The NewStandard ceased publishing on April 27, 2007.

Poor ‘Shareâ€TM More Costs Under Medicaid ‘Cost Sharingâ€TM Initiativ

by Michelle Chen

Recent research shows that the ongoing cuts in public health care spending are doing exactly what critics predicted: forcing the poorest Americans to use emergency rooms or forego medical visits altogether.

June 3, 2005 – As a rollback on federal Medicaid funding crystallizes in Congress with a $10 billion budget cut, analysts predict that tightening fiscal pressures on state health systems will spur governments to shift a greater share of the healthcare burden onto economically disadvantaged populations.

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Health policy experts at the progressive Washington think tank Center on Budget and Policy Priorities and the Kaiser Family Foundation, a healthcare research organization, have released new reports documenting the impact of so-called "cost-sharing" initiatives – such as increased co-payments for services and higher premiums – imposed on Medicaid recipients in various states.

The research indicates that policies to increase the amount people must pay for government subsidized healthcare could have a dramatic effect not only on access to services in general, but on the health of the poorest and most vulnerable groups – people who typically depend on the public safety net to meet their medical needs. In states that have imposed cost increases and similar impediments to services, enrollments have declined steeply, and signs have emerged that poor people are limiting their usage of services and seeing their health deteriorate as a result.

Presenting recent research findings at a press conference on Tuesday, Judy Feder, dean of Georgetown University’s Public Policy Institute, remarked that attempts to cut the costs of Medicaid, at both federal and state levels, focused exclusively on budgetary concerns without addressing deeper issues that prevent people from obtaining necessary care. "The real problem the nation faces is not with the Medicaid program. It’s… the low incomes of people on Medicaid, and the high costs of medical care."

Among both disabled and non-disabled adult beneficiaries, direct payments for prescription drugs jumped by roughly 15 percent annually, and out-of-pocket Medicaid costs in general have consumed a growing portion of their household income.

Medicaid is the country’s most comprehensive public health program, serving 38 million people, including low-income adults, children and seniors. Jointly funded and administered by state and federal governments, individual states’ programs have in recent years expanded or retracted services and enrollment in response to economic and budgetary fluctuations.

Federal mandates for the Medicaid program limit the contributions states can require from beneficiaries in the form of co-payments and premiums. But since the 1990s, many states have obtained special federal waivers that enable them to adjust their cost-sharing plans or eligibility rules in response to local circumstances, such as an initiative to expand coverage to certain groups or a state budget crunch.

Kaiser Foundation researchers reported that state governments have promoted cost-sharing initiatives as a way to increase what they call "personal responsibility" and flexibility among healthcare recipients. Last year, twenty states raised medical co-payments for beneficiaries, and nine states are slated to do so during 2005.

New research sheds light on how the costs of healthcare are often "shared" by the poor population in the form of poorer health and financial insecurity.

Recent research suggests that the net effects of the increased medical payments have been a shrinkage in benefits and services available to low-income people, a heavier economic burden on individuals and families, and the indirect consequence of people being deterred from accessing care, sometimes avoiding treatment until an emergency situation.

An analysis of national Medicaid data from 1997 to 2002 by the Center on Budget and Policy Priorities found that for adults living in poverty who are not elderly or disabled, out-of-pocket medical costs rose by an average of over 9 percent a year -- double the rate of income growth. By contrast, middle-income, privately insured adults saw their out-of-pocket expenses grow by only six percent.

Among both disabled and non-disabled adult beneficiaries, direct payments for prescription drugs jumped by roughly 15 percent annually, and out-of-pocket Medicaid costs in general have consumed a growing portion of their household income.

According to the Kaiser Foundation report, when Rhode Island enacted monthly premium rates of $43 to $58 for people with incomes above one-and-a-half times the poverty line, within three months, twenty percent of enrolled households were forced out of the program for failure to pay. In follow-up survey, half of the disenrolled familes said the higher premiums had forced them to drop out of the program.

In Maryland’s State Child Health Insurance Program, a Medicaid-related healthcare plan offered to Medicaid-ineligible children, the state imposed premiums of $37 per month for children living at around double the poverty level. Nearly 30 percent of children affected by the policy fell off the rolls, and 20 percent of surveyed disenrolled families cited the premium as a factor in pulling their children out of the program, which later prompted the government to rescind the policy.

Some of the most drastic impacts of increasing payments for Medicaid services have been demonstrated in Oregon, where the government, facing a budget crisis in 2003, combined increased program costs with stricter enrollment rules. Legislators installed a two-tier system of coverage that imposed new premiums and co-payments on the "non-mandatory" Medicaid population -- adults living below the poverty line who would not otherwise qualify for Medicaid under the more limited federal eligibility statutes.

Under the new policy, a beneficiary who missed a payment would be automatically dropped from coverage, even in cases of financial emergency or if the person had zero income. After the plan took effect in early 2003, enrollment plummeted from nearly 90,000 to less than 50,000, and is now approaching a state-mandated cap of 24,000

New research sheds light on how the costs of healthcare are often "shared" by the poor population in the form of poorer health and financial insecurity. According to survey data, nearly 70 percent of those who lost coverage in Oregon as a result of the Medicaid restructuring failed to find another source of insurance.

Compared those who stayed on Medicaid, people who lost coverage were four times more likely to rely on emergency rooms served as the main source of medical care. Among extremely poor, chronically ill respondents, living below 10 percent of the poverty line, half of the disenrolled population reported a recent visit to the emergency room, compared with one-third of those who remained in the program.

According to one Oregon healthcare advocate, service providers have reported that the recent Medicaid policy changes, in addition to reducing enrollment, have also deterred people even from public facilities that accept patients regardless of ability to pay. As many face a combination of prohibitive costs, tighter enrollment rules, and limited knowledge about their eligibility for healthcare, "There’s been a certain proportion… who stop coming in and likely go into emergency rooms," said Laura Sisulak, director of policy of the Oregon Primary Care Association, an organization representing the state’s public healthcare centers and clinics.

Sisulak also noted that the public healthcare system has been forced to absorb the growth in the uninsured population since the new Medicaid rules took effect. Clinics have responded to budgetary strains by reducing staff or operating hours, she said.

A study by researchers at the Oregon Health & Science University revealed that the enactment of cost-sharing initiatives was followed by a substantial increase in emergency room visits by the uninsured, including people with mental health and substance abuse problems, who are frequently unable to obtain treatment by other means.

"Every part of the healthcare system impacts the other," Sisulak told The NewStandard. So, while a policy may save money in one program, ultimately "costs don’t go away."

Healthcare advocates argue that when governments cut expenditures by raising rates for beneficiaries, the sickest and the poorest tend to feel the pinch. Speaking at the press conference, Leighton Ku, a health policy fellow with the Center on Budget and Policy Priorities, explained, "The greater the savings you try to incur … the more risks that you’re creating, and the more problems that you’re creating for low-income beneficiaries."

Though state governments have touted cost-sharing programs as a way to more evenly distribute both the costs and benefits of Medicaid, critics see them as a calculated shift of budgetary burdens from government coffers to the pockets of those with the least.

"Proposals to increase cost-sharing or premium payments for Medicaid eligibles," said Feder, "should be recognized as what they are: proposals to increase barriers to access to care."

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The NewStandard ceased publishing on April 27, 2007.


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Michelle Chen is a staff journalist.

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