Medicaid budget woes expected to persist

The program's growth continues to squeeze states, leading to new cuts to physician payments and patient eligibility.

By Joel B. Finkelstein, AMNews staff. Nov. 8, 2004.

Washington -- Medicaid reform could be on the table next year, but any changes Congress makes to the program are unlikely to forestall cuts in several states, experts said.

States have been struggling in recent years with rising Medicaid costs. Congress helped out this year with an additional $10 billion. Those augmented federal matching funds ran out June 30, and new federal money for the program seems doubtful in the near future, they said.

Medicaid is also eating up an increasing share of state money. It now makes up more than 20% of the average state's budget, according to an October report from the National Assn. of State Budget Officers.

Spending on the program continues to grow by around 8% a year on average, while total state spending grows an average of 4.5%. The report also shows that 23 states had Medicaid shortfalls in 2003, and this year 18 will have losses, adding up to a cumulative $7 billion gap.

Another recent report, published by the Kaiser Commission on Medicaid and the Uninsured, shows that next year more states plan to cut or freeze reimbursement to physicians than any other group, including hospitals, nursing homes and managed care organizations. This year, 42 states cut or froze physician payments.

Efforts to reduce spending growth have been somewhat successful, but states also have had to deal with the effects of the recession, which has led to an increase in the Medicaid-eligible population.

Without help from the federal government, states will continue to trim their Medicaid programs to bring spending growth down, and that means more cuts to physician rates, said Barbara Lyons, the Kaiser Commission's deputy director.