fiscal responsibility between states and the federal government outlined in
the Constitution. The Obama administration says the requirement is well within
the federal government's power. Since the severability question only applies
to the mandate, the judges could decide to uphold or reject the Medicaid
expansion, regardless of what they decide on the mandate.
The 1965 federal Medicaid law only requires states to cover certain health care services. Those services include pregnancy and child birth-related services, pediatric care, hospitalization (except for mental illness), regular check-ups and long-term care for the elderly and disabled. Over the years, many states added optional services such as dental and vision, mental health, and a variety of others such as HIV therapies, hospice care, podiatry and occupational and speech therapy.
Since the Great Recession triggered a state fiscal crisis in 2009, many states have cut those optional benefits. Tennessee ended coverage of adult acne medicine. North Carolina stopped covering eye exams and glasses for adults. Massachusetts no longer covers dentures.
As a result, many states now have few places left to turn for savings but to cut the fees they pay doctors, hospitals and other health care providers in the coming budget year. At least 33 states cut provider fees in their 2012 budgets, according to a report by the National Association of Budget Officers; even more are expected to do so this year.
But states can cut hospital and doctor fees only so much without ending up in court --- a trend that has accelerated in recent years as health care providers claim that state budget cuts are making it impossible to keep their doors open. Patients, too, say there aren't enough doctors willing to take Medicaid to provide the care they need.
While the federal Medicaid statute requires states to set reimbursement rates "sufficient to enlist enough providers" so that health care for the poor is comparable to the care given to people with private health insurance, the law provides no standards for fee-setting. The federal government has so far left the calculation up to states.
A proposed federal rule published last April, however, would for the first time require states to show that lower rates will not make it harder for Medicaid patients to get doctor's appointments. According to Matt Salo, executive director of the National Association of Medicaid Directors, the new rule calls for extensive studies before a state can reduce provider fees --- studies he says most Medicaid agencies lack the resources to carry out.
The issue will also come before the U.S. Supreme Court, in a case that has been overshadowed by the challenge to Obama's health care overhaul but may be just as important from the states' perspective. In a decision also expected this June, the high court will determine whether individuals can sue states for failure to comply with the federal Medicaid law if they cut provider fees too deeply.
In recent years, successful lawsuits against state Medicaid programs have been most prevalent in states in the U.S. Court of Appeals for the Ninth Circuit: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington. But in the 45 years since the Medicaid law was enacted, legal experts say that nearly every state has had at least one Medicaid budget cut stopped because of successful lawsuits by patients, health care providers and other advocates.
As legislative sessions get started this year, a large number of states will have to address holes in their 2012 Medicaid budgets before taking on 2013 budgets.
California Governor Jerry Brown, a Democrat, tried to save $145 million last year by eliminating an adult day care program that was generally agreed to have kept many seniors and people with disabilities out of costly nursing homes. In November, a successful lawsuit by advocates for the disabled forced the state to put back $85 million for a scaled-down program. Those savings will have to be found elsewhere.
North Carolina Governor Bev Perdue, a Democrat, is battling Republican lawmakers over a nearly $150 million projected shortfall in the state's Medicaid budget. Agency officials say that unless lawmakers come up with the needed funds, they will have to cut optional services such as hospice and mental health care, and possibly reduce fees to Medicaid doctors by as much as 20 percent.
In Maine, Republican Governor Paul LePage is proposing controversial cuts because the state already is spending $220 million more than its two-year budget calls for. His solution: elimination of a program that serves 65,000 childless adults, including 19- and 20-year olds. He also wants to make it harder for parents to qualify for Medicaid and do away with adult dental coverage and other optional benefits.
But the governor is having a hard time selling his ideas even to fellow Republicans. If the GOP-controlled legislature approves the cuts, the governor's next battle will be with the federal government. Only a few states have been allowed to scale back the number of Medicaid beneficiaries, even when their programs are more expansive than the Medicaid law requires.
If the Affordable Care Act survives its high court test in June, the federal government plans to pay the full cost of Medicaid coverage for most of the low-income adults whom states are cutting from the rolls --- but not until 2014. In the meantime, governors will have to make unpopular decisions that many of them will find extremely painful.
"Washington is a state with a political leadership whose instincts are exactly the opposite of what we've been forced to do," says Gregoire's policy adviser, Jonathan Seib, noting that the governor supports Obama's health overhaul. "The goal is not to dismantle and contract, but to expand health care."
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