Forty-nine states planning Medicaid cuts

March 1, 2003

Pharmaceutical Representative

Nearly two-thirds of states have had to implement or are planning a second round of Medicaid cuts in the 2003 fiscal year.

Nearly two-thirds of states have had to implement or are planning a second round of Medicaid cuts in the 2003 fiscal year, according to a survey by the Washington-based Kaiser Family Foundation's Kaiser Commission on Medicaid and the Uninsured.

The report, "Medicaid Spending Growth: A 50 State Update for FY 2003," reveals that 32 states are finding it necessary to take further action to reduce spending for the year, and five states that had not taken action prior to July now feel cuts are necessary. Overall, virtually every state (49 states and the District of Columbia) has already taken Medicaid cost-containment actions for FY 2003.

"This is the third consecutive year of nationwide budget problems for the states," said Diane Rowland, executive director of KCMU. "For most states, there aren't any easy solutions left."

Budget shortfalls

These actions come in the face of a worsening fiscal situation and widening budget gaps. Twenty-seven states report that their Medicaid budget shortfall is even greater than they had projected at the beginning of the fiscal year. The Medicaid spending growth forecast for the year is now an average of 9%, almost double states' original appropriations for the year and more reflective of actual growth in Medicaid spending for FY 2002. States acknowledge that a sluggish economy continues to drive enrollment in Medicaid beyond predictions of six months ago. Nearly halfway through the fiscal year, they predict enrollment will grow at an average of 7.7%.

Actions to reduce spending

According to KCMU, 49 states are taking some Medicaid cost-containment action for FY 2003. Some of the actions they have implemented or are planning include:

•Â Provider payment reductions, including freezing provider rates, reducing rates or reducing increases.

•Â Prescription drug cost controls, including prior authorization, preferred drug lists, monthly prescription limits, new or higher co-payments, and mandating generics.

•Â Reducing benefits, including restricting or eliminating dental coverage, occupational or physical therapy, and inpatient hospital days.

•Â Eligibility cuts and restrictions.

•Â Increasing beneficiary co-payments, including co-pays for emergency room visits, emergency transportation and physician visits.

In addition, 17 states have planned to take or have taken action to reduce spending on long-term care.

As the fiscal crisis – which has entered its third year – continues, KCMU expects that rainy day fund depletions and deep program cuts are likely to continue. PR

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