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Medicaid bears brunt of states' budget crunch

Healthcare cuts in California and New York could affect thousands.

(Page 2 of 2)

Even with the reduction in rates, California still needed to find ways to bridge the chasm in its budget. So, in May, the state announced another series of changes, including a proposal to restrict eligibility from 107 percent of the federal poverty level to 61 percent.

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Ms. Lav says there are estimates this could reduce the number of Medi-Cal (the state name for Medicaid) recipients by 400,000. "That means an adult making $14,500 a year, the equivalent of the minimum wage, would not be getting healthcare," says Mr. Wigglesworth.

The second round of potential changes have not gone into effect yet because the legislature has been deadlocked for the last 45 days over the budget. During that time the state has not made payments to providers.

"Some of the rural hospitals are on the edge of bankruptcy," says Jan Emerson, a spokeswoman for the California Hospital Association in Sacramento. "I had one rural hospital with 40 beds – 39 of them for long-term patients – tell me they can go two more weeks before they have to shut their doors."

Hospitals in peril

In New York's situation, Gov. David Paterson, facing a growing budget deficit, has proposed freezing Medicaid reimbursement rates for hospitals for the rest of 2008 and for 2009. Normally, the state factors in inflation.

In addition, Mr. Paterson wants to cut reimbursement rates by an additional 7.2 percent for the next two years and impose a new tax on hospital revenues. In New York City alone, this could result in a loss of $663 million in revenues, estimates the Greater New York Hospital Association.

"Some would have to cut back services, others would be forced to close their doors," warns Brian Conway, spokesman for the organization.

For Paterson, it could be difficult to convince legislators to make the cutbacks, which are also opposed by local 1199 of the Service Employees International Union, a powerful lobby in Albany.

"In the past, it is my understanding the unions have been quite successful at blunting cutbacks," says Mr. Hawkins. "This is a case where the traditional foes, the institutions and the workers are together on the same side and it multiplies the influence."

The state of Maine recently added a $25 enrollment fee for adults for its Medicaid program. While the fee may seem small, Lav says it could strain low-income Down Easters faced with higher fuel costs and grocery bills. "It's amazing how hard it can be to come up with $25 when everything is going up in price," she says.

Other states, such as California and Arizona, are asking recipients to reenroll for benefits more frequently. New Jersey, also facing a huge budget deficit, has cut funds for charity care hospitals. And Florida has frozen reimbursements to nursing homes.

Some states with significant funding shortfalls are either waiting until after the election or studying how to bridge the gap. That includes Virginia and Mississippi.

In fact, some healthcare observers believe most states will wait until after the election to face up to their shortfalls. "Most states will pretend their budgets are in balance until November," says Lav. "It's hard to admit your budget is out of balance six weeks after you passed it."