Medicaid in Crisis

Medicaid in Crisis

The insurance program is facing its toughest challenges just as the health reform law is poised to expand eligibility for millions of Americans.


Like millions of Americans, Jamie McBride and her family are scrambling to make ends meet on a fraction of what they earned in happier times. Her partner, Felipe, is in community college in Albuquerque, training for work in sheet-metal technology. She stays home raising her two young daughters and earns $100 a week providing childcare for her sister’s kids. Jamie has gone without a functioning pair of glasses since she broke her frames in 2009. When she went to get them repaired she was told that because of Medicaid cuts she now has to wait three years instead of one before her insurance will cover replacements. To repair the frames herself would cost $50, which she can’t spare. So for now she squints.

Cases of more dire medical needs going unmet are, sadly, no less common these days. Consider Patty Poole, a 42-year-old woman living in Endicott, New York, who suffers from chronic lymphedema, a nasty condition in which lymph nodes swell and tissues fill with undrained fluid. By the time she received the diagnosis in February, one of her legs had swelled to several times its normal size, and her skin was so badly infected that she had to be hospitalized to control the infection before a surgeon could operate on her. She urgently needs a $900 compression garment to keep the swelling under control, but Medicaid no longer covers the cost.

Over the past couple of years, Medicaid administrators and legislators around the country have been penny-pinching wherever possible to prevent their overstretched systems from snapping. Some cuts have already kicked in; many more will do so in 2012. But these short-term savings come with consequences that will have long-term costs: fewer services, lower-quality care, less access to doctors, more difficulties in getting impoverished residents enrolled. The crisis is particularly acute—and self-reinforcing—because surging poverty is raising the number of Americans who qualify for Medicaid. There will, in short, be more Jamie McBrides and Patty Pooles in the years to come.

All of this reflects a stunning reversal of fortune for the Obama administration, which saw the crisis coming early and acted aggressively to contain it. The American Recovery and Reinvestment Act of 2009 dramatically beefed up federal contributions to state Medicaid budgets for a two-year period and mandated that states maintain their existing eligibility criteria. And the American Healthcare Act of 2010, upon which President Obama has staked so much political capital, envisions expanding rather than contracting Medicaid access.

Now that the federal stimulus has tapped out, nearly all states are finding that their larger Medicaid populations are potential budget-busters. But if the crisis is in part indicative of the depth of state fiscal woes amid the Great Recession, it is also the product of GOP ambition in the wake of the midterm elections of 2010, when the Republicans opened up several fronts in an ideological war on the American safety net.

The energetic GOP attack on New Deal and Great Society programs has put Medicaid, in particular, in the cross-hairs. House Budget Committee chair Paul Ryan envisions block grants replacing federal eligibility mandates for the states. The grants would essentially remain constant even if the need for Medicaid increases considerably.

Ryan’s budget would also cut the federal contribution by almost $1.4 trillion over the next decade, shifting the burden to states that are already strapped for cash and barred from running deficits. The Center on Budget and Policy Priorities has estimated that if such a system had been in place since 2000, average cuts to state programs would have been more than 25 percent. Meanwhile, conservative think tanks and politicians increasingly laud vouchers and privatization schemes as preferred methods of Medicare and Medicaid delivery.

In a rational world, the federal stimulus would be extended another few years to help boost the economic recovery and protect the most vulnerable Americans from slipping into despair. Medicaid would be explicitly protected even if the government had to raise the national debt to keep it running. After all, hospitals and specialized clinics throughout the country rely on Medicaid spending. If you take that spending down a notch or two, not only patients but the broader healthcare system would suffer: hospitals would close, the number of uninsured ER visits would rise, costs for those with insurance would increase.

Today’s politics, of course, are anything but rational. Instead of making Medicaid more attractive to doctors and hospital administrators, shoring up a program that’s desperately needed in this difficult moment, our leaders seem hell-bent on making it ever less attractive. By fulminating against deficits and refusing to raise taxes on the wealthy to plug revenue gaps, GOP politicians have all but guaranteed that this basic social insurance program will come under increasing stress in the years ahead.

* * *

Medicaid is a complex system: it is partly funded by the federal government, partly by the states, with the exact ratios determined by states’ poverty data and per capita income numbers. California gets only 50 percent of its expenditures reimbursed by the feds. Mississippi, by contrast, gets fully 75 percent reimbursed in a typical year. Different states have more or less expansive eligibility criteria. In Iowa, for example, a pregnant woman with income up to 300 percent of the federal poverty line can qualify for coverage. In Colorado and North Dakota, the cutoff is 133 percent. Likewise, treatment coverage and reimbursement rates for doctors vary.

For all the differences from one state to the next, there are core groups that must be covered according to federal law—impoverished children being the prime example. What that means is that in tough times states can’t save money by shrinking the number who qualify for the coverage. If more people, and in particular more children, fall below certain income thresholds, then more people will end up on Medicaid. In fact, since the 2008 financial implosion, an additional 7 million Americans have enrolled.

This leaves the states with two main options for trimming expenditures: cutting the number of services provided through the program and reducing the reimbursement rates for providers. Both solutions have the potential to seriously affect public health. In many states Medicaid recipients are unable to gain access to basic care: dental and vision coverage has been cut; the elderly don’t qualify for dentures or hearing aids; mental health services have been restricted; day centers for seniors have been eliminated or have seen their hours cut back; and an increasing number of seniors are finding it impossible to get the help that makes it possible for them to stay in their homes. The speed with which new recipients can receive care is declining as well, as the number of staff on hand to process Medicaid applications is dropping.

Though reimbursement rates for Medicaid vary from state to state, they consistently lag behind those given for equivalent services under Medicare. New York, New Jersey and several other states spend far more than the national average per recipient, but they are increasingly scaling back the services they cover—making Medicaid relatively accessible but more restricted in terms of coverage. In California, a state that has been fairly generous with coverage but parsimonious toward doctors, the reimbursement rate for primary care services is a mere 47 percent relative to Medicare. As a result, fewer doctors are accepting Medicaid patients. These days, according to research conducted by the California Healthcare Foundation, only 57 percent of doctors in the state accept new Medi-Cal patients, and that percentage is going down as reimbursement rates decline.

So dire is this situation in some parts of the country that healthcare experts now refer to certain regions as Medicaid deserts. Thirty-two of the thirty-three counties in New Mexico are underserved by providers, according to the New Mexico Law and Poverty Center. Mired in poverty, residents of such regions use Medicaid in very high numbers. Yet they have to spend precious time and money driving long distances to primary care physicians willing to take their insurance.

And then there’s a state like Texas, which restricts access to Medicaid and reimburses doctors badly, creating disincentives for both patients and providers. When it comes to the rate of uninsured residents, the Lone Star State is a notorious national outlier, with a stunning 17 percent of children and 36 percent of adults going without coverage. And things are getting worse fast. The state legislature voted to implement $2 billion of Medicaid cuts in its 2012–13 budget. And if the legislature doesn’t vote for a supplemental appropriation it could face another $3 billion in Medicaid shortfalls in 2013. Such drastic disruption to the state’s already shambolic system will likely drive the number of enrollees even further south.

* * *

Scanning the scarred Medicaid landscape in the states where they work, many advocates are beginning to sound alarms. “The system around state support is crumbling,” says Anthony Wright, executive director of the advocacy group Health Access California. In 2009 Medi-Cal eliminated ten major benefits. In 2011 the state capped the number of doctors visits patients were covered for, while granting exceptions for emergencies and certain chronic conditions. It’s a telling sign of the times that these exceptions were heralded as a compromise. If Governor Jerry Brown’s original proposal had gained traction, those caps would have been absolute and inflexible, even for life-saving treatments such as chemotherapy and dialysis.

The state also proposed introducing co-pays for visits to doctors and emergency rooms (it is awaiting federal approval for this), and reimbursement rates were slashed. Some of the rate cuts were so severe that a coalition of providers—hospitals, pharmacies, daycare centers and others—sued to stop their implementation. Sadly, the Justice Department stepped into the fray, arguing as a friend of the court that the plaintiffs had no standing to sue. The case is wending its way to the Supreme Court.

According to Valerie Bogart of Selfhelp Community Services’ legal resources program—a group of attorneys operating out of a Midtown Manhattan office that pushes for better access to Medicaid—New York State has recently stopped paying for Ensure nutritional supplement unless patients are so sick they can’t eat solid food.

In addition to implementing these cuts, New York, like an increasing number of states, is flirting dangerously with privatization. The state’s shift to an HMO-based model, designed as a cost-saving measure, comes with disheartening risks. Patients who qualify for 24/7 homecare help, for example, could see their coverage reduced to twelve hours a day, and the HMOs will have the right to mandate, in some cases, that patients be moved into nursing homes rather than continue to be treated at home.

“We have a client in her 80s,” Bogart explains, “who’d been getting round-the-clock care for four years. She needed to go into the hospital for two days. The home-help agency refused to reinstate the services when she went home. They basically dumped her, because they’d been shifted from this fee-for-service payment to a complex formula that in effect was a cap on her cost.” In other words, she was an expensive, money-losing proposition, and in a privatized environment that’s grounds enough for dismissal.

The New York Legal Assistance Group has filed a class-action lawsuit on behalf of Medicaid recipients in the state who seek to protest reductions, denials and terminations of home healthcare services. The pending case could serve as a harbinger for the rising number of states considering similar privatization schemes.

* * *

Ironically, Medicaid is facing its toughest test just as the program is poised to expand dramatically. Two years before the major provisions of the American Healthcare Act are set to take effect—the landmark reform relies in part on the expansion of Medicaid to ensure coverage for millions of uninsured Americans, and requires states to beef up their Medicaid expenditures—states are recoiling. Some are slashing their Medicaid budgets; others are increasing them by such small amounts that per-patient spending will drop as enrollment goes up. As a result, Obama’s signature domestic policy accomplishment is at risk of becoming a hollow victory—increasing the number of Americans covered by Medicaid just as the value of that coverage is plummeting. This would suit Republicans just fine, but it would be a disaster from a healthcare perspective.

Colorado Democrat Diana DeGette, a member of the House Committee on Energy and Commerce, which has within its portfolio huge oversight responsibilities for healthcare programs, fears “sweeping cuts to Medicaid” and believes that coverage for childless adults is particularly vulnerable in this political and fiscal climate. “If we’re cutting discretionary spending to try to balance the budget, we’re going to be cutting into medical funds, and Medicaid is obviously a top target,” she argues. “We’re very worried.”

She has good reason to be. On August 30, the Republican Governors Public Policy Committee put out a report calling for “more flexibility” in eligibility criteria for Medicaid and for a rollback of the “eligibility requirements” contained in the federal stimulus bill and the healthcare act. In other words, the GOP has opened the door to a debate about dramatically scaling back the number of impoverished Americans with access to state-funded medical coverage.

While some cuts can be done in ways that maintain medical standards, in most instances these cuts are penny-wise and pound-foolish. “For every dollar we cut, we lose a dollar from the federal government, so it has two times the effect,” explains Anthony Wright of Health Access California. “There’s no other place where you’re guaranteed a magnifier effect like this than in health and human services programs.”

Not only is federal money lost to the states in the rush to cut Medicaid; long-term medical costs are also driven up. Eliminating podiatry coverage, for example, might save California $2 million per year, but it increases the number of amputations and destroys an early warning system for bigger problems on the horizon, like obesity and diabetes-related ailments. Likewise, reducing seniors’ access to adult day health centers will ultimately push thousands of elderly people into more costly nursing homes.

“Cutting Medicaid will hurt the ability to have reform, and will end up driving up the costs of the entire system,” argues Catherine Abate, president and CEO of the New York City–based Community Healthcare Network, a nonprofit that links low-income residents with health providers and clinics. “This is about being fiscally prudent. Medicaid makes sense in terms of quality healthcare and costs to the economy. It’s too easy to dismantle a system, and too hard to rebuild it.”

For Arizona Representative Raul Grijalva, co-chair of the House Progressive Caucus, the attacks on the social insurance programs made possible by the New Deal and the Great Society are symptomatic of the country’s growing inequality. “Every time we cut a vital support program, the poverty rate goes up and the misery quotient goes up,” Grijalva argues. The specter of a “permanent underclass of poor people,” he adds, “goes against everything we believe in as a nation.”

Also in This Forum

Betsy Reed: “Occupy the Safety Net” (Introduction)
Lizzy Ratner: “Food Stamps: The Safety Net That Deserves Its Name
Kate Kahan and George Wentworth: “Unemployment Insurance Under the Knife
Barbara Ehrenreich and John Ehrenreich: “The Making of the American 99 Percent
Diana Spatz:The End of Welfare as I Knew It
Pedro Noguera: “Tearing the School Safety Net
Patrick Markee: “The Unfathomable Cuts in Housing Aid
Kai Wright: “Hard Knocks in the Bronx
Frances Fox Piven: “A Proud, Angry Poor

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