Crisis In Medicaid Threat to Senior Citizens

March 15, 2002 - Social Security and Medicare receive a lot of media coverage related to reforms that can make these programs better and safer. Almost ignored is the most critical crisis facing senior citizens - the economic pressures forcing states to cutback on Medicaid funding, which pays nearly two-thirds of all nursing home and long-term care bills.

Most Americans think of Medicaid as a program for poor citizens. A hearing in Washington on Thursday (March 14, 2002) makes it clear that Medicaid is the life-line for millions of senior citizens who have seen their savings and retirement income vanish in a sea of healthcare expenses.

"For seniors, the recession's painful effects are perhaps nowhere more starkly evident than in the Medicaid program. And contrary to the perceptions of some, Medicaid is not just a lifeline for America's poorest citizens. Rather, for America's seniors, Medicaid is now also very much a middle class program," said U.S. Senator Larry Craig, ranking member of the Special Committee on Aging. Sen. Craig chaired the hearing on the impact the nation's troubled economy is having on the country's older citizens.

"When Medicaid is in trouble, so too is middle America," declared Craig.

Medicaid, the federal-state funded insurance program, covers 44 million Americans. Those receiving both Medicare and Medicaid - senior citizens - represent about 16 percent of recipients but account for more than 30 percent of Medicaid spending. The increased rates of spending on prescription drugs and long-term care for seniors are reported as being particularly burdensome for the states, according to testimony by Gail R. Wilensky, PhD, former Administrator, Health Care Financing Administration and now with Project Hope.

In contrast to the growth in Medicaid expenditures, the economic slowdown has been causing state revenues to decline. According to Scott Pattison of the National Association of State Budget Officers, revenues have fallen short of expectations in 39 states while Medicaid spending exceeded budgeted amounts in 37 states. Since most states require a balanced budget, this has put enormous fiscal pressure on the states.

"Health care spending increases, especially for prescription drugs, have been unusually large at the same time that state revenues have slowed dramatically," Wilensky said.

Overall, Medicaid spending grew by 11 percent during FY 2001 and is expected to grow at least that much this year. This growth represented the fifth year that spending growth has accelerated.

"Part of the growth reflects recent expansions in eligibility and benefits in addition to increasing reimbursements to providers and increased outreach. A portion of the growth, however, reflects forces that are clearly beyond the state’s control; increasing higher prices, increasing enrollments and increasing utilization. The increase is spending on prescription drugs has been especially dramatic - 19 percent in 2001, 22 percent in 2000 and 18 percent in 1999," reported Welinsky.

Craig said, ”Forty-two states are projecting Medicaid budget shortfalls in 2002, up two-fold from 20 states last year." As the nation's economy has contracted, tax revenues have dropped, leaving states facing a collective $40 billion deficit this year, a near-record level, according to the Idaho senator.

"The 'Age Wave' is more than a wave, it is really a tidal wave… that will crush the current models of Medicaid, Medicare, and long-term care," said testifier Jack Riggs, a medical doctor and Lieutenant Governor of Idaho.