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Beware of Medicaid Expansion Pitfalls

Les Masterson, for HealthLeaders Media, November 18, 2009

Medicaid expansion as a vehicle to insure more Americans is seen by many as a compromise to the public insurance plan.

Supporters of the move think expanding to the lower middle class is a way to provide coverage to millions of Americans, while not creating a government plan. Plus, Medicaid programs already know how to reach out to at-risk populations, including those who have little or no experience with the healthcare system maze. It's only natural to allow those plans to take in lower-middle class families.

Margaret A. Murray, executive director of the Association of Community Affiliated Plans, which represents 45 nonprofit safety net plans that serve 7 million enrollees, says safety-net plans already understand the "unique needs of the low-income population." The plans offer programs targeted to those individuals, such as health literacy, multi-lingual staff, and transportation services to doctor appointments.

But expanding Medicaid programs isn't a cure-all—especially if permanent federal dollars aren't involved.

For instance, just over the past week, two states proposed making cuts to their Medicaid programs as a way to help bridge budgetary gaps.

In Massachusetts, the state may require Medicaid recipients to pay more for visits to specialists, require prior authorization in order to receive psychiatric medications, and limit dental care to cleanings, X-rays, and emergency services. The state is doing this as a way to make up part of the $307 million shortfall in the state's MassHealth program.

The federal government picks up 62% of the program's costs, so MassHealth needs to cut about $117 million. More than 1.2 million residents are covered by Medicaid, which is up 115,000 from a year ago, mostly because of the state's health reform program that requires all Bay State residents to have health insurance.

But it's not only Medicaid beneficiaries who are facing uncertain times. Indiana announced last week that it plans to cut Medicaid payments to hospitals by 5% as a way to deal with the state's budget problems. The move would save $10.6 million.

In my column last week, I predicted that Medicaid expansion would be part of health reform and I still think Congress will view expansion as a better alternative than creating a public option. The feds will then be able to pass the coverage issue onto the states, while providing seed money to help them out for the next few years.

But federal policymakers can't think short-term. This past week's events are a reminder that Medicaid is often the program that states cut during difficult times.

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