States Weigh Options To Cover Medicaid Shortfalls, Providers Brace for Cutbacks

A number of states are facing budget shortfalls in their Medicaid programs. The following briefly summarizes what options officials are considering, according to recent news reports:

• Iowa: A panel within the state Department of Human Services voted Jan. 16 to cut Medicaid care provider reimbursements by 13.2% to cover an $18.6 million budget shortfall, the Des Moines Register reports. Although the state Council on Human Services, which sets policy for the department, opted to reduce payments, the panel decided not to cut 4,000 people from the program or to stop providing optional services such as dental or eye care, as previously considered. State officials said the reimbursement reduction might force providers to stop accepting Medicaid beneficiaries, but providers said such action is unlikely. The panel's recommendation must be approved by state lawmakers before it can take effect (Santiago, Des Moines Register, 1/17).
• Michigan: As the state expects a $200 million Medicaid budget shortfall this year, state Department of Management and Budget officials might propose taxing hospital revenue to increase state contributions to the program and thus, federal matching funds, the Detroit News reports. If such a plan is approved by the state Legislature, the money could possibly be used to make "lump payments" to hospitals that treat a large number of indigent patients and to increase provider reimbursements (Webster, Detroit News, 1/15).
• Mississippi: Mississippi officials are considering ways to cover a $124.6 million Medicaid budget "hole" that may increase when new estimates are reported, the AP/Memphis Commercial Appeal reports. The budget problems were created in part when the state expanded the number of beneficiaries by about 87,000 and widened the number of services available. At the same time, the federal government reduced its contribution to the program to 76.09% of the programs' costs, down from 76.8% (Wagster, AP/Memphis Commercial Appeal, 1/13). Legislators are considering reducing Medicaid providers' reimbursements by 3% to 5%. Payment cuts to pharmacists and nursing homes also are under consideration (Wagster, AP/Memphis Commercial Appeal, 1/15).
• Missouri: Because of cuts in Illinois' Medicaid spending, St. Louis hospitals -- which often treat the "sickest" Illinois patients -- are expected to lose $3 million to $4.5 million by June 30, the St. Louis Post-Dispatch reports. Illinois Gov. George Ryan (R) last fall cut $114 million in Medicaid hospital reimbursements, but last week $24.4 million of that was restored. In restoring the cuts, Ryan ordered "specifically" that only Illinois hospitals benefit from the extra funding. Hospital officials in St. Louis say they treat a "significant" number of Illinois Medicaid beneficiaries -- one-third of the Medicaid beneficiaries using Children's Hospital are Illinois residents -- and that the cuts may force layoffs. Illinois officials say "limited" funding required them to restore money only within the state (McDermott/Powers, St. Louis Post-Dispatch, 1/13).