States Make Drastic Cuts To Medicaid Reimbursment Rates

Phil Galewitz’s worries that states’ efforts to control costs in their Medicaid program by cutting reimbursement rates to providers will lead to serious access problems for beneficiaries and only exacerbate physician shortages:

The payment cuts, which require federal approval, are part of a larger effort by states to reduce the cost of Medicaid, typically the largest- or second-largest expenditure after education. In some states, dental services and other optional benefits have gone under the knife. And many states are requiring enrollees to sign up for private Medicaid managed care plans.

There are two things to say about this. One is that some of these cuts could be prevented if the federal government kicked more money to the states — to make up for the cuts that have gone into effect after the additional FMAP increase in the stimulus ran out — and asked them to pay back the dollars once revenues increase. (That’s the idea Judy Feder and John Halahan recently proposed.) And the other is that it simply follows that if states are faced with a situation where they have decreasing revenue (in part due to the recession) and less federal dollars to spend on Medicaid, they will make provider cuts (as well as many other reductions) that will leave beneficieires without doctors and sink the program. This does not bode well for conservative proposals that seek to transform Medicaid into a block grant system that doesn’t keep up with projected health care costs. We’d see this happen and then multiplied.