Surging costs for Medicaid ravage state & federal budgets. - Gov. Alfred E. Newman Perdue reacts: "What, me worry?"

To see how Medicaid is devouring state budgets across the country, take a look at Mississippi.

Over the past five years state and federal spending in Mississippi on Medicaid -- the health program for the poor and disabled -- has doubled to $3.5 billion. Fully one-quarter of state residents are in the program.

"Medicaid is a cancer on our state finances," says Mississippi Gov. Haley Barbour, the former head of the Republican National Committee and a close ally of President Bush.

In the current fiscal year, which ends June 30, Medicaid is projected to cost $268 million more than the state budgeted. Officials are now warning that the program will run out of money by the end of this month unless the legislature passes an emergency appropriation. To open up funds for Medicaid, the state has slashed road construction and may delay plans to raise the salaries of public-school teachers who earn an average of about $35,000 a year.

Forty years ago, Congress, as an afterthought to the Medicare program for the elderly, created Medicaid to help pay for the medical needs of about four million low-income people. Today, the program covers 53 million people -- nearly one in every six Americans -- and costs $300 billion a year in federal and state funds, recently surpassing spending on the federal Medicare program. In some states, Medicaid accounts for one-third of the budget.

Now a state-versus-federal battle over Medicaid may be looming.

(2-7-05 wsj.)
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In mid-December 2004 Bill Shipp wrote:

When Perdue took office, he told his staff he wanted to wait a year before he offered any sweeping proposals to cure the out-of-control Medicaid malady. He shelved most of his predecessors' reform programs; then he sat down and pondered. Meanwhile, the cost of Medicaid in Georgia rose to more than $500 million in state and federal funds. In just four years, the cost of prescription drugs for Medicaid recipients has doubled, to more than $1 billion.

You want to know why Georgia has a perennial budget crisis? The answer is Medicaid, which has been growing and gobbling up first millions and then billions for nearly 30 years. Good economic times or bad economic times - it doesn't matter; the Medicaid monster must be fed. Georgia taxpayers foot about 40 percent of the cost; U.S. taxpayers, including us Georgians, pay the rest.

Perdue has muttered about privatizing Medicaid. He says he wants to turn it into a gigantic HMO run by insurance companies. Such a suggestion has brought critics out of the woodwork, meaning privatizing will be scrapped or drastically watered down.

Of course, the governor has instituted some cuts. PeachCare, the health insurance program for children of the working poor, has undergone severe but baffling whacks. The state pays a measly 28 percent of PeachCare's cost. The feds pick up the rest of the tab for the program that helps sick kids.
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In mid-February 2005 Bill Shipp writes:

Perdue's frozen-at-the-throttle approach to slowing the runaway cost of Medicaid and avoiding yet another brush with state insolvency or big-time borrowing or a major tax increase can only be explained by his sighting of the specter of the Governor Just Past.

Perdue rolled into office on a promise he would be the un-Barnes. He takes pride in dismantling much that Barnes did. Smaller school class sizes have been junked. Teacher tenure is back. A new non-Barnes flag flies over Georgia. And Barnes' pet Open Meetings and Open Records Act has been turned into a dartboard.

But what about Medicaid? Just before voters bade him adieu and cast him off the political map, Barnes devised a plan to contain the insatiable health-care program that shapes (and distorts) every other budget decision. Barnes started to put in place a strict cost-containment program for Medicaid, one that was sure to incense Medicaid providers, particularly pharmaceutical companies.

However, like everything else with REB's initials on it, Perdue laid aside his predecessor's strategy. Instead, he announced that muzzling the Medicaid wolf required more study.

And study he did. Meanwhile, the state's share of Medicaid jumped by nearly 32 percent, from $1.5 billion to almost $2 billion. By comparison, other parts of the state budget have increased by relatively minuscule amounts - if at all.

According to Bill Tomlinson, director of the governor's Office of Planning and Budget under both Barnes and for a little while Perdue, a Barnes Medicaid-research group worked for a year - reviewing best practices from other states, meeting with experts from around the country and consulting national organizations to develop an innovative plan. The plan was to be implemented in November 2002, just as Barnes was voted out of office.

Tomlinson recalls: "We shared what we had learned with (Gov. Perdue) and his transition team. It was a pretty good plan that included reducing drug costs, better case management for chronic issues and very few cuts to service. Our recommendation was to move ahead, but he said he wanted to wait and do some more studying."

What has Perdue done since the bell rang on his study period?

The administration's initial solution involved cutting services to some of the state's most vulnerable citizens. Perdue's planners changed the eligibility requirements for pregnant women and infants. When that wasn't enough, they raised the premiums for PeachCare, Georgia's health-care program for low-income children. Then they eliminated a program for the medically needy that threatened to put almost 2,000 elderly Georgians out of nursing homes. To the governor's credit, he gave the soon-to-be-evicted geezers a couple of months to figure out where they were going next.

None of this has slowed the out-of-control Medicaid train. Gov. Perdue is presently gambling on the private sector to bail the state out of its health-care budget hole. Perdue has suggested an HMO-like program as the cure for Georgia's health-care woes. He claims such a managed-care program will operate more efficiently, cost less and actually provide better health care.

No other state in the nation has implemented as dramatic a change to its health-care system as Perdue has proposed. As we all know, Georgia has never been on the cutting edge of innovative administration

Besides, Georgia's history of using HMOs to cut Medicaid costs is replete with disaster. In the mid-1990s, the state decided to use an HMO-like system to control Grady Hospital spending. The program failed miserably. Costs spiraled upward. It was determined the current fee-for-service system actually cost less to administer than the HMO.

Gov. Perdue, of course, understands the Medicaid-money fiasco which is hobbling budgets in nearly every other state could be decisive in his re-election campaign. You can be sure those who will run against him know that, too. Remarkably, Medicaid, which affects millions of Georgians directly or indirectly, is one of the state's most politically sensitive areas. Critics say Perdue's managed-care plan will drive out of business scores of rural health-care providers, many of whom are heavily dependent on Medicaid payments for survival.

"There are a handful of issues that drive Georgia's budget, and health care is one of them. There is no doubt the current budget crisis is in large part a result of our failure to aggressively act to contain health-care costs," says ex-budget chief Tomlinson. "I hope that what the governor is doing works, but I'm truly concerned that the programs being recommended will only end up hurting those that they were designed to help."