15 States Try To Cut Back On Medicaid Programs

Medicaid provides health care to people with low incomes, who also meet certain other categories. And while the federal government pays more than half of the bill, the share the states pay consumes 22 percent of the average state's budget. That's more than they pay for education, transportation or other large budget items.

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RENEE MONTAGNE, host:

New Jersey is just one of 15 states around the country trying to cut back its Medicaid program this year or next. With us to look at why Medicaid is posing such a financial burden on states is NPR health policy correspondent Julie Rovner.

Good morning.

JULIE ROVNER: Good morning.

MONTAGNE: For those who get confused, let's start with the difference between Medicaid and Medicare.

ROVNER: Well, Medicare is a totally federal program that provides health insurance for the elderly and disabled, regardless of their income. Medicaid is a program whose funding is shared by the federal government and the states that provides health care to people with low incomes, but who also meet certain other categories: They have to be children, or pregnant women, or elderly, or disabled, for example.

And while people always think of Medicare as the larger of the two programs, Medicaid, in recent years, has actually covered more people, well over 50 million, compared to Medicare's roughly 48 million.

MONTAGNE: Julie, why, though, is Medicaid always such a big target for state budget-cutters?

ROVNER: Well, to paraphrase that famous bank robber Willie Sutton, Medicaid is where the money is. Even though the federal government pays more than half of the bill for Medicaid, the share that states pay consumes 22 percent of the average state's budget. That's more than states pay for education, more than they pay for transportation, more than they pay for prisons, which tend to be the next-largest items in states budgets.

Then you have the complication that Medicaid is what we all a counter-cyclical program. That's a fancy way of saying that when the economy gets bad, more people lose their jobs, they get poor and they become eligible for Medicaid. So at the very time when states have less tax money coming in, they have more people who are qualifying for and getting on Medicaid.

MONTAGNE: But it's not the people who've lost their jobs who cost Medicaid the most, is it?

ROVNER: No. It actually isn't. You know, coverage for young and mostly healthy people is just nibbling at the edges of what really drives Medicaid spending. Yet, that's what most people think about when they think about Medicaid. And it's true that children and parents are about 75 percent of Medicaid enrollees, but they only account for about a third of all Medicaid spending. Where most of the money in Medicaid goes is for nursing home and other long-term care for the elderly and disabled. They're about a quarter of Medicaid's patients but they consume two-thirds of all of Medicaid's dollars.

MONTAGNE: Of course, whenever there's an economic downturn we hear states complaining about Medicaid costs. What's different about this year?

ROVNER: Well, this time it's different because the new health law has put states in quite a bit of a bind. It basically says that states can't cut back on eligibility between now and the year 2014. That's when the new health law will expand Medicaid dramatically for nondisabled low income adults. Those are people who right now aren't eligible in most states for Medicaid no matter how poor they are. But at the same time, the extra money that the states have been getting to help them with their Medicaid costs, that's money that's been coming from the 2009 stimulus law. That money is going to expire at the end of this month. So states are losing $89 billion starting July 1st. That's basically going to leave them having to pay 19 percent more for Medicaid going forward.

MONTAGNE: Well, what can states do if they can't cut eligibility?

ROVNER: Well, the federal government realizes that the states have a problem and they're trying to work with them to find other ways to reduce Medicaid cost. One big one, of course, is to reduce spending for that very expensive population of elderly people and people with chronic conditions who cost so much. The people that we just talked about - finding ways to better coordinate their care, to keep them out of the hospital or to keep them out of nursing homes. That could save a lot more money than just cutting eligibility for a few thousand most healthy patients.

Other areas, that could be ripe for savings are prescription drug costs and health care fraud. But none of those are easy and states need to balance their budgets right now, so it's a continuing struggle. And while state revenues are improving, a lot of states, particularly California, is seeing a lot more money coming in; states are still short of their pre-recession revenue levels. So like everything else the answer isn't going to lie with just fixing Medicaid, but it's going to lie with getting a handle on health care costs overall, and that's something that's still nobody really knows how to do.

MONTAGNE: Julie, thanks very much.

ROVNER: Thank you, Renee.

MONTAGNE: We've been speaking with NPR's health policy correspondent Julie Rovner.

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