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Medicaid Enrollment Drop Tied to Citizenship Documentation Rules

By John Reichard, CQ HealthBeat Editor

October 10, 2007 – Enrollment in the Medicaid program dropped 0.5 percent in fiscal 2007, mainly because of an improving economy and new requirements to document citizenship, according to a survey of 50 state Medicaid programs released Wednesday. The authors of the study said they could not tell which of the two factors had the greater impact on enrollment, but said the new documentation rules were most often cited by state Medicaid directors as the reason for the decline—the first in nearly a decade.

The study by the Kaiser Commission on Medicaid and the Uninsured also reported that Medicaid spending grew only 2.9 percent in fiscal 2007, after rising just 1.3 percent in fiscal 2006. "We have just come through a period of historic low growth in Medicaid spending," said Vernon Smith of the consulting firm Health Management Associates, which conducted the survey along with Kaiser Commission researchers. In addition, the study found that state officials used growing revenues from their improving economies to increase Medicaid payment rates to providers, improve benefits, and expand eligibility. "Faced with an improving economy, 42 states expect to expand coverage to the uninsured in the next year," the commission said in a news release.

Study authors and state officials offered a mixed prognosis for Medicaid in a press briefing Wednesday. On the one hand, Medicaid's financial vital signs are getting stronger as state revenues grow and spending comes under better control. That, in turn, is fueling state ambitions to cover more of the nation's growing uninsured population. One the other hand, state officials expressed concern that tens of thousands of eligible American citizens, many of them children, won't be enrolled in Medicaid because of the time and expense involved in documenting their citizenship. And officials warned that regulatory changes pushed by the Bush administration could slice $20 billion from Medicaid spending over the next five years.

About three-fourths of the states mentioned specifically that the documentation rules had an impact on the number of people enrolled in the program, Smith said. Kansas Medicaid Director Andrew Allison told reporters that when the rules took effect in July 2006 with little advance guidance from federal Medicaid officials, his staffers were "immediately inundated with paper, with phone calls, with confusion, and our process simply wasn't scaled to meet that administrative burden." Allison added, "not every consumer was equally able to meet those requirements either. We have people applying who have children born in other states," who have to arrange to buy birth certificates to prove citizenship, for example.

After a few months, Allison said his staff found that "the primary impact of these new requirements was on eligible citizens, and in particular on African-American citizens whose citizenship in the country I'm not sure has ever been questioned to the same extent." The biggest part of the application backlog that developed consisted of African-American children, he added. "I regret having to recount the last year in Kansas," Allison said. "We lost ... about 20,000 in case load," primarily children. "I am hoping we are not seeing a permanent impact, which would simply dissuade eligible American families from applying for coverage."

Asked whether it was possible that part of the enrollment decline was because fewer illegal immigrants are getting into Medicaid, Smith downplayed that as a significant factor. Most state Medicaid officials "spoke very confidently that the issue was not affecting persons who would be illegal," he said. The requirement that an enrollee be a citizen was not new, "it's how it's documented that's new," Smith said. "Medicaid director after Medicaid director said the persons who are affected by this are American citizens, primarily children."

Forty-two states, mindful of the growing uninsured population in the United States—46.5 million in 2006, up from 44.4 million in 2005—have developed or are moving ahead with plans to expand coverage. Almost all of them would rely extensively on Medicaid or the State Children's Health Insurance Program to do so, the survey found. The failure of Congress to reauthorize SCHIP by the Sept. 30 deadline lawmakers set for doing so does not bode well for support from Washington for state efforts to broaden coverage of the uninsured, said David Parrella, director of the Connecticut Medicaid program.

Even with support from Washington, state efforts are only part of the answer to the uninsured problem, officials cautioned. "It would be a misconception to view states as now having both the initiative and the ability to address the needs of the uninsured," Allison said. "That initiative and ability vary quite dramatically across states."

Sounder finances led more states to improve their Medicaid programs than in any of the past seven years of the annual survey. "Most notably, every state implemented some type of provider rate increase in 2007 and 49 states planned to increase rates for at least one provider group in 2008," the survey found. "In the past two years we've been in a period where states have been catching up" by restoring payment levels they were forced to cut a few years earlier, Smith said. Connecticut, in particular, made "really historic investments in provider rates" in 2007, Parrella said.

But Medicaid payment rates to doctors are very low, giving Medicaid enrollees difficulties finding a physician. Even the big improvements in Connecticut went only so far. "The last time we did a comprehensive fee schedule increase was 19 years ago," Parrella said. During the past year "we actually did a secret shopper survey" in which people posed as new Medicaid enrollees trying to get their first doctor's appointment. The results "were really dismal," he said. "They were shameful for the department ... we took a real beating public relations-wise." Legislators responded with increases that raised rates paid to doctors from their previous level of about 45 percent of Medicare rates to about 80 percent of those rates. But even with better reimbursement, Medicaid patients "won't get into every practice," Parrella said. "That's just a reality."

The study found that Medicaid spending grew only 2.9 percent in fiscal 2007, largely because of the decline in enrollment and the shift, from Medicaid to Medicare, of a chunk of prescription drug costs for "dual eligibles"—Medicare enrollees who also qualify for Medicaid. But state Medicaid officials are planning for higher spending. "Moving into fiscal year 2008, state legislatures authorized total Medicaid spending growth that averaged 6.3 percent," the study found.

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