States Looking at Medicaid Service Levels for Savings

January 24, 2011

States can offer whatever they want, and the feds will pick up most of the cost. That’s been how Medicaid (health care for low-income individuals) has worked for some time, and it’s no surprise that the incentive is for more services, higher expenses, and fast cost growth. As a Bloomberg News article notes, Medicaid is about 22% of state spending and a stimulus-enacted higher federal share ends on June 30. The Kaiser Foundation finds that unless states change service levels, providing the same level of service may mean states have to cough up 25% more in money.

The Bloomberg article goes through some of the cuts on the table. Washington is paring back vision and hearing benefits. California cut back on acupuncture, chiropractic, and dental services. Arizona will be reducing payments to doctors and hospitals, and stopped paying for organ transplants. New York wants to make greater use of clinics rather than hospitals. Florida and Texas are pushing for more flexibility in using their federal funds.

The Bloomberg article sums up:

States face the prospect of enrolling 16 million more people in Medicaid beginning in 2014 under the Patient Protection and Affordable Care Act, the health-care law Obama signed in March. It expands coverage to include certain childless adults under 65, according to Foley & Lardner LLP, a law firm in Milwaukee. The federal government will pay 100 percent of the increased expense for the first three years. California, which expects 1.6 million people added to Medi-Cal by the new law, estimates the expansion will cost $3.5 billion a year in 2020, when the federal subsidy drops to 90 percent, according H.D. Palmer, a Finance Department spokesman.

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