States' Changes Reshape Medicaid

Other states are not far behind the leading edge. South Carolina's governor has been pushing for changes that would include health savings accounts and rewards for being a good patient. Oklahoma's legislature has just passed a bill that would allow the state to pay health plans a defined amount depending on a patient's health. And a recent Missouri law calls for the current Medicaid system there to be abolished in 2008; its replacement is being designed.

State health officials say such changes make sense, particularly because Medicaid has expanded in many states in recent years from a program that covered only the very poor and dispossessed into one that includes a growing share of children -- and sometimes parents -- in working-class families.

The most basic force behind the changes, though, is that Medicaid costs continue to increase more rapidly than state revenues. Ray Scheppach, executive director of the National Governors Association, said the states' new strategies are a trade-off, imposing "additional co-pays and small reductions in benefits" to avoid eventually "pushing hundreds of thousands of women and children off the rolls." Medicaid directors say they do not expect large savings in the next few years but hope to curb costs in the long run.

They are emphasizing preventive care and predict that patients will think twice about how much care to seek if they have to pay a fraction of the bill. And by specifying different benefits for different groups of patients, "we are trying to take advantage of a tool that's really been available in the private sector," said David Rogers, Medicaid administrator for Idaho, which -- like Kentucky -- is starting next month to divide patients into "health-needs categories."

Like Florida, several states are trying to steer Medicaid patients into private-sector health insurance. Arkansas, for example, has just received federal permission to use Medicaid money to subsidize small companies with low-wage workers if they begin to offer employee health benefits.

The focus on private-sector insurance and self-reliance is favored by conservative groups, such as the Heritage Foundation and the Center for Health Transformation, which was founded three years ago by former House speaker Newt Gingrich (R-Ga.). "If you look particularly at the states like Florida that are emphasizing more individual responsibility," Gingrich said, "they are moving in exactly the right direction."

On the other hand, Ron Pollack, executive director of Families USA, a consumer health lobby, said, "Low-income individuals are increasingly going to be put at far greater risk of not receiving critically important services that they used to receive."

Joan Phillips, a West Virginia pediatrician, said she worries that, with the member agreements, children could be denied certain medical services if "the parent is not motivated or is dysfunctional." And Phillips said doctors who report to the state that a patient is not following the rules will face an ethical bind, knowing the patient will lose benefits as a result.

In Florida, Lori Parham, a state lobbyist for the AARP, worries about Medicaid patients who are healthy when they join a health plan but later get cancer, say, or have a heart attack, requiring more expensive treatment than their plan has been paid to provide. "The question becomes, will the care be available?" she said.

Alan Levine, secretary of Florida's Agency for Health Care Administration, said the revised Medicaid will give patients more "emotional buy-in" by increasing their choices and incentive to take care of themselves, while eventually saving the state money. "We are doing it for the right reasons," Levine said. "I just hope it works."