Kaiser Daily Health Policy Report Rounds Up Action in States’ Medicaid Programs

The following is a round-up of actions taken by Arkansas, Louisiana, Missouri and North Carolina to reduce costs in their Medicaid programs:

• Arkansas: State officials on May 29 said they will use money the state is expected to receive through the Medicaid upper payment limit, commonly known as the Medicaid loophole, to cover cuts to the state's Medicaid budget that had been imposed earlier this year, the Arkansas Democrat-Gazette reports. According to state Medicaid Director Ray Hanley, Arkansas expects to receive $3.5 million -- which should be enough to cover the last round of Medicaid budget cuts Gov. Mike Huckabee (R) announced on April 17 -- through the funding mechanism (Blomeley, Arkansas Democrat-Gazette, 5/30). Under the loophole, some states reimburse health facilities, including nursing homes and hospitals, for more than the actual cost of services for Medicaid beneficiaries, receive inflated matching funds from the federal government and then have the facilities return the extra funds, which the states then can use for services not related to health care. The Clinton administration issued a rule in January 2001 that set the upper payment limit at which states may pay facilities at 150% of the Medicare rate for any one service. Stating that the rule did not go far enough in curbing abuse of the loophole, the Bush administration issued a rule last November to reduce the upper payment limit to 100% for some states this year and to phase out the loophole completely by 2010 (Kaiser Daily Health Policy Report, 5/15).
• Louisiana: A list of recommended budget cuts submitted to the state Senate Finance Committee this week includes a $65 million reduction in Medicaid payments to nursing homes and hospitals, the New Orleans Times-Picayune reports. The cuts, recommended by state Commissioner of Administration Mark Drennan, would represent a 4.9% decrease in reimbursements, according to state Health and Hospitals Secretary David Hood (Maggi, New Orleans Times-Picayune, 5/30).
• Missouri: As a result of a $4.6 million cut to the state's Medicaid budget in the fiscal year beginning July 1, nearly 300,000 adult Medicaid beneficiaries will no longer receive dental care benefits, the St. Louis Post-Dispatch reports. The cut could "catch some Medicaid recipients by surprise," as the state Division of Medical Services has not yet begun notifying recipients, dentists or insurers of the change, the Post-Dispatch reports. According to Chris Stewart, the director of the oral care program at the Missouri Primary Care Association, the cuts could end up costing the state more than it will save, by increasing the number of emergency room visits for people with dental emergencies. Members of the Missouri Coalition for Oral Health Access plan this summer to ask Gov. Bob Holden (D) to restore the funding (Glass, St. Louis Post-Dispatch, 5/30).
• North Carolina: Officials from the state Department of Health and Human Services on May 29 announced they have reached a deal with the state's pharmacies to substitute generic medications for brand-name versions "whenever possible" for Medicaid beneficiaries, the Raleigh News & Observer reports. CVS Corp., Eckerd Drugs, Kerr Drugs and Walgreen's were among the pharmacies that promised to work with doctors to "steer" Medicaid beneficiaries toward generic drugs, a move that could save the state $22 million annually. The state also is considering instituting a preferred drug list in the Medicaid program. Combining both tactics could save the state $37 million, approximately half of the savings Gov. Mike Easley (D) has asked state Medicaid officials to produce (Gardner, Raleigh News & Observer, 5/30).