Governors-elect focus on drug costs, Medicaid funds

States are unlikely to have money to do more than hold the line on existing programs, analysts say.

By Joel B. Finkelstein, amednews staff. Dec. 9, 2002.

Health care issues took a backseat to concerns about the economy in last month's gubernatorial races, but most governors-elect still include health care reforms among their goals for next year.

An analysis of campaign promises compiled by the National Academy for State Health Policy shows that most governors will stick to health care initiatives that either save money or are relatively inexpensive.

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Physicians can expect that new and incumbent governors will focus on bringing down the cost of prescription drugs, fitting Medicaid and the State Children's Health Insurance Program into shrinking budgets, and creating market-based initiatives, such as tax credits, to help more residents afford health insurance.

"The economy impacted [those campaigning for governorships] in two ways," said Mimi Marchev, senior policy analyst at the academy. "One, their major concern is the economy, and so they're not talking about new initiatives as much as they might otherwise have, and, two, in some ways they are going to be struggling to hold steady now, as opposed to really being able to take a hard look at expanding coverage."

Prescription drug costs

As on the federal level, a main focus in the states has been and will continue to be making prescription drugs affordable for Medicare enrollees and cutting Medicaid prescription costs.

But due to economic considerations, past efforts to create subsidy programs for seniors likely will give way to less-costly bulk purchasing and pharmacy benefit programs in most states, said Richard Cauchi, a health care program manager with the National Conference of State Legislatures.

15 governors-elect plan to continue or expand Medicaid prescription drug programs.

Governors-elect in 15 states have proposed either new strategies or the continuation and expansion of existing programs to address the high costs of prescription drugs both for Medicaid pharmacy programs and for low-income seniors without drug benefits.

Proposals range from promoting the use of drug-company-sponsored discount cards to subsidy programs. Middle-of-the-road proposals include expanding Medicaid to cover some drug costs for those who are not normally eligible, such as low-income seniors, and setting up purchasing pools to negotiate lower prices.

For example, returning Gov. John Rowland of Connecticut and Gov.-elect Ed Rendell in Pennsylvania support the continuation of prescription drug programs for low-income seniors in their states. They also both propose using Medicaid waivers to expand these programs to more patients.

Funding for Medicaid and SCHIP is expected to continue to pose a problem for many governors next year.

If the last recession is any indicator, new and returning governors may be forced to resort to new taxes to buoy their Medicaid budgets, said Jocelyn Guyer, senior policy analyst with the Kaiser Commission on Medicaid and the Uninsured.

Cuts mean less federal money

Many states have considered deep cuts to Medicaid to shore up their budgets. But implementing such reductions would mean loss of federal matching dollars. "There will still be cuts, just not as deep as originally considered because of the loss of federal dollars," she predicted.

Some governors-elect said they want to lobby the federal government to give the states more money to support their Medicaid programs. SCHIP programs are also facing steep funding reductions over the next couple of years, and many states lost their unspent funds this year. Legislation to stop the cuts failed in Congress.

4 incoming governors say they want to increase Medicaid physician reimbursement.

These funding issues will come into play as many new and returning governors attempt to implement Medicaid and SCHIP initiatives proposed during their campaigns.

For example, the governor-elect of Massachusetts, Mitt Romney, wants to restore coverage to 50,000 people cut from Medicaid this year.

Others offered new proposals to expand Medicaid and SCHIP or to pay for the programs. Included on that list are the new governors of Arizona, Arkansas, Illinois, Iowa, New Mexico, Pennsylvania, South Carolina and Wisconsin.

Medicaid waivers, which give states more flexibility in how they administer their programs, seem likely to be a popular way to expand Medicaid to more uninsured people. But increasing Medicaid rolls often means cutting services, although sometimes states can use leftover money from their SCHIP programs to subsidize Medicaid expansions.

A few incoming governors -- those in New Mexico, Pennsylvania, South Carolina and Vermont -- said they wanted to increase Medicaid reimbursement to participating doctors to ensure good access to care for enrollees.

Several governors-elect are proposing further increasing taxes on cigarettes or otherwise making use of funds from the tobacco settlement to help pay for their health care programs.

States are also likely to pursue market-based health reforms, such as medical savings accounts, insurance purchasing pools for small employers and defined-contribution programs, in order to improve health care accessibility, Cauchi said.

There has been little movement on the uninsured issue in Washington. But many governors hope to expand Medicaid and other state health care programs to bring in more of the working poor. Others believe that creation of market-based approaches, such as tax incentives to employers, would improve access.

More creative approaches include that of Arkansas Gov. Mike Huckabee, who seeks a federal Medicaid waiver to let employers buy into the program, and Maine's Gov.-elect John Baldacci, who wants to get federal dollars to help low-income residents pay their health insurance premiums.

Runaway premiums for medical liability insurance also will force many states' hands if the federal government fails to pass tort reform legislation early in the year. In Massachusetts, Romney has proposed excluding punitive damage awards for medical liability suits. Texas Gov. Rick Perry wants caps on noneconomic damages and trial lawyers' contingency fees.