Medicaid tab is draining state funds


Three times a week the minivan pulls alongside the lonely trailer in the hills of Garrett County to pick up Helen, a blind woman in her 50s, and transport her 33 miles to Cumberland for a kidney dialysis treatment.

In South Baltimore, Howard, an industrial worker with a wife and three children was laid off 13 months ago. His union benefits, savings and health insurance quickly evaporated.

They may be scores of miles apart, with vastly different lives, but Helen and Howard -- state officials didn't want to disclose their full names -- share a common link. They are both part of Medicaid, the medical assistance program for the poor and the disabled created three decades ago during the heady days of what President Lyndon B. Johnson called his Great Society.

Today, the Financially Strained Society is finding it hard to pay the bill.

The recession that claimed Howard's job, the growing federal rules that include Helen's $65 round-trip hospital ride, and the rise in health care costs -- mostly through better technology -- have transformed a noble venture into a financial catastrophe.

Those triple realities have sapped precious tax dollars from the federal and state governments that run the program, funds that could have been used for other pressing needs, such as housing, the environment or education.

In 1980, Medicaid cost the federal taxpayer $14 billion. The figure rose to $52.5 billion in 1991. By 1996 it could soar to $105 billion, the Congressional Budget Office has determined.

Meanwhile, 38 states, including Maryland, witnessed double-digit increases in Medicaid spending during the past year alone. Medicaid spending surpassed higher education as the second largest state spending category -- second only to elementary and secondary education, according to the National Association of State Budget Officers.

What cost Maryland about $800 million during the current fiscal year will rise to about $1.05 billion in the coming year.

Nationally, nearly half of the Medicaid costs are for long-term care, mostly nursing home costs.

And the state deficit from Medicaid spending alone has snowballed in the past two years to $219 million -- part of the projected $1.2 billion state budget deficit that Gov. William Donald Schaefer said will require additional budget cuts and tax increases to close.

"You have [Medicaid] programs that are literally driving states into bankruptcy," lamented Maryland Health Secretary Nelson J. Sabatini.

It's agreed: It's a mess

Despite its high cost, Medicaid covers less than half the poor: The aged, blind and disabled and poor families with children add up to 25.5 million people. Families near the poverty line and low-income, childless couples find themselves ineligible for help. They are among the 34 million Americans with no health coverage.

From the committee rooms of Congress to the statehouses, nearly everyone agrees that Medicaid is a mess.

"Medicaid has gone from a middle-burner issue to a front-burner issue," said Diane Rowland, executive director of the Kaiser Commission on the Future of Medicaid, a five-year effort centered at the Johns Hopkins University. "I think we need to look a lot at how we buy health care in this country."

"It's the problem of the early '90s. . . . We're looking for some national kind of relief," said Del. Charles J. Ryan, D-Prince George's, chairman of the Special Joint Committee on the Medical Assistance Program. "The states are going to get together and say, 'Something's got to be done.' "

But there is no consensus on the "something" that has to be done.

There are those in Congress who want the federal government to assume most of the Medicaid costs. Others want the states to be able to select from a "menu" of medical services. Still others would like to retire Medicaid and replace it with a new federal-state insurance program.

As a presidential candidate, George Bush said he wanted to have people buy into Medicaid. But as president, Mr. Bush has had little to say on the matter, although he is expected to raise the issue of tax credits for health care coverage during his State of the Union address Jan. 28.

Meanwhile, the nation's governors, complaining of burdensome federal requirements under Medicaid, would like more flexibility to experiment with less costly forms of health care.

"There are limits on what states can do," said a staffer with the National Governors' Association, pointing to the Medicaid rules. "They can't require people to be in HMOs [health maintenance organizations]."

States can, however, apply for waivers to release them from some of these federal regulations. Executive Director Raymond C. Scheppach of the governors association would like to see a half-dozen states released in order to devise systems of managed care such as HMOs.

"Why not let us go forward and demonstrate what can be done?" he asked.

Mandating more recipients

Gripped by the longest-running recession since the Great Depression of the 1930s, states are seeing their Medicaid rolls steadily increase. Maryland budgeted for 370,000 Medicaid recipients last January; it ended up with 442,000 on the rolls.

But the recession is only part of the explanation for the growing number of recipients and the costs. Another reason is the continued expansion by Congress of the Medicaid program. Every year since 1984, there has been at least one piece of legislation "mandating" new coverage.

In 1989, Congress required coverage of pregnant women, infants and children up to age 6 with family incomes below the federal poverty level. This year, as a result, Maryland will serve 26,500 more people at an added cost of $17 million.

In 1990, Congress ordered coverage of all children up to age 18 in families at or below the poverty level. This law added 2,500 to the Maryland rolls and cost an additional $1 million this year.

Maryland is also required to pay for transportation for Medicaid recipients to and from medical services -- as in the case of the Garrett County woman's hospital visits. The round-trip rides for Maryland's Medicaid recipients cost $18.5 million this year, split between the state and federal governments.

Joseph M. Millstone, director of the state's Medical Care Policy Administration, called the federal mandates "an attempt to create a backdoor national health insurance."

In Congress, such conservatives as Rep. William E. Dannemeyer, R-Calif., ranking minority member of the health and environment subcommittee, attack the growing use of mandates. He favors allowing the states to select from a "large menu" of health care options.

But Rep. Henry A. Waxman, D-Calif., the subcommittee's chairman and the leading force behind the mandates, continues to propose them as a way to expand health care for those without. Last spring he offered four additional mandates, including one that would require states to cover mammography and Pap smear services. Congressional aides doubt if any of them will be approved in these economically gloomy times.

"Some will ask why, given the fiscal problems so many states are facing, should the Congress continue to expand Medicaid?" Mr. Waxman said on the House floor. "The fact is that Medicaid is the only program now in place that can finance these compelling needs when they need to be met: today."

Trading food for health

But to finance the new Medicaid services required by federal law, Maryland and other states have -- as an alternative to raising taxes -- chopped back optional portions of Medicaid, placed ZTC limitations on the numbers who qualify for the program or cut other anti-poverty programs, such as Aid to Families with Dependent Children. Unlike the federal government, most states are required to have a balanced budget; they are prohibited by law from spending above their means.

The mandated additions are "literally forcing states to make cuts in AFDC," said Mr. Scheppach of the governors association. "You're cutting out food to give medical care."

Maryland trimmed its reimbursements to nursing homes and cut prescription subsidies for low-income elderly.

Oregon, meanwhile, has embarked on the most ambitious cost-cutting proposal: rationing health care. Oregon is awaiting federal approval of a law that would deny Medicaid payments for medical procedures not deemed cost-effective.

Mr. Waxman, however, has a plan that would ease the burden on the states: The federal government would administer and finance all of the Medicaid program except for such long-term care as nursing homes. This spring, he plans to introduce a bill that would give the states more money for long-term care.

No cost estimates for his plan have been discussed.

Mr. Waxman and some health care experts are wary of giving states too much power over the Medicaid program. Under the Oregon proposal, they say, the state could trim back needed services. "From our point of view, it eliminates the entitlement to anything," said an aide to the congressman.

And Ms. Rowland of the Kaiser Commission said that when California attempted managed care in the 1970s, unscrupulous health providers sprouted up to handle the load. "You had a lot of fly-by-night operations . . . services just not delivered," she said.

Still, Mr. Scheppach said, the governors would like to control the medical assistance program. "I believe they think they can run it more efficiently," he said.

While the debate continues, all agree that real solutions are years away. A few things remain certain: States will continue to be burdened by debt and continue to trim the Medicaid and poverty programs, probably adding to the millions of Americans without health care coverage.

"There's going to be some kind of change," said a House health subcommittee staffer, who expects the states to reach a "breaking point" in the coming years. "I don't think the program is sustainable through the '90s."

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