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Kaiser Survey Shows State Budget Problems of Providing Medicaid Is Decreasing

OCTOBER 19, 2005 -- The fiscal crises many states experienced from providing Medicaid in past years has eased and many are expanding coverage for their residents, according to three surveys released Wednesday by the Kaiser Family Foundation.

But possible federal cuts to the joint federal–state health insurance program for the poor could impose more costs on the states and provide long-term challenges to providing coverage in the future, said the surveys' authors.

After coping with a large gap between state revenues and Medicaid spending in 2002 and 2003, one survey showed that state revenues have increased as Medicaid spending and enrollment growth has slowed between 2004 and 2005.

The gap between Medicaid spending growth and state tax revenue in 2005 has been the lowest since 1999, according to the survey.

The survey found that all 50 states are considering ways to revamp their programs to expand coverage and contain costs, even in the face of budget woes. More states are increasing co-payments, creating disease management programs, and expanding programs for long-term care, said Vernon Smith, principal of Health Management Associates and author of one of the surveys.

Another survey showed that two states, Missouri and Tennessee, implemented deep eligibility cuts, but 20 other states are expanding eligibility or reducing premiums. Twelve states are expanding eligibility for children, pregnant women, and parents and eight states have adopted simplifications for enrollment.

And fewer states took action that would have made it more difficult for eligible children and parents to keep health coverage.

The survey showed that states still have to deal with rising health costs, less employer-sponsored coverage, and a growing aging population, all of which raises their Medicaid spending.

Implementation of the new Medicare drug benefit in 2006 (PL 108-173) also would reduce Medicaid rebates from pharmaceutical manufacturers, according to Jeff Crowley, project director of the Georgetown University Health Policy Institute and author of one of the reports.

The health care experts said states would face many challenges if the federal government cuts funding for Medicaid. Congress is considering a package of reductions to Medicaid, the federal–state health care program for the poor, as part of the fiscal 2006 budget reconciliation process.

"We are at a turning point in how much we think of (Medicaid) as a national program," said Alan Weil, executive director of the National Academy for State Health Policy. "There is tension between state and federal government . . . we need to think about who the burden is going to fall upon."

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