Healthcare for poor strained by recession: study

Safeway Pharmacist Sonya Safaie works at a Safeway Pharmacy in Great Falls, Virginia, July 29, 2009.

WASHINGTON (Reuters) - The U.S. recession has ramped up demand for Medicaid and states that manage the healthcare program for the poor are worried they may not be able to cover future costs, a study showed on Wednesday.

U.S. states have had to rely on federal stimulus funding to cover growing Medicaid costs as their revenues tumbled during the worst U.S. recession in 70 years, the study by the non-profit Kaiser Family Foundation found.

Budget constraints have forced many states to cut Medicaid benefits to patients and limit payments to healthcare providers, the study said.

With federal stimulus funding set to expire at the end of next year, and healthcare reform plans proposing an expansion to the program, states say cutbacks will get worse and some expect to enter Medicaid budget deficits, the study found.

"Many states believe they may be pressured to consider previously unthinkable eligibility and benefit reductions," the report said.

State spending on Medicaid, which is administered by the states with partial reimbursement from the federal government, rose at the fastest rate in six years during fiscal 2009. As people lost work, and their employer-sponsored health insurance, they had to turn to public assistance for their medical needs.

Medicaid provides health coverage and care for 60 million low-income Americans, nearly half of whom are children. It also helps 8.8 million seniors enrolled in Medicare whose incomes are so low they need help paying premiums.

Total funding for the program grew on average by 7.9 percent across all states in the fiscal year which expired in summer in many states, the study found. That was the highest rate since 2003 and more than a third higher than the 5.8 percent growth originally projected at the start of the year.

Spending growth is seen at 6.3 percent for fiscal 2010.

The foundation said most states expect current appropriations to be insufficient, and a dozen see a Medicaid budget shortfall as almost certain.

According to the foundation, Medicaid accounts for about one-sixth of all healthcare spending in the United States.

FEDERAL GOVERNMENT A HELP, POTENTIAL HINDRANCE

In February, the U.S. Congress passed a stimulus plan that increased the reimbursements states receive. That helped states manage swelling caseloads.

Even with that help, virtually every state had to reduce its program, with 10 states restricting benefits people could receive in fiscal 2009 and 15 states considering benefit cuts in fiscal 2010.

Many states are cutting or freezing rates they pay healthcare providers, Kaiser said. There may be more cuts on the horizon, since the stimulus is a two-year program, and the states are not confident they will have enough revenues by 2011 to make up for the withdrawal of the extra reimbursements.

Adding potential pressure is a healthcare reform plan passing through Congress that would mandate all Americans have health insurance and change requirements for Medicaid -- pushing more people into the program.

"It is highly likely that federal healthcare reform, if successful will build on existing state Medicaid programs, potentially resulting in new fiscal and administrative challenges for states," the study said.

(Reporting by Lisa Lambert; Editing by Andrew Hay)