Governors Get Advice for Saving on Medicaid

Published: February 3, 2011 - New York Times

WASHINGTON — Fearing wholesale cuts in Medicaid by states with severe budget problems, the Obama administration told governors on Thursday how they could save money by selectively and judiciously reducing benefits, curbing overuse of costly prescription drugs and attacking fraud.

However, the administration refused to say whether it would allow states to adopt stricter eligibility standards that would, in effect, throw low-income people off the Medicaid rolls and eliminate their insurance coverage.

Kathleen Sebelius, the secretary of health and human services, said she was still studying that question.

Governors said the ideas, though constructive, were not nearly enough. They said they wanted waivers of some federal requirements and relief from Congress, and they noted that the new health care law would greatly increase Medicaid rolls in 2014.

In a letter to governors on Thursday, Ms. Sebelius said, “I have heard the urgency of your state budget concerns.” Ms. Sebelius emphasized that states already had substantial discretion to alter benefits and establish or increase co-payments.

While state Medicaid programs must cover hospital and doctors’ services, Ms. Sebelius said, many other services are classified as optional. The optional services, she said, include prescription drugs, physical therapy, respiratory care, optometry services and eyeglasses, dental services and dentures.

An administration official, discussing the letter on condition of anonymity, said: “Cuts can hurt people. We certainly see that.”

The official said that, instead of taking an ax to Medicaid, states should find ways to save money and improve care at the same time. For example, the official said, states should more aggressively manage the care of the sickest Medicaid recipients.

“Just 1 percent of all Medicaid beneficiaries account for 25 percent of all expenditures,” Ms. Sebelius said, and 5 percent of the recipients account for more than half of Medicaid spending.

In addition, Ms. Sebelius said, states could save large sums by reducing premature births and medically unnecessary Caesarean sections, by reducing hospital admissions and by using proven techniques to improve the care of children with asthma.

Republicans in Congress are introducing bills to give states much more latitude in Medicaid and to block the provision of the new health care law that vastly expands eligibility.

The law, with some exceptions, generally bans states from restricting eligibility. In Arizona, Gov. Jan Brewer, a Republican, has asked the federal government for permission to remove 280,000 people from the rolls.

Despite painful cuts in benefits and in payment rates for health care providers, Ms. Brewer said, the Arizona Medicaid program “is still growing at an astounding rate.”

The 29 Republican governors recently asked President Obama for relief from the Medicaid eligibility requirements, which they said tied their hands.

Mike Schrimpf, a spokesman for the Republican Governors Association, said, “Secretary Sebelius’s cleverly buried response to governors is that she is still studying the issue.”

Gov. Haley Barbour of Mississippi, a Republican, said, “Secretary Sebelius’s letter fails to provide solutions that immediately address the exploding state budget problems posed by the Medicaid program.” Governors of both parties want the administration to remove the “burdensome constraints” on states’ ability to change Medicaid eligibility rules, Mr. Barbour said.

In 2003, when President George W. Bush proposed to give states new power to reduce or eliminate optional Medicaid benefits, advocates for poor people and the disabled denounced the idea. They expressed similar concerns on Thursday.

“ ‘Optional services’ is a misnomer,” said Peter W. Thomas, a lawyer for the Consortium for Citizens with Disabilities, a national advocacy group. “These items and services, which include artificial limbs, wheelchairs and kidney dialysis, are life-saving and life-sustaining. They improve functional abilities and the quality of life for millions of people.”

A version of this article appeared in print on February 4, 2011, on page A11 of the New York edition.