as they did, lower than they did before the recession, but also now the stimulus funds are ending and those were funds that came from the federal government to help them with their programs, including Medicaid.

So, they are really up against the wall and because Medicaid and other health programs are generally the first or second largest part of the spending in the states, those programs are really affecting the budgets and those are the ones that the states are looking at to target to try to make some cuts.

JACKIE JUDD: And the governor of Arizona has asked the federal government for a waiver to allow her to shrink the Medicaid rolls. Walk us through that and is it representative of what other governors may be coming to Washington to ask for?

JULIE APPLEBY: Well, the money came with some strings attached – both money from the stimulus program and from the federal health care law in order to pay for Medicaid – and they said you cannot reduce eligibility in Medicaid, so that was a string that was attached. Arizona would like to have that waived. They are saying if they don’t have that waived, they are a billion dollars short. There is no more stimulus money coming in, and they are going to have to make deeper cuts to education or other programs. So, Arizona has asked to remove 280,000 people from their Medicaid rolls, which is not allowed under these rules.
We don’t know yet if other states are going to follow suit, but lots of folks think that they will and that they may ask for these kinds of cutbacks.

JACKIE JUDD: And other states, short of removing people from Medicaid, they are looking at ways to reduce services.

JULIE APPLEBY: Right. They can do that. They can reduce services and they can reduce payments to providers. Those are about their only two options. So some states, for example, California wants to limit to 10 the number of doctor visits Medicaid patients can have in a year and six, the number of prescription drugs they can get in a month.

South Carolina wants to cut off hospice care for dying patients. They just can’t afford to offer it anymore. Other states, like Washington State is talking about ending a program that supplied nearly 60,000 folks with health insurance, they were folks who didn’t quite have the income to meet Medicaid requirements but couldn’t afford it on their own, so the state is talking about cutting that program as well.

JACKIE JUDD: Marilyn has the federal government, the administration, shown its hand yet in how it might respond to the kind of request it has received from Arizona?

MARILYN WERBER SERAFINI: What is significant here is what the administration has not said yet or may not say at all. The administration, for example, has not asked officially to continue the stimulus money to continue to give the states some extra help with Medicaid, and what they also have not done is they have not said to the states, we are sympathetic and we will go ahead and support you, trimming back your Medicaid rolls or your Medicaid eligibility.

There is a lot of concern amongst supporters of the new health care law, that if you cut back on eligibility now and you decrease the number of people covered by Medicaid at this point, that come 2014 when an estimated 16 million people will be added to Medicaid that that’s going to make it very hard for states to make that jump from lower rolls to cover the new population.

JACKIE JUDD: And so is the silence from the administration being interpreted by state officials that they are not going to be getting the kind of latitude that some are asking for?

MARILYN WERBER SERAFINI: Well, states right now are proceeding as if they are not going to get help.

JACKIE JUDD: And CMS, the agency inside of Department of Health and Human Services that runs Medicaid, are they giving states any advice about, “look at ways to reduce your costs?”

MARILYN WERBER SERAFINI: That is exactly what they are doing. When I asked the CMS head this last week about whether they would consider easing up, loosening up these restrictions on the states, these eligibility restrictions, the response was not yes or no but it was well, we are going to tell the states, “here is what you can do to reduce your costs and that will save you money. Here is how we will share with you best practices, such as ways in which to reduce hospital admissions.” And this is the focus right now for HHS to help the states.

JACKIE JUDD: And what is the sense from Capitol Hill from Democratic leaders and Republican leaders about what Congress may or may not do?

MARILYN WERBER SERAFINI: Well, I had conversations last week with Senator Baucus, who is the chairman of the Senate Finance Committee, and with Senator Harkin, who is the Chairman of the Senate Health Committee, those are the two main committees that have jurisdiction over health care, and both of them were very sympathetic to the states on this issue. They are concerned about not reducing Medicaid eligibility, Medicaid enrollment at the states, but there is no doubt that Democrats on Capitol Hill want to continue the stimulus funding to help the states.

JACKIE JUDD: Beyond June.

MARILYN WERBER SERAFINI: Beyond June to help them get to 2014 when really everything changes. The problem with that is that the House is now controlled by Republicans and their top effort is to decrease the budget deficit. So, those two priorities don’t go hand in hand.

JACKIE JUDD: Julie is there any indication that the states may try to unilaterally push back, for example yesterday we had the very significant federal court ruling declaring the new reform law unconstitutional. Is there a sense that governors may try to go their own way to see if they could push back?

JULIE APPLEBY: I think some states will slow down, but for the most part states are moving forward with implementation. There is some debate over the court ruling and what affect that will have, but mostly states are saying we have got to move forward because these cases are going to go to the Supreme Court.

That might not happen until 2013 or 2014, and they have got to have a lot of things in place by 2013, so if they stop now and don’t do anything they are that much further behind in 2013.

JACKIE JUDD: Okay, thank you both so much, Julie Appleby, Marilyn Werber Serafini, I appreciate it. 

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Medicaid States The Health Law