In health-care history, 2012 will be remembered for the U.S. Supreme Court's
upcoming decision on the Obama administration's health overhaul. But in the
states, 2012 will likely be remembered less as an historic turning point than
as a gradual continuation of their longstanding struggles to get Medicaid
costs under control.That's not to say the states aren't watching the Supreme
Court closely. The case set to be heard in March and decided in June was
brought by 26 states who argued the federal law's "individual mandate," as
well as a massive expansion of Medicaid in 2014, were unconstitutional. While
the outcome could have long-term consequences for states, it likely won't
change their most pressing short-term budget considerations.
And those considerations are huge. Continuing sluggishness in the economy means that Medicaid rolls are still rising. But with the federal stimulus program over, support from Washington is no longer going up along with enrollments. The result is that Medicaid spending is ballooning, despite deep cuts states have made over the past three years to make the federal-state health insurance program for the poor less and less generous.
Two years ago, Medicaid eclipsed K-12 education as the most expensive item in state budgets. Since then, it has only kept growing. Medicaid now comprises 24 percent of state budgets, when federal funds are counted. That's up from 22 percent last year, according to the National Association of State Budget Officers. The upward spiral seems to be continuing. Even as states get ready to write their budgets for fiscal year 2013, which starts in July in most states, half of them expect to be wrestling with Medicaid shortfalls in their 2012 budgets, according to a survey by the Kaiser Family Foundation.
Making the job for fiscal 2013 even more difficult for states are new federal restrictions and an increasing number of court rulings that limit states' options for trimming their programs. Recent cuts have run so deep that they are pushing the limits of what health care providers and patient advocates will tolerate without seeking court review. That's especially true in Western states, where the 9th U.S. Circuit Court of Appeals has been halting Medicaid cuts and ordering states to spend a year or more to study the issue and hold public hearings.
Other restrictions on states come from the Affordable Care Act, which prevents states from doing anything that would lower enrollment. In addition, a new federal rule proposed late last year would require states to produce data showing that cuts to hospital and doctor fees won't make it harder for Medicaid patients to get the care they need.
One state's woes
This wall of restrictions is all too familiar in Washington State, where lawmakers are grappling with painful cuts aimed at closing a $2 billion budget gap. In a special budget session last November, Democratic Governor Christine Gregoire proposed a list of controversial Medicaid cuts, including terminating what is known as a "lifeline" medical program for some 22,000 disabled adults. She also proposed limiting the use of brand-name prescription drugs; eliminating coverage for over-the-counter drugs and adult dental services; slashing payments to small hospitals that treat a large percentage of uninsured patients; and defunding language interpreters who serve 70,000
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