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April 2011 St@teside

Medicaid Spending Continues to be a Top Issue for Governors

State officials continue to grapple with Medicaid as a means to close budget gaps. Over the past two months, governors in North Carolina and West Virginia have signed legislation instituting taxes on providers that would bring in additional federal Medicaid funds. In North Carolina, the new law imposes an annual assessment—equity assessment and upper payment limit (UPL) assessment—on hospitals and uses the $43 million in new revenue to support the Medicaid program and obtain additional matching funds from the federal government. Similarly, in West Virginia, the new law authorizes a 0.88 percent temporary tax levied on 28 acute-care hospitals through a Medicaid UPL program.1

In New York, the state legislature approved a budget bill on March 30 that is expected to be signed by Governor Andrew M. Cuomo and will make fundamental structural changes to the Medicaid program recommended by the governor's Medicaid Redesign. The approved budget bill will eliminate trend factors2 in setting reimbursement rates for hospitals, nursing homes, and home care providers, and implement a 2 percent across-the-board reduction in reimbursement rates. In addition, it creates a demonstration program authorizing providers to form up to seven accountable care organizations (ACOs), which will provide care to patients under Medicaid and private insurance.3

Many states have been taking steps to enroll a greater number of the Medicaid population in managed care. Most recently, the Florida House approved two Medicaid reform bills that would create three state-wide, managed-care programs. The programs follow a five-county pilot project begun in 2005.4 Most Medicaid recipients would receive health care services through the managed care program. Critics have charged that the proposed reforms would shift the responsibility of care from the state to managed care companies and would reduce the scope, amount, and duration of care. Two recent reports from the Center for Children and Families at the Georgetown Health Policy Institute are questioning whether the pilot project on which the reforms are based have produced the necessary efficiencies or cost reductions.5

Shortly after California’s Governor Jerry Brown signed into law more than $1.5 billion in cuts to the Medicaid program (Medi-Cal) and the state’s Children’s Health Insurance Program (Healthy Families), three county agencies6 filed a lawsuit in state court seeking to prevent another bill signed by the governor from diverting almost $1 billion from child development programs to Medi-Cal.

The most recent among Arizona’s plans to reduce Medicaid spending is a proposal to charge a $50 annual fee to Medicaid enrollees who smoke, are obese, or suffer from diabetes or other chronic disease and fail to work with their primary care providers on a care plan. Another proposal would increase copayments and impose 'no-show' penalties for missed appointments. The proposals are included in an amended request for a Section 1115 demonstration waiver sent to the U.S. Department of Health and Human Services and cover the October 1, 2011 to September 30, 2016 period.

On April 8, the Nebraska legislature approved two bills implementing changes to Medicaid. The first bill eliminates Medicaid eligibility for legal immigrants, saving the state $2.6 million per year, and the other allows the state Department of Health and Human Services to implement copayments for services received by Medicaid enrollees, saving an estimated $450,000 in fiscal years 2012 and 2013.7 Although Governor Heineman has not officially said he would sign the bills, his spokeswoman said that both bills were part of the governor’s budget proposal for the coming fiscal year.

Idaho’s legislature also approved a bill cutting Medicaid spending by $108 million—with $34 million in state savings coupled with a loss of $74 million in federal matching funds.8 The changes would take effect July 1 and include:

  • halting mandatory rate increases for Medicaid providers;
  • reducing psychosocial rehabilitation services by 20 percent;
  • dropping developmentally disabled people from therapeutic services that help them learn or maintain life and employment skills once they reach the age of 45;
  • reducing chiropractic services;
  • adding eight new Medicaid staff to find fraudulent payments; and
  • instituting co-payments for Medicaid services other than for prescription drugs.9

Idaho Governor C.L. Otter is expected to sign the bill.

1Raupe, B. (2011, April 11). Acting Governor Enacts Temporary Tax In Effort to Generate More Medicaid Funds. BNA’s Health Care Policy Report (Subscription only). Retrieved April 19, 2011, from
2Medical inflation factors.
3Silverman, G.B. (2011, April 4). Lawmakers Pass Budget Bill With Cuts To Medicaid Spending, Program Reforms. BNA’s Health Care Policy Report (Subscription only). Retrieved April 19, 2011, from
4Douglas, D. (2011, April 4). House Passes Bills to Transform Medicaid to Managed Care System. BNA’s Health Care Policy Report (Subscription only). Retrieved April 20, 2011, from
5Douglas, D. (2011, April 11). Researchers Doubt Medicaid Expansion Of Managed Care Will Meet Intended Goals. BNA’s Health Care Policy Report (Subscription only). Retrieved April 20, 2011, from
6Fresno, Madera, and Merced County.
7Brown, C. (2011, April 8). Legislature Passes Bill to Eliminate Medicaid for Certain Legal Immigrants. BNA’s Health Care Policy Report (Subscription only). Retrieved April 19, 2011, from
8Linn, A. (2011, April 18). Lawmakers Pass Budget Bill to Cut Medicaid Spending, Send to Governor. BNA’s Health Care Policy Report (Subscription only). Retrieved April 19, 2011, from
9Miller, J. (2011, March 9). Overflow crowd at Idaho hearing on Medicaid cuts. Associated Press. Retrieved April 19, 2011, from