In Sickness and in Wealth

Medicaid patients could be facing death by a thousand cuts.

The system appears to be spiraling toward crisis: As more people become uninsured, hospitals pass the cost on to the insured, which helps fuel huge increases in insurance costs, which causes more employers to drop health-care coverage for their employees, boosting the ranks of the uninsured.

"When Medicaid reimbursement rates are low, like they are in Colorado, that forces additional costs on insurers," says the Bell Policy Center's Hedges. "Medicaid has shifted the costs onto the backs of employers and employees. The costs get shifted to employers trying to provide health-care coverage for their employees. It's a vicious cycle where fewer people are covered and more people are uninsured and more are on Medicaid."

The relation of that cost-shifting to health-insurance fees so worried the Denver Metro Chamber of Commerce that it convened a task force in 2001 to study the issue. The report -- "Medicaid, the Uninsured and the Impact on Your Business" -- called for Colorado to try to find ways to cover more of the uninsured. In the report's 2002 followup, "Recommendations for Reform," the chamber was adamant that two things not happen: further limiting those eligible for Medicaid and continuing cuts into doctor payments.

Alex Watson receives care from a home health aide, 
paid for by Medicaid.
Anthony Camera
Alex Watson receives care from a home health aide, paid for by Medicaid.
Pediatricians such as Dr. Lee Thompson are being 
forced to turn away Medicaid patients because of 
budget cuts.
Anthony Camera
Pediatricians such as Dr. Lee Thompson are being forced to turn away Medicaid patients because of budget cuts.

"Both approaches would significantly increase the amount of uncompensated care and, therefore, the cost allocated to private health-insurance premiums through cost shifting," the study reads. "If either of these options were to be implemented, the additional burden could become the 'tipping point' -- especially for small businesses -- in terms of the affordability of providing health-care benefits to employees in the private sector."

Instead, the chamber recommends that Colorado cut costs by putting more of its Medicaid patients into managed-care plans administered by private companies. The state has been experimenting with such an approach for several years, shifting thousands of Medicaid recipients into managed-care plans like Colorado Access. However, Reinertson recently told legislators that the managed-care companies had failed to save the state money, instead using more than $38 million for administrative expenses.

President George Bush's recent proposal to reform Medicaid would give the states more authority to determine who is eligible, something the Chamber of Commerce supports. States would receive a short-term increase in federal assistance, which would then be capped and turned into a block grant. Some Democratic governors have criticized the plan as a way to shift the primary responsibility for funding Medicaid to the states, because costs could continue to soar without additional matching money.

And squeezing Medicaid recipients can have unintended consequences.

Caroline Watson's family is a good example of how cutbacks in Medicaid can boomerang and ultimately boost costs to taxpayers.

Watson is a single mother with two sons. One of them, eight-year-old Alex, is confined to a wheelchair. He is unable to talk, unable to care for his basic needs and cannot be left alone. Even the doctors still do not fully understand his chronic health problems.

Through the Medicaid waiver program, Watson is able to have a home health aide come several days a week and care for Alex, allowing her to work full-time and provide for most of her children's needs.

"As a single parent, there would be no possible way to do this without an aide," Watson says. "For us, this is not optional. It's allowed me to go back to work. Taking care of Alex is a lifetime job, and Medicaid has been a lifesaver for me."

With her earnings, she is able to pay $10,000 a year for private medical insurance that covers many of Alex's expenses, but not the home aide. She estimates that Alex has had $750,000 in medical expenses in his short life, and most of that was paid by private health insurance because she was working.

In the past two years, the bill for Watson's private health plan has gone up by 50 percent. She has no choice but to pay it, because any other insurer would refuse to cover her son.

"If I canceled that policy, I couldn't get insurance for him," Watson says.

If the family lost the Medicaid waiver that pays for a home aide and Watson had to quit working and go on welfare, the government would have to pay for Alex's health care.

"It behooves the government to keep me employed," notes Watson.

It's likely the state would wind up spending more money in the long term if it cut the Medicaid waiver programs. "That's basically the rationale for all the waiver programs," Reinertson says. "If you can get the kind of services you need at home, it will probably cost less. The parents in those waiver programs will tell you it allows them to work. The logic is if people can keep working, it will save the state money."

If overwhelmed parents simply give up and deliver their children to institutions, the state will have no choice but to fund their care.

That also ignores the heartbreak of parents who desperately want to keep their families together.

"It would be unbelievably horrible if Alex was taken away," says Watson. "It would be heart-wrenching. Whenever possible, children should be able to grow up with their families."

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