Unintended Consequences…..

Posted By on March 23, 2010


States Sue Over Healthcare Overhaul

By Pat Wechsler


March 23 (Bloomberg) — President Barack Obama faces a fight over the health-care overhaul from states that sued today because the legislation’s expansion of Medicaid imposes a fiscal strain on their cash-strapped budgets.

Florida, Texas and Pennsylvania are among 14 states that filed suit after the president signed the bill over the constitutionality of the burden imposed by the legislation. The health-care overhaul will make as many as 15 million more Americans eligible for Medicaid nationwide starting in 2014 and will cost the states billions to administer.

States faced with unprecedented declines in tax collections are cutting benefits and payments to hospitals and doctors in Medicaid, the health program for the poor paid jointly by state and U.S. governments. The costs to hire staff and plan for the average 25 percent increase in Medicaid rolls may swamp budgets, said Toby Douglas, who manages the Medicaid program for California, which hasn’t joined the lawsuits.

“The states are coming through the worst fiscal period in the history of record keeping, said Vernon Smith, a former Medicaid director for Michigan and now a principal at the research and consulting firm Health Management Associates in Lansing, Michigan. Medicaid is the most significant, most visible and most costly part of this expansion and states fully expect to see increases in their spending.

For California, with a $20 billion budget deficit, the extra load will cost at least an additional $2 billion to $3 billion annually, said Douglas, chief deputy director for California’s health care programs. He said the overhaul is currently projected to add 1.6 million people to the 7 million enrolled in his state’s program.

“We face enormous challenges just sustaining our existing program, said Douglas in a March 18 telephone interview. I just don’t see states having the capacity to move forward on these changes in this environment.

The numbers of new enrollees because of the overhaul are based on current estimates and may be low, he said in an e-mail. The estimate doesn’t incorporate the growth that the program, known in California as Medi-Cal, may experience even without the new federal legislation, he said.

Medi-Cal recipients are projected to increase 4.3 percent to 7.3 million in fiscal 2011, which begins July 1, spokesman Norman Williams said.

Medicaid spending accounts for about 22 percent of state spending, according to the National Governors Association, which said it doesn’t expect revenue to return to pre-recession levels until at least 2014. Budget directors estimate the fiscal 2011 budget gap could expand to $102 billion and may even reach $180 billion, the Kaiser study said. States by law, unlike Washington, must balance their budgets.

“In the past, Medicaid was only as strong as its weakest link, said Stephen Somers, president of the health-policy nonprofit Center for Health Care Strategies Inc. in Hamilton, New Jersey. Now, there is the first universal floor and it will form the foundation for universal coverage.

Last Updated: March 23, 2010 16:30 EDT


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