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December 2009 St@teside

Federal Funds Help Many - But Not All - States Avoid Public Health Insurance Cuts

Fiscal relief from the federal government to the states through the American Recovery and Reinvestment Act (ARRA) has helped states tremendously in mitigating cuts to public programs and services and, more specifically, in expanding and improving access to Medicaid. The ARRA funds, along with the requirement that states not reduce Medicaid eligibility in order to receive the funds, enabled many states to avoid cuts. More than half of states (26 states) in 2009 improved coverage for low-income children, parents and pregnant women. Improvements included eligibility expansions, as well as enrollment and renewal simplifications and premium reductions.[1]

Unfortunately, however, not all states have managed to avoid making cuts to Medicaid and other state public health insurance programs. In 2009, there were 15 states which decreased coverage because of budget pressures. The states’ Children’s Health Insurance Programs (CHIP) were more affected than Medicaid programs because the eligibility and enrollment protections in ARRA only applied to Medicaid.[2]

In November, Missouri announced $32.5 million in Medicaid spending cuts as part of a broader $204 million budget cut designed to balance the state’s budget. The savings will come from reduced reimbursement rates and greater use of generic pharmaceuticals—not from a reduction in the numbers of those covered by Medicaid. State officials have said that they will focus on identifying services and procedures that are reimbursed by the Medicaid program at a higher rate than by the Medicare program, and to align thse services to the Medicare reimbursement rates.

In New York, as part of an effort to reduce a $3 billion mid-year budget deficit, Governor Paterson signed legislation in early December to reduce Medicaid and health care spending by $107 million for the current fiscal year 2010. This spending cut is actually far less than the $280 million in Medicaid and health care reductions that Paterson initially proposed in November. The state plans to save $20 million by reducing Medicaid reimbursement rates for hospitals, nursing homes, and home and personal care providers. Another $18.5 million in savings will come from reducing pharmacy reimbursement rates under Medicaid and the state’s Elderly Pharmaceutical Insurance Coverage program.[3]

Tennessee is also facing some challenges, announcing a freeze in enrollment for CoverKids, its expanded children’s health insurance program. According to the Center for Children and Families at Georgetown University’s Health Policy Institute, Tennessee is the only state to have closed its CHIP program for new enrollees.[4] On November 30, Tennessee also introduced an enrollment freeze for its small business health coverage program, CoverTN, because enrollment had reached its budgeted capacity at more than 20,000 Tennessee residents. Unlike the CHIP program which receives federal matching funds, CoverTN is a state-only funded program designed to increase access to health care for low-wage workers who were previously uninsured. Despite the enrollment cap, those currently covered under CoverTN will actually see their benefits expand in 2010, as announced by Governor Bredesen in late October. Some of the new benefits from the expansion include full coverage of mammograms, an increase in the number of covered outpatient nonsurgical visits—from two per year to three—and an increase in the number of outpatient surgical visits covered, also from two to three per year.[5]

[1] Ross, D.C. et al. “A Foundation for Health Reform: Findings of a 50 State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost-Sharing Practices in Medicaid and CHIP for Children and Parents During 2009,” Kaiser Commission on Medicaid and the Uninsured, December 2009.
[2] Ibid.
[3] “Governor Patterson Signs Bill to Cut Medicaid, Other Spending, Increase Fraud Recovery,” BNA’s Health Care Policy Report, December 14, 2009.
[4] Wilemon, T. “Tennessee Alone In Capping Child Enrollees Memphis Daily News, December 8, 2009.
[5] “Tennessee—State Announces Benefits Expansion for Small Business Insurance Program,” BNA’s Health Care Policy Report, October 26, 2009; “Tennessee—State Announces Enrollment Freeze for Small Business Insurance Program,” BNA’s Health Care Policy Report, November 16, 2009.