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Beware of Medicaid Expansion Pitfalls

 |  By HealthLeaders Media Staff  
   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.

Medicaid beneficiaries don't have the powerful lobbying groups that other population segments enjoy and the general public is not as offended when programs for the poor are cut, though they are outraged when senior programs are sliced.

Maybe it's because most Americans expect they will grow old, but they don't think they'll ever need Medicaid.

If Medicaid expansion is a part of the final health reform plan, Congress will need to create long-term (if not permanent) additional funding to help states pay for the new Medicaid beneficiaries.

The House reform bill includes $23.5 billion in short-term assistance to help states cover Medicaid costs because of rising unemployment. Plus, states received a huge chunk of the federal stimulus money this year to help with Medicaid funding. These are short-term fixes.

If Congress decides to extend Medicaid eligibility but not include long-range Medicaid funding, don't be surprised if states return to Medicaid cuts as a way to bridge budgetary gaps once the federal seed funding dries up. Also expect health insurers to question whether Medicaid is worth the money, and doctors and hospitals to start rethinking whether they can continue to lose money by accepting Medicaid beneficiaries.

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