Medicaid Stalemate Tests Cash-Strapped States -- With Extra Federal Funding in Limbo, Local Cuts Clash With Health-Care Law

From The Wall Street Journal:

Several states are preparing to make deep cuts to Medicaid as a federal stalemate over funding for the poor drags on—even as states face mandates to expand the program under the new health-care law.

Frustration is mounting with Congress's failure to pass an extension of additional Medicaid funding to plug holes in state budgets. With the antispending mood building in Washington, governors say they are increasingly skeptical that such an extension, needed to prop up the program starting next year, will come.

That has states laying plans to cut hundreds of thousands of Medicaid enrollees and pare services such as dental care, organ transplants, insulin pumps and over-the-counter medications in the coming months.

At the same time, by cutting eligibility for enrollees, states risk losing their remaining Medicaid funding from the federal government, which pays for about $2 out of every $3 spent on Medicaid, the federal-state program that provides health insurance to people below or around the federal poverty level.

The health-care overhaul signed into law in March imposes eligibility requirements for federal funding. The law will add 16 million Americans to the 60 million on Medicaid starting in 2014, leaving states to cut a program while they are planning for its largest expansion in years.

"It's like living in a parallel universe," said Monica Coury, assistant director of intergovernmental relations for the Arizona Health Care Cost Containment System, which oversees the state's Medicaid program. "On the one hand, we have federal partners talking about expansion of this program. And at the state level, we're looking at a program that we can't sustain."