Don’t assume that State Medicaid programs will cover the vulnerable populations this and next year. Even with the stimulus funding provided in ARRA, Governors will be hard-pressed to cover all of the growing demands for health care among citizens in their states.

Governors’ budgets are severely constrained due to declining tax receipts and increasing financial obligations, especially for education and health care. According to the Center for Budget and Policy Priorities (CBPP), the American Recovery and Reinvestment Act (ARRA) includes about $140 billion in fiscal relief to the States. However, this funding will cover only about 40% of the $350 billion shortfall that the Governors face in the next 2 to 3 years, according to CBPP in its report, An Update on Budget Cuts, published on March 13, 2009.

To balance their budgets, more than 34 states have already reduced services to citizens. More cuts are expected as of July 1 when new fiscal years kick in.

At least 18 states have cut health programs for low-income citizens; these include:

– Arizona, which reduced its Medicaid rolls by requiring some adult beneficiaries to reapply for
benefits more frequently.

– California, cutting SCHIP by increasing co-pays and reducing dental benefits, along with cutting payments to Medi-Cal providers.

– Rhode Island, by increasing monthly premiums for public health insurance.

– Tennessee, reducing services through TennCare.
– Utah, cutting Medicaid payments to providers.

– Washington, reducing enrollment a program for low-income residents.

Many other states have cut Medicaid and/or SCHIP such as Florida, Georgia, Idaho, Illinois, Louisiana, Maine, Maryland, New Hampshire, New Jersey, and New York. Others have cut payments to providers who serve the Medicaid population.

Health Populi’s Hot Points: The longer the recession continues, the more State Governors will be burdened with making very difficult cuts to health programs. The Center points out that more cuts lead to worsening the fiscal environment in the States as the cuts to services (especially health services), “not only harm vulnerable residents but also worsen the recession by reducing overall economic activity.”

This happens through reducing the multiplier effect in communities: contracts with local companies are severed, payments are reduced to local businesses, both of which result in layoffs of local workers which further exacerbates the drop in tax receipts to the Governors. We can expect this scenario to be the case for at least the next two fiscal years.

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