ElderWeb

Financial problems in many states may jeopardize programs that cover long term care costs for many older adults. The states finance about half of the cost of Medicaid, a joint federal-state program which pays some or all of the cost of care for about 70% of all nursing home residents. Also at risk are state programs to offset the cost of prescription drugs for older adults that lack insurance coverage, many of which are so new they have not yet been fully implemented. The Wall Street Journal and the National Conference of State Legislatures report that many states are considering making cuts in both these programs to offset their budget woes.

States are facing financial problems they have not seen in years. The National Conference of State Legislatures (NCSL) reports that at least 28 states have implemented or are considering budget cuts or holdbacks to address fiscal problems, including 14 states that have implemented hiring freezes, cancellations of capital projects and travel restrictions, and 7 states that will convene or have convened in special sessions to address budget problems. Altogether, 44 states are generating revenue below forecasted levels, and 19 states are seeing expenditures higher than forecasted levels. Things could get much worse than this, since much of the information the NCSL has accumulated shows financial deterioration that happened prior to September 11, and does not yet include the economic effects of the terrorist attacks.

Virtually no one believes that income tax increases are a viable alternative to build up state coffers, so most states will be forced to make cuts in expenditures, and Medicaid is unlikely to escape unscathed. Medicaid is a significant portion of many state budgets, and the NCSL reports that at least 11 states already need to make supplemental Medicaid appropriations, while many other states have seen Medicaid costs exceed budgeted amounts and may need to react to those cost overruns. Earlier in the year, states reported that Medicaid spending grew by 14% on average, even though it originally had been budgeted to grow by 6.4%. Preliminary FY 2002 budgets estimated that Medicaid will grow 8.7%, about half as fast as it is currently growing, but still nearly twice as fast as other big budget items like K-12 education (3.7%), higher education (3.6%) and corrections (3%).

Part of the reason for the increase in Medicaid spending is the huge increase in health care costs in general. Another factor is the increase in unemployment, which is adding new people to the Medicaid roles. The Wall Street Journal reports that many states are considering a variety of ways to reduce Medicaid costs, including imposing co-payments or premiums for Medicaid beneficiaries, changing the income level it takes to qualify for the program, eliminating or reducing some benefits like dental, vision or prescription drug benefits, or reducing or delaying payments to health care providers.