Virginia leaders grapple with mushrooming Medicaid costs

RICHMOND

More than 750,000 low-income Virginians depend on it to stay healthy. It costs more than the state's college system and prisons. And signs are that Virginia's Medicaid program is only going to grow even more, thanks to the federal health care overhaul and other trends.

Republicans, Democrats and health care industry leaders all agree that paying for the growth in Medicaid is a challenge.

Over the years, Medicaid spending has markedly increased in Virginia.

It was about 5 percent of the state general fund budget in 1985. Soon it will be nearly 20 percent, or about $3 billion, second only to public education spending.

"This already out-of-control, unsustainable level of increase in Medicaid funding... has got to be arrested," Gov. Bob McDonnell said recently. "We cannot continue to sustain the same level of funding in the Medicaid process."

Medicaid pays for medical care for certain infants and children, pregnant women, elderly people and physically or mentally disabled adults who meet income-eligibility standards.

It's a partnership between the state and federal government, which each bear roughly half of the financial burden.

During the recent economic downturn, stimulus money covered a larger portion of the split with states because Medicaid enrollment tends to increase when more people are out of work. An extension of that temporary aid - Virginia's projected share is $417 million - is pending in Congress. Of that sum, $165 million must be spent to undo cuts to Medicaid in the two-year state budget, officials said.

As the federal health care overhaul begins to take effect, more people will qualify for Medicaid - that's one way of extending coverage to millions of uninsured Americans.

In Virginia, those mandates mean expanded eligibility for low-income elderly and disabled people as well as certain other adults, including some who historically haven't been eligible, according to Dr. William Hazel Jr., Virginia's Health and Human Resources secretary.

Even though the federal government is expected pay the lion's share of Medicaid expenses under the health care overhaul, Virginia will see higher costs as well. Between 2014 and 2022, the additional state costs are estimated to be $1.5 billion.

Hazel has said Virginia's Medicaid rolls could grow by 270,000 to 425,000 recipients in the coming years under the new requirements.

Virginia now ranks 48th among the states in per capita spending on Medicaid. Part of the problem is that the state has spent so little, it now has further to go to expand coverage, said Del. Bob Brink, an Arlington Democrat.

State officials point out that the program has been ranked as one of the mo st efficient in the nation. And because Virginia doesn't pay for as many services as other states, it hasn't had to eliminate as many programs during this spring's budget-balancing process.

Nonetheless, the state cut the amount that some health care providers will be paid for treating Medicaid patients.

For doctors, dentists and other medical professionals, those cuts are tough to absorb because Medicaid reimbursements already don't cover the full cost of services, said Norfolk Democratic state Sen. Ralph Northam, a physician.

"We need to be careful not to cut our reimbursements so much that people stop taking Medicaid," he said.

When that happens, some Medicaid patients go to a hospital emergency room for care if they can't find a doctor to treat them, a more costly approach for the state and providers.

Unlike doctors, hospitals and other health care facilities don't have the option to decline to treat Medicaid recipients, said Katharine Webb, senior vice president of the Virginia Hospital and Health Care Association.

One possible alternative proposed by McDonnell, a Republican, is to seek federal authorization for a comprehensive managed-care program in the state.

He submitted a budget amendment with that aim this year, saying it would reduce costs through regular, preventative care rather than expensive emergency room visits.

But the legislature rejected it amid concerns from some health advocates worried that the quality of care would suffer and that some of the limited money would be siphoned away by administrative costs.

While increased Medicaid expenses are a looming concern, it isn't the only issue state leaders face under the new health care law.

As an employer, government must determine how the federal package will affect its work force and prepare for other costs associated with the change.

McDonnell has assigned that task to Hazel, whose office will oversee preparations for the transition.

In the meantime, Virginia Attorney General Ken Cuccinelli is proceeding with his challenge of the federal legislation, arguing that it conflicts with a new state law and is a congressional overreach.

The governor supports that effort and has signed into law a statute exempting Virginians from the individual insurance mandate in the federal health care bill.

Partisan divisions aside, there is near universal agreement on this: Mushrooming Medicaid costs must be addressed.

"We're all in this together," Webb said. "And everybody's going to have to figure out a better way to deliver services to this population so we can both get our arms around the cost and make sure we don't do any damage to the quality of care."

Julian Walker, (804) 697-1564 julian.walker@pilotonline.com