USA Today
October 31, 2011

To get a sense for how desperate states are to cut Medicaid costs, think about this: Several of them are seeking federal permission to impose short, inflexible annual limits on hospital stays, no matter how sick or severely injured the patient is.

• OPPOSING VIEW: States have little choice but to cut Medicaid

While the states face severe budget squeezes, imposing unaffordable burdens on some of their sickest and most vulnerable residents is hardly a responsible answer, or one that will be felt by the poor alone. Hospitals will feel pressured to cut stays short, but they also say they'll continue to provide essential care, so the costs will be recovered by pushing up the price of care for bill-paying patients.

A 10-day hospitalization limit under consideration for some patients in Hawaii would be the shortest in the nation, but several states have already capped the number of days Medicaid patients can receive coverage, with medically costly results.

Last year, 4,000 of Arizona's 1.3 million Medicaid patients required hospital stays longer than the new 25-day limit the state wants. In another example of hard times, California wants to limit Medicaid patients to no more than seven doctor visits a year and charge co-pays of $50 for emergency room visits and $100 a day for hospital stays. Co-pays are an essential tool to keep people from overusing health care, but the more costly they are relative to a patient's income, the more likely they are to stop patients from seeking treatment they need.

States say they're taking tough measures like these out of desperation. Medicaid is typically the largest or second largest item in most state budgets, and costs rose during the recession as more people lost income and qualified for coverage. States got about $100 billion in federal stimulus funds over the past two years to help them pay the non-federal share of Medicaid costs — usually a quarter to a half of the total — but the subsidy ended June 30.

In the long run, the fix for Medicaid is the same as for the health care system in general. Health care has to become more efficient: It should focus on therapies and drugs that work and weed out those that waste money. It should reward quality of care, not quantity. But those are longer-term efforts, and states with balanced budget requirements have to make ends meet now.

One target of opportunity is the sickest 5% of Medicaid patients, who account for a shocking 54% of the program's spending. What if states mounted aggressive primary care efforts to manage chronic conditions before they became acute? For example, asthma sufferers can avoid costly emergency room visits and hospital stays if they stick with the proper medications.

Other short-term fixes are the least politically likely, but they shouldn't be off the table. The latest moves to limit Medicaid benefits pose a choice between modestly raising taxes or squeezing savings out of the sickest and passing on costs less visibly to those with private insurance.

Medicaid patients generally lack the political clout of the elderly on Medicare, who tend to be vocal and vote. But that might be changing. Because of the recession and the rapidly rising cost of health insurance, Medicaid is projected to serve 69 million people this year, or about 22% of the population. Many are seniors who can't afford the steep costs of nursing-home care, which is covered by Medicaid, not Medicare. More than one-fourth of Medicaid spending goes toward long-term care.

States have to make ends meet, but extracting savings from those who can least afford health care is a callous way to balance budgets.