Medicaid cuts: What is the impact on your services?

By Cynthia Dailard
Senior Public Policy Associate
The Alan Guttmacher Institute
Washington, DC

Today, more than 6 million women of reproductive age rely on Medicaid for their basic health care, including family planning services. In fact, Medicaid is the largest source of public funding for family planning services and supplies, and the federal Medicaid statute contains a number of important provisions designed to facilitate access to family planning care among women enrolled in the program. That is why family planning advocates were so concerned when, earlier this year, the Bush administration announced its proposal to revamp the Medicaid program.

Specifically, the administration proposed ending the individual entitlement to care that has been the cornerstone of the program since its inception. Instead, states would have received a fixed allotment to run the program, and, in exchange, would have received much greater flexibility to set benefit levels and to determine which populations would be served.

The proposal was intended to reign in the program’s rapidly escalating costs, which, by their very nature, rise during economic downturns when caseloads increase. It was also designed to respond to mounting calls from the nation’s governors for greater latitude in designing and administering their programs, which account for 20% of state spending.

Subsequently, the administration was taken by surprise when the states failed to embrace the proposal — largely due to the federal funding cap that would leave states on the hook for any expenditures incurred beyond their specified allotments. In fact, a bipartisan task force comprised of 10 governors charged with reviewing the proposal and making recommendations disbanded after finding itself deadlocked, which doomed the administration’s proposal.

Yet with states facing their worst fiscal crisis since World War II — involving an estimated collective budget shortfall of almost $70 billion in fiscal year 2004 — many increasingly desperate governors have enacted deep cuts to their Medicaid programs to achieve savings. Many of these cuts have eliminated critical services or placed them out of reach of some recipients. Still others have resulted in a loss of coverage, either directly by trimming enrollment or indirectly by making the enrollment process more cumbersome. These cuts fall into four basic categories that may reduce access to family planning and other reproductive health services for low-income women:

Reductions in program eligibility levels. For example, Alaska’s income-eligibility level will no longer rise with inflation. The state also reduced the income ceiling for pregnant women from 200% to 175% of poverty. Texas is reducing its Medicaid eligibility for pregnant women from 185% of poverty to 158%.

Changes in enrollment procedures. States are turning back the clock on efforts begun in the 1980s to ease the process of applying for and retaining Medicaid coverage. Texas, for example, imposed a 90-day waiting period for Medicaid enrollment and reduced the amount of assets a family could have and still qualify for Medicaid.

Freezes or cuts in provider reimbursement. Virtually all states adopted such a strategy as part of their 2004 budgets, according to the Kaiser Com-mission on Medicaid and the Uninsured. California enacted a 5% cut in reimbursement to most health care providers (down from the 15% cut initially proposed in the governor’s budget). Planned Parenthood Affiliates of California in Sacramento estimates that this will result in a loss of $15 million to family planning providers in the state.

Limitations on covered benefits. Because family planning services are mandated by federal law, they have been largely shielded from state efforts to cut back specific benefits. The exception was Missouri, which in 2002 scaled back its demonstration program providing family planning to women following a Medicaid-funded birth from two years to one year.

Congress responded to the state crisis this spring by providing $10 billion to the states in the form of a temporary increase in the proportion of Medicaid costs reimbursed by the federal government. Experts believe that this infusion of cash was critical to preventing additional scale-backs, at least in the short term.

States, however, are rightly concerned about what may happen next year when this temporary boost in funding ceases before fiscal conditions improve, particularly with additional aid from Congress unlikely. And if the picture were not bleak enough already, recent census bureau statistics showed that the number of Americans without health insurance rose by 2.4 million last year, the largest increase in a decade, which raised the total number of uninsured to 43.6 million.

But one thing is clear: Should states be forced to implement further cuts to their Medicaid program, the impact on women’s access to family planning services could be enormous.