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Holes in the safety net: Medicaid falls short just as some need it most

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For weeks now, 2-year-old Ashley Soto's hair has been falling out in clumps and bunches.

Doctors at the Maple City Health Care Center, a neighborhood clinic where the toddler's family receives most care, couldn’t diagnose the problem. The child needed to see a specialist, but no local dermatologist would agree to accept Medicaid, the government’s safety net plan. Instead, Antonia Mejorado, 33, has to drive nearly two hours to see a dermatologist willing to treat her daughter's potentially serious illness.

“There is not a doctor around here that takes Medicaid,” said Mejorado, whose husband, Osvaldo Soto, 33, has recently seen his hours cut to almost nothing at a local mechanic shop.

When workers get laid off and lose their health insurance, the medical insurance plan that covers some 60 million poor, elderly and disabled people, is a critical safety net. At no time is Medicaid more needed than during an economic downturn. Yet it’s also precisely during a recession that Medicaid’s shortcomings are clearest.

Medicaid, the second-largest item in most state budgets, after education, is funded jointly by the states and the federal government, with the federal government matching state dollars by as much as 76 cents to every 24 cents of state money. Wealthier states bear a bigger share of their Medicaid costs than poorer states do.

But in a recession, state revenues sink at the very time that more unemployed people sign up for Medicaid.

Over the past year, enrollment in Arizona, for example, has increased by 13 percent. It has jumped by 100,000 in the last four months alone. Medicaid enrollment in Alabama has been increasing at 5,000 per month for the last six months. In Indiana, enrollment rose by more than 17,000 between January and April, up about 9 percent from the previous year. In the stimulus bill passed last January, Congress rushed $30 billion to the states to keep Medicaid afloat, with an increase in the normal federal matching fund formula.

The Recovery Act’s additional Medicaid money accounts for nearly two-thirds of all the stimulus funds going to the states in the current fiscal year, according to the Government Accountability Office.

But even as states get their Medicaid windfall, some needy people complain that they’re not getting care under the program, because they are not eligible due to their states’ restrictive rules, or because they can’t get to see a doctor even though they are signed up for Medicaid.

About one in five physicians say they are not accepting any new Medicaid patients, largely because of low payments or delays in reimbursements, according to the Center for Studying Health System Change in Washington, D.C.

‘A lot of things are scary’

Ashley Soto, the 2-year-old with unexplained hair loss, is eligible for Medicaid because she was born in this country. The child’s parents, who are from Mexico, are not. Her mother worries that a serious diagnosis could mean more long days traveling the 75 miles between Goshen and Michigan City, Ind.

“A lot of things are scary — not having a doctor nearby in case something happens to her,” said Mejorado, who is also the mother of three other children ages 17, 14 and 14 months.

The problem is that low reimbursements and complicated, time-consuming paperwork have left many physicians wary of the program, noted Cindy Hayes, director of physician services for Elkhart General Hospital in nearby Elkhart, Ind. Some clinics in the region have stopped accepting Medicaid completely, while others have waiting lists for appointments. At Elkhart General, hospital officials have worked hard to reopen Medicaid access to pregnant women who need prenatal care, plus labor and delivery services, she said.

“We rely on reimbursements from other payers to compensate for Medicaid,” said Hayes. “We’re taking our fair share.”

Some doctors who have stopped accepting Medicaid patients say that it’s not that they don’t want to see them, it’s that they can’t afford to anymore.

Medicaid reimbursement rates can be as much as 40 percent lower than those for private insurance, according to John Holohan, the director of the Health Policy Research Center at The Urban Institute, a Washington think tank.

Michigan, for example, recently announced a 4 percent cut in payments to doctors, dentists and hospitals who treat Medicaid patients. The move prompted a new exodus of doctors who’ve decided to limit care.

"I love what I do, but I can't keep getting cuts from Medicaid," Dr. John Pfenninger, a family physician in Midland, Mich., told the Associated Press. "It's time to say no. "

Eligibility varies from state to state

Under current law, Medicaid eligibility varies from one state to another. In several states, eligibility is set at less than 100 percent of the federal poverty line, which is $22,050 for a family of four. Poor children are eligible for Medicaid; their parents often aren’t. And childless adults are usually ineligible.

Dwindling revenues have led more than a dozen states to cut payments to doctors and hospitals or to propose cutting eligibility or benefits. Only the injection of the stimulus money has kept the states from cutting even deeper.

But the states face a “cliff” when the Medicaid stimulus money ends on Dec. 31, 2010 – and state revenues may not have resumed growing by that time.

“You are now seeing in some states the loss of 40 percent of their tax revenue, and if we don’t see start to see an upturn pretty quickly, then you very well could see a devastating impact on Medicaid programs next year,” said Alabama Medicaid Commissioner Carol Steckel, who serves as the chair of the National Association of State Medicaid Directors.

Without a dramatic improvement in economic growth in the next 12 months, Steckel said, “You’re going to have the perfect storm of the loss of the stimulus money and an economy that hasn’t made its way out of the basement yet.”

One of that things that most worries state Medicaid directors, says Steckel, is the time lag between the unemployment rate and increase in Medicaid enrollment.

“For unemployed adults, it generally takes them about three to six months to work their way through COBRA (the law that allows unemployed people to temporarily take part in their ex-employer’s health plan) and unemployment insurance. And then they start popping up on our rolls. Then it takes another six to 18 months for them to get re-employed and to fall off our rolls after they get a job where they are getting employment-based insurance.”

Fight to fix Medicaid

Even though it has gotten relatively little attention, fixing Medicaid is at the heart of the health insurance bills that Congress is debating.

After all, whatever else “health care reform” might mean, insuring the uninsured has been the reformers’ perennial demand. And since most of the uninsured are low-income people, expanding Medicaid is the most efficient way to help the uninsured.

Congress seems likely to expand Medicaid eligibility nationwide, perhaps up to 150 percent of the federal poverty line, or $33,075, for a family of four.

This would cost about $500 billion over 10 years and would increase enrollment by 20 million people, or by about a third.

Under the House Democrats’ bill, the newly eligible people would be paid for entirely by the federal government. The Senate Finance Committee has yet to unveil its bill, but its first proposal, released in May, was for the federal government to pay for all the newly eligible for Medicaid beneficiaries through 2015, and then phase in the states paying their costs according to the current matching fund formula. Congress is also likely to change the matching fund formula so that federal dollars would automatically start flowing to states as soon as a recession hit, rather than waiting for Congress to act.

Divisive issue

Increasing Medicaid eligibility is a contentious topic for governors and state Medicaid directors.

Colorado’s Democratic Gov. Bill Ritter told the Denver Post that at a recent meeting of several governors with Health and Human Services Secretary (and former Kansas governor) Kathleen Sebelius, “Our only point was that a significant Medicaid expansion should not operate as an unfunded mandate for the states.”

While some states are supportive of a wider Medicaid reach, others don’t think their budgets could absorb any increase, says Ann Kohler, director of the National Association of State Medicaid Directors.

“For states, that’s the biggest question on this whole health care reform: how is the match going to come?” said Carolyn Ingram, who runs New Mexico Medicaid program. “The House bill gives a 100 percent match to the states which is great, but I’m not sure the Senate bill is going to be that generous.”

Steckel argues that the added burden of paying for more Medicaid beneficiaries would be more than some states could bear.

“Even with probably one of the most bare-bones Medicaid programs in the nation on both eligibility and benefits, we still are consuming 30 percent of our state’s general fund,” Steckel said of Alabama's program. “And that is at the expense of other necessary and vital services — such as corrections, public safety, mental health, public health, human resources. All of those have to absorb bigger cuts because of the Medicaid budget.”

Steckel says she fears states will be strained to the point of deciding they can’t support the federal Medicaid program any longer and might even opt out.

“Congress needs to allow states the ability to manage their programs in the most efficient manner,” Steckel said. “The surest way of not accomplishing that goal is to put mandates on the states that require us to do things that may not make sense for a particular state.”

In Alabama, an income of 150 percent of the federal poverty level goes farther than in New York, so residents there would be more able to afford health insurance. "This is why there should be a recognition of the differences between the states in health reform,” she said.

But Ingram said that the comprehensive health insurance reform that Congress is planning will help the states “because you will start to see a smaller amount of uninsured people. It’s how Congress is going to implement it that we’re watching very carefully.”

If Congress enacts an overhaul of health insurance which includes a requirement that all Americans must have insurance, Ingram said, “You’re going to see people coming out of the woodwork to get that coverage."

For states, it will make all the difference if the federal government — not state taxpayers — pays those new costs.