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Short-Term Medicaid Controls May Have Negative Long-Term Effects

By Derek Wallbank, CQ Staff

DECEMBER 16, 2008 -- State officials in California, looking to patch a gaping hole in the state's budget, will try in 2009 to cut costs by scratching ineligible recipients from its Medicaid rolls. But those efforts may actually wind up costing the state more, according to a new study.

That's because those whose coverage has been interrupted are more likely to be hospitalized for a treatable condition, like diabetes, high blood pressure and asthma, than those with continuous coverage, the Annals of Internal Medicine study found in its study released Dec. 15.

Funded by the Commonwealth Fund, the study looked at California Medicaid recipients from 1998 to 2002, when adults were required to re-prove their eligibility every three months. That policy was changed in 2001 to every six months, state officials said.

"People are making the decisions based on short-term controls rather than looking at the long-term effects," said Andrew B. Bindman, a professor at the University of California, San Francisco, who authored the study. "But it's not just the money--remember we're making people get hospitalized who wouldn't otherwise get hospitalized."

According to the study, those with interrupted health care coverage had an almost 30 percent chance of being hospitalized for a preventable condition within five years, vs. about 3 percent for Medicaid recipients with uninterrupted coverage.

The study comes just weeks before just such a decision goes into effect on Jan. 1. That's when California will begin to require children in the Medi-Cal program, its version of Medicaid, to have their eligibility verified every six months, rather than annually as they are now.

"The primary reason behind this reform is the budget in California," said Tony Cava, spokesman for the state Department of Healthcare Services. "Because of our current shortfall we can't continue to cover those ineligible."

Cava estimated about 34,000 of the state's 3.3 million children on Medicaid will leave the program in 2009, a decline of about 1 percent. The hope is that savings from that drop--projected at $193 million--will help offset the state's looming budget deficit, which state leaders project could reach $41.8 billion over the next 18 months.

The pressures to reduce Medicaid costs aren't confined to the Golden State. Medicaid spending ranks second behind K-12 education in state spending, consuming about 20.7 percent of state budgets, according to the National Association of State Budget Officials. States spent approximately $142.6 billion on Medicaid in 2007, about 43 percent of the program's $333.2 billion total cost.

And Medicaid spending is projected to double by to $673.7 billion by 2017, according to an October report from the Centers for Medicare and Medicaid Services.

With the stagnating economy, the Medicaid population is likely to surge. An average of 49.1 million were on Medicaid in 2007; that number is expected to top 50 million this year and is forecast to grow to more than 55 million by 2017.

"It's at the same time that revenues are falling and there's a real push for cutbacks," said Robin Rudowitz, principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured. "It winds up being a real crunch for states."

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