By Sean Whaley, Nevada News Bureau: Despite the need for drastic spending reductions to balance Nevada’s budget, the government program that provides health care to the poor continues to expand, consuming a growing share of the state’s scarce state revenues.
Medicaid, the cost of which is shared by both the federal government and the state, could require about $1.25 billion in state general fund support in the upcoming two-year budget. That’s a spike up from the $835 million approved by the 2009 Legislature for the current spending plan.
The increase is due both to an ever rising caseload and the loss of federal stimulus funds that paid for a greater share of the Medicaid budget in the current biennium.
Unlike many other state-funded programs, the state must provide Medicaid coverage to those who qualify. Higher education funding can be cut and prison populations can be managed with early parole or alternative sentencing. While the state must also fund the public education system, enrollments are expected to be nearly flat because of the current economic situation in Nevada.
Medicaid has expanded significantly in the current economic slowdown, however, as more people lose jobs and become eligible for the government funded health care coverage. As a result, the program is consuming a larger piece of a shrinking budget pie.
The increasing cost of the Medicaid program can be seen in the caseload. The number of Nevadans receiving assistance totaled nearly 276,000 as of October. The caseload is expected to hit 311,416 by the end of the next biennium on June 30, 2013.
“That’s significant growth,” said Charles Duarte, administrator of the Division of Health Care Financing and Policy, which oversees Nevada’s Medicaid program.
In December of 2000, Nevada had a Medicaid caseload of 116,000, according to the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured. In December of 2009 that figure had more than doubled to just over 238,000.
The foundation reported recently that from December 2008 to December 2009, Medicaid enrollment increased by 8.4 percent nationally. In Nevada, that number was 22.4 percent, the biggest increase reported by any state.
Gov.-elect Brian Sandoval, who will take office in January, recently traveled to Washington DC to discuss Nevada’s growing Medicaid costs with U.S. Sen. Harry Reid, D-Nev. Sandoval intends to balance Nevada’s two-year general fund budget without a tax increase, which could mean even greater reductions to the Medicaid budget than are already under consideration by the agency.
Duarte said that despite the increasing caseload, the agency is looking at reducing the cost of the program in the next two-year budget. Options are limited, however, since Medicaid is an entitlement program and people who are eligible must be served. The cuts are even tougher because of reductions already made over the past two plus years, he said.
Two general approaches to cost cutting are reducing or eliminating some services to recipients and reducing payments to the various medical providers who treat Medicaid recipients, Duarte said.
Nevada’s Medicaid program does offer some optional programs which can be cut to the adult population, he said. Under consideration are cuts to personal care services, which involve helping adults with daily activities at home, eye glasses and dentures.
“Final decisions aren’t made on a lot of this,” Duarte said.
There are other optional programs that could potentially be cut, including pharmacy coverage for adults, but such reductions could result in serious adverse consequences, he said. Cutting prescriptions could result in increased hospitalization, Duarte said.
Pharmacy coverage is a big factor in the Medicaid program, costing Nevada $81 million total in fiscal year 2008, according to the Department of Health and Human Services.
There are also potential legal challenges to program cuts if they could lead to people ending up in institutional care, Duarte said.
“We fully understand the effects on lives,” he said. “But we’re looking at a cash issue.”
Any budget cuts could also have an effect on the state’s employment situation, since Medicaid pays for many programs such as those that employ thousands of home health care aides, Duarte said. Most of Nevada’s Medicaid program is spent directly on care provided by private sector health care professionals, he said.
“It affects their revenues and the ability of those providers to pay people,” he said. “We’re a fairly big chunk of the health economy.”
Cutting rates paid to health care providers has its own set of issues, Duarte said.
Decisions at the 9th U.S. Circuit Court of Appeals, mostly involving challenges to reductions in California, could make such reductions difficult if they are challenged in court, he said.
“So there is a host of legal restrictions, dealing with the courts, judicial actions, as well as federal regulatory actions, that really restrict our ability to manage the budget in a crisis,” he said.
State Sen. Sheila Leslie, D-Reno, said there are no realistic options available to policy makers to cut Medicaid.
Nevada has one of the stingiest Medicaid programs in the country, and other states that are cutting Medicaid are making reductions to services that Nevada never offered to begin with, she said.
Cutting personal care services that keep Medicaid recipients in their homes will just shift costs to more expensive nursing home care, Leslie said.
“Any of the optional Medicaid programs that we have, if you eliminate them, there is a corresponding cost in another area that exceeds the cost of providing that optional service,” she said.
And the state has already made some payment reductions to health care providers, Leslie said. Further reductions could reduce access to care for Medicaid recipients as providers drop out, Leslie said.
About the only option is to seek more funding from Congress, unless there is an appetite to drop out of Medicaid entirely as outgoing Gov. Jim Gibbons suggested at one point earlier this year, she said.
Other states have also entertained the idea.
“It’s a very difficult problem,” Leslie said.
State Sen. Joe Hardy, R-Boulder City, said the reality is there will be painful cuts to education, Medicaid and other programs in the upcoming session because there just isn’t going to be enough revenue to continue to pay for all existing services.
But the problem with cutting state dollars to Medicaid is that the federal match is lost as well, so it costs the state as much as $2 or more in Medicaid funding to save $1 in state general fund support, he said.
The key to reducing Nevada’s funding for Medicaid is to create jobs and get people back to work, Hardy said.
“The most important thing we can do to decrease Medicaid expenses is get people back to work,” he said. “If we get people back to work, if our focus is on jobs in the private sector, where the jobs produce instead of use, anything we do that gets people to work will help us with our Medicaid budget.”
Several states have a program where employers can hire the unemployed and use the individual’s jobless benefits as part of the worker’s salary, Hardy said. It is an incentive for businesses to hire workers.
The last time Nevada’s Medicaid population declined was in the boom years of 2005 and 2006. Nevada now leads the nation in unemployment.
Heading off potential cuts to Medicaid reimbursement rates will be the top goal of the Nevada Health Care Association in the upcoming session of the Legislature, the group’s president said this week.
Charles Perry, president and chief government affairs liaison for the non-profit group, said the association will play a defensive position in the 2011 session in an effort to ensure adequate Medicaid funding to the nearly 50 non-profit and for-profit assisted living and nursing facilities that care for over 6,000 elderly and disabled individuals statewide.
Perry said the association was able in the 2010 special session in February to head off a proposed $10 per day per patient reduction in Medicaid reimbursements after it was shown the state would only save $3.60 because of the sizeable federal matching share of the program.
There has been discussion of a $20 per day per Medicaid patient reduction in the 2011-13 budget, he said.
Such a reduction would lead to some facilities having to close, Perry said.
“And it would also have a very detrimental effect on the issue of access to care,” he said.
According to a recent study published by the Mercatus Center at George Mason University and authored by University of Kentucky economics professor John Garen, a big part of the increased cost of Medicaid is the conscious decisions by many states to greatly expand who is eligible for the program.
According to research done by Matthew Mitchell, a research fellow with the Mercatus Center’s State and Local Policy Project, since 2001, 24 states have expanded their eligibility. In some of these cases, the expansion more than doubled the number of possible participants for the program.
Duarte said Nevada has not expanded its eligibility in any significant way so this expansion is not a factor driving the state’s Medicaid costs.
On a per recipient basis, Nevada’s costs are about in the middle of all states because the Medicaid population is smaller and there are fewer healthy people in the program, he said. Nevada is also a high health care cost state.
But on a per capita basis, Nevada historically has spent the least of any state on Medicaid, Duarte said.
“We run a fairly modest program from an eligibility standpoint,” he said.
Nevada has likely seen an increase in the percentage of people covered by Medicaid because of the economic downturn, Duarte said. Nevada is probably at about 10 or 11 percent now, but nationally the rate is higher at 14 percent to 15 percent, he said.