Doctors Fear Lowered Provider Rates After S.C. Cuts

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By Matt Kennard–June 20 2011 19:10

Doctors treating the poor in the US are braced for significant reductions to their services amid increased pressure from both the Obama administration and Republicans for deep cuts in health spending.

Twenty-nine Republican governors have called for greater flexibility in how states administer Medicaid programmes for the poor, a move which coincides with the Obama administration’s withdrawal of stimulus funds used to pay for treatment.

Nearly 49m people in the US, or one in six Americans, were covered by Medicaid in 2009. The figure is thought to be higher today.

The federal government increased its subsidies to the states under the stimulus programme, spending $2.68 for every dollar a state spent on Medicaid, nearly twice as much as before the stimulus.

The withdrawal of the stimulus money will leave a huge financial shortfall in the programme, which the states do not have the funds to fill.

The cost of Medicaid, a flagship Democratic programme, has long been shared between Washington and the states.

In a letter addressed to Orrin Hatch, the senior Republican on the Senate Finance Committee, the 29 governors complained that “[as] federal funding has expanded, so has federal control”. It added: “States should not have to seek waivers to manage their unique programmes.”

The budget squeeze is already having an impact on frontline services, such as the allergy, asthma and sinus practice operated by Dr Stephen Imbeau in South Carolina.

South Carolina, which like many states is battling to fill a large budget deficit , has already cut by 3 per cent the money it pays to doctors. In July, authorities are proposing to cut it by another 7 per cent.

“That really means 20 per cent in lost revenue because of the big overheads we pay,” he says.

To make matters worse, on July 1, the same day as South Carolina implements its second round of cuts, the federal stimulus money which has increased funding for Medicaid patients around the country will stop.

“A lot of doctors can’t cope with that kind of cut and the withdrawal of matching funds, and they will have to move or retire or just become employee physicians at hospitals,” says Dr Imbeau.

Patients will be hit as well. Nearly one-third of the patients in South Carolina cannot afford to pay for their own care, do not have insurance and are relying on Medicaid.

The debate over Medicaid also plays in to the larger budget clash in Washington and the standoff between Republicans and Democrats over health spending on the elderly and the poor.

These two programmes, Medicare and Medicaid, both created in the 1960s under the Great Society reforms of President Lyndon Johnson, are projected to add most to the federal deficit over coming decades.

Both have been targeted for substantial reform and cuts by Paul Ryan, the Republican house budget chairman. Mr Ryan proposed capping Washington’s Medicaid contributions, shifting the burden further to states.

The imminent reductions in federal funds have already prompted many states to treat as many patients as possible before Washington’s money is cut back.

“The ending of the stimulus money will put more burden on states at a time when it’s hard to bear – it is billions of dollars per state,” said Daniel Mendelson, chief executive of Avalere Health, a healthcare advisory company in Washington.

South Carolina is seen by many as a template for how states will deal with budget deficits and the withdrawal of the stimulus money at the end of this month.

“That’s one reason South Carolina is making these cuts, because of that expected change,” said Dr Imbeau.

Medicaid spending is also a target for governors, who portray it as a bloated programme subject to widespread fraud and significant drains on tight state budgets.

“In states where governors want to shrink their Medicaid budget they will use deficits as a plausible deniability excuse,” said Mr Mendelson.

But Henry Waxman, a Democratic congressman from California, told the Financial Times that the administration should reconsider withdrawing the stimulus money. “This should be a warning that we should not be cutting back on federal support and we shouldn’t be taking away state sources of revenue,” he said.

The recession means many need Medicaid because they have no health insurance, he added. “The states are struggling. But as we shift the burdens on to states, they are shifting the burdens on the poor by reducing provider payments. In the end, fewer providers will even be willing to see Medicaid patients.”

Despite the Democratic criticism, the need to reform Medicaid has bipartisan support. The co-chairs of the White House’s fiscal commission, Erskine Bowles and Alan Simpson, proposed a wholesale reform of Medicaid in their recommendations.

It included increases to co-payments by patients, a cap to growth of both Medicaid and Medicare, which provides funds for over-65s, and moving more poor people into Medicaid managed care.

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