Recession Drove Many to Medicaid Last Year

By KEVIN SACK

Joblessness and the accompanying loss of health benefits drove an additional 3.7 million people into the Medicaid program last year, the largest single-year increase since the early days of the government insurance plan, according to an annual survey by the Kaiser Family Foundation.

Enrollment in the program, which provides comprehensive coverage to the low-income uninsured, grew by 8.2 percent from December 2008 to December 2009, the second-largest rate of increase in the 10 years that Kaiser has conducted the survey. There were 48.5 million people on Medicaid at the end of 2009, or about one of every six Americans.

Every state showed enrollment growth, with nine above 15 percent and Nevada and Wisconsin above 20 percent.

Those kinds of increases exact a heavy toll on state budgets, as states share the cost of the Medicaid program with the federal government. The foundation, an independent nonprofit group that conducts research on health policy, found that spending on Medicaid grew 8.8 percent in 2009, the largest increase since 2002.

“We do have horrific pressures on the Medicaid program,” said Carol A. Herrmann-Steckel, Alabama’s Medicaid commissioner.

Last year’s spending growth was well above the 6.3 percent increase projected by states at the start of their fiscal years, explaining why virtually every state’s program ran a deficit. And it provides a cautionary note for states that have projected a slowed rate of spending growth — 7.4 percent — for the current fiscal year.

The only hopeful news found by the survey was that the growth in enrollment slowed considerably in the second half of 2009. Yet, two-thirds of the Medicaid officials surveyed said they thought this year’s appropriations might not be enough to cover continuing enrollment growth.

States have been buffered from the harshest recessionary effects of the Medicaid explosion by a series of Congressional appropriations that have temporarily increased the federal share of spending. The stimulus package included $87 billion in Medicaid relief for states, and Congress last month extended the assistance, at a reduced level, through June.

At that point, absent further legislation, the state and federal shares will revert to their historical ratios. If the economy does not recover enough to reverse the enrollment growth, states fear they could be left with an unmanageable burden on their already inadequate revenues. Unlike the federal government, states must balance their budgets.

Without the assistance from Washington, said Vernon K. Smith, a principal with Health Management Associates, which conducted the survey for Kaiser, “we would have seen cuts on a scale that we’ve never seen before.”

Adding to the anxiety in state capitals is an expected surge in Medicaid enrollment due to a vast expansion of eligibility for the program under the new health care law. Starting in 2014, the expansion will make the program available to able-bodied adults with incomes up to 133 percent of the federal poverty level (currently $14,404 for a single adult and $29,326 for a family of four). Today, Medicaid, which was enacted in 1965, primarily serves children, pregnant women and the aged and disabled.

The government expects the Medicaid expansion to account for about half of the 32 million uninsured people who are projected to gain coverage because of the new law.

Despite the enhanced federal aid for Medicaid last year, virtually every state made cuts to benefit levels or provider payments in order to balance budgets. As a condition of receiving stimulus money, states were prohibited from lowering eligibility thresholds, which they are allowed to set within federal parameters.

Instead, 39 states cut or froze payments to providers, including 20 states that reduced rates for doctors. That can have the effect of discouraging physicians from accepting Medicaid patients. Twenty states eliminated or restricted benefits like dentistry, imaging services and certain medical equipment. Further cuts are anticipated this year in many states.

States are running out of options for cuts that produce real savings, Mr. Smith said, and are increasingly turning to efficiencies like quality improvements, managed care and computerization.

Enrollment in Medicaid declined as recently as 2006 but began a rapid ascent the next year as the economic downturn began and the unemployment rate started to double.

There is often a lag between the start of a recession and its worst effects on safety net programs. Last year’s increases in enrollment and the rate of growth in enrollment were nearly double that of 2008, the survey found. Over three years, Medicaid enrollment has grown by 6.2 million.

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Saturday, October 2, 2010