Congress, states seek ways to curtail Medicaid spending

Physician payment cuts and freezes, and a growing shift toward managed care can be expected in many states next year.

By Joel B. Finkelstein, AMNews correspondent. Nov. 14, 2005.

Washington -- States are showing early signs of economic recovery, but that isn't likely to save financially struggling Medicaid programs from the budget knife, says a new survey by the Kaiser Family Foundation.

Physicians in 31 states can expect payment freezes or cuts next year, the survey found. Other cost-containment efforts are expected to make doctors' lives more difficult.

Although state Medicaid officials are more optimistic than they have been in past years, they remain worried about the program's long-term fiscal sustainability, the Kaiser survey found. Fueling that concern are billions in federal spending growth reductions, health care cost growth, demographic trends and the erosion of private health insurance.

Bills recently passed by committees in the House and Senate outline what steps the federal government will take to curtail Medicaid spending. The House measure would cut expected Medicaid spending growth by nearly $10 billion over five years. But Medicaid would still continue to grow 7% a year at an additional cost of $66 billion over five years, according to Rep. Joe Barton (R, Texas), chair of the House Energy and Commerce Committee.

The measure passed by the Senate Finance Committee also would reduce federal spending growth by more than $10 million over five years but would take some of those savings from Medicare.

Meanwhile, more than half the states also are facing reductions to the share of matching funds they receive from the federal government.