THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Medicaid cost crisis looms for Bay State

Budget is pushed to brink as more enroll in program

By Michael Levenson
Globe Staff / January 3, 2011

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The money, it seems, is never enough.

Governor Deval Patrick approved a record $9.6 billion last July for the state’s health insurance program for the poor — sufficient, he assumed, to last a year. But the program’s costs quickly outpaced expectations, forcing the governor to approve an additional $329 million in October and then seek $258 million more, which lawmakers approved last week.

And even that may not last, with six months remaining in the budget year.

The ballooning cost of Medicaid is one of the biggest challenges facing Massachusetts and other states, which have seen demand for the program jump during the recession as increasing numbers of unemployed residents enroll in the subsidized insurance plan.

With Massachusetts confronting an estimated $1.5 billion shortfall in the coming budget year, Patrick has said he is committed to financing the program, known as MassHealth. But he has acknowledged that it cannot continue to grow at this rate.

“Containing growth in our health care costs, particularly MassHealth, is something we absolutely need to do, because it is unsustainable at the rate that it’s been growing,’’ said Jay Gonzalez, Patrick’s budget chief.

The choices confronting the governor, however, are hard.

Massachusetts last summer slashed dental benefits for MassHealth recipients, forcing hundreds of thousands of poor, elderly, and disabled residents to visit community health centers, instead of their regular dentists, for fillings, root canals, dentures, and other routine procedures. Bigger cuts or restrictions loom.

Arizona recently made national headlines when it stopped financing certain organ transplant operations under its Medicaid program. Wisconsin stopped paying for caesarean sections unless they were deemed medically necessary. In Texas, Governor Rick Perry has entertained the idea of abolishing the state’s Medicaid program entirely.

Patrick, who is set to unveil his latest budget plan later this month, has not said what steps he will take to control Medicaid costs, but further cuts are all but certain.

“We need to do some things differently,’’ Gonzalez said, declining to elaborate. “There are going to be some hard decisions.’’

MassHealth is open to a range of people who meet certain criteria, including some individuals 65 and over, disabled residents, and those with low or moderate income — generally defined as earnings below 133 percent of the federal poverty level, or less than about $29,327 a year for a family of four.

Qualifying for Medicaid is easier in Massachusetts than it is in two-thirds of other states, said Brian Rosman, research director of Health Care For All, an advocacy organization.

Massachusetts, even though it has approved an additional $587 million in Medicaid spending this budget year, will be on the hook for only $223 million, because the federal government pays for part of the program.

Even so, Medicaid is putting unprecedented pressure on state finances.

Health care spending, most of which is for Medicaid, now accounts for 37 percent of the state budget, up from 21 percent in 2000, according to the Massachusetts Taxpayers Foundation. In the last three years, as the state cut services and weathered a historic economic downturn, Medicaid costs grew by $2 billion, according to the foundation, a business-backed budget watchdog group.

One reason is clear: As the slow economy was sapping the state of revenue, layoffs and wage cuts were forcing more people onto Medicaid. As of September, about 1.3 million residents were enrolled in MassHealth, an increase of 24 percent since 2006, according to state officials. The figure includes 107,000 residents identified as “long-term unemployed,’’ a number that has nearly doubled since 2006.

“Medicaid has been a so-called budget-buster for 25 years,’’ said Michael J. Widmer, president of the taxpayers foundation. “There’s no easy fix for Massachusetts or any other state. But its relentless growth is forcing cuts in other state programs. So it’s a longtime problem, but it’s reached the breaking point.’’

During his reelection campaign, Patrick said controlling health care costs would be his top priority in his second term. House Speaker Robert A. DeLeo and Senate President Therese Murray have also embraced the goal. But such talk is common on Beacon Hill.

“It’s been talked about for several years now and kicked around . . . but we’re getting to the point where the rubber meets the road,’’ said Charles A. Murphy, chairman of the House Ways and Means Committee. “If we continue on the same track, it’s a recipe for disaster.’’

The state is also being pushed by Washington, which is cutting back its support. The federal government, which had been paying 62 percent of the state’s Medicaid costs as part of the stimulus program, will pay only 50 percent when the program ends this July.

Richard T. Moore, Senate chairman of the Legislature’s Committee on Health Care Financing, said the state may have to respond by tightening eligibility requirements for Medicaid, or further slashing benefits.

“We really have to be looking at what we can do to rein in costs, and it may mean some curtailment of health care services that may not be critically needed,’’ said Moore, an Uxbridge Democrat.

“It’s not just the cost of the program’’ that is to blame, he said. “It’s the cost of health care’’ overall.

Harriett L. Stanley, House chairwoman of the committee, said if the state is serious about controlling Medicaid costs, it will require standing up to advocates for the poor, elderly, and disabled, who have long opposed attempts to cut benefits or move recipients into managed care.

“We now have to begin messing with Medicaid,’’ said Stanley, a West Newbury Democrat. “Everybody says it, but no one is willing to be the bad guy and do something about it.’’

Michael Levenson can be reached at mlevenson@globe.com.