Medicaid’s Critical Condition

by Charles Katebi

Governor Matt Mead's critics rightly chastised his plan to expand Medicaid without any foreseeable way of paying for new patients. Now it turns out we can't even afford totake care of patients already on Medicaid.

In April, Wyoming's Consensus Revenue Estimating Group (or CREG) reported that the state will take in $110 to $130 million less tax revenue than it previously reported in January. In response, Mead called on every state agency to cut their budget by at least 8 percent, saying:

"Declining revenues are not unexpected and look to continue in the near future. I have asked state agencies to reduce general fund spending in budgets by 8 percent in preparing for the 2017 supplemental budgets."

Public healthcare spending will be hit particularly hard. At the Labor, Health, and Social Services Committee hearing in Casper, the Department of Health announced their plans to slash $117 to $200 million from their budget over the next Biennium to cope with Wyoming's dire fiscal reality.

Given Medicaid's outsized share of state health spending, most of these cuts will fall on this entitlement. As illustrated in the table below, Medicaid consumes 70 percent of general funding legislators allotted the Health Department for the 2017/2018 Biennium.

The Health Committee's members wondered where the Health Department would cut. Surely there is room to cut wasteful spending in a $2 billion budget.

Unfortunately, we have very little say over how state healthcare programs, particularly Medicaid, spend our tax dollars. When Wyoming opted into Medicaid in 1967, we agreed to cover a range of low-income populations in exchange for federal funding. These include children, parents, pregnant women, as well as aged, blind and disabled adults. We also agreed to cover a slew of healthcare services as a condition of participation, including nursing homes, inpatient services, pediatric care, laboratories and x-rays, and others. If Wyoming fails to honor these commitments, the federal government would rescind its Medicaid funding, and blow a $600 million hole in the state budget.

One of the few ways the Health Department can cut Medicaid's budget without running afoul of the feds is by reducing payments to providers. This is how states traditionally try to control Medicaid's spending. In 2011, a total of 28 states cut or froze hospital payments and 40 states restricted reimbursements in 2012. On average, Medicaid reimburses providers just 56 percent of what private health insurers pay.

But patients pay a steep price when states cut Medicaid's reimbursement rates. The less Medicaid pays doctors, the less incentive they have to treat patients. A study published in Health Affairs by Sandra Decker of the National Center for Health Statistics found that one-third America's doctors refuse to treat Medicaid patients because of how poorly it pays doctors in most states. In many metropolitan areas, as many as 55 percent of doctors no longer treat patients on Medicaid.

Wyoming, on the other hand, compensates doctors relatively well through Medicaid. On average, Wyoming's Medicaid program pays doctors and hospitals 94 cents for every dollar that private insurance pays. As a result, nearly all providers accept Medicaid patients. According to Wyoming's Department of Health, every hospital and nursing facility works with Medicaid. As do 99 percent of practicing physicians and 95 percent of pharmacies.

If the Department of Health slashes Medicaid's payments, many providers will have to turn away these patients or risk going out of business. And the patients that manage to find a doctor will have to wait longer for treatments. A 2014 survey by Merritt Hawkins found that Medicaid patients in other states have to wait 17 days on average to be treated by a doctor. But in some cities, they could wait as long as six months.

When it takes this long to see a doctor, Medicaid's patients frequently develop conditions that go untreated until it's too late. A University of Virginia study found that Medicaid patients undergoing surgery were 13 percent more likely to die in the hospital than patients without insurance. Likewise, the National Cancer Institute observed that Medicaid patients had far higher rates of late state melanoma, prostrate and breast cancer than the uninsured. Wyoming's Medicaid patients will likely suffer similarly dismal outcomes if the Health Department slashes reimbursements.

For years, Wyoming's mineral boom afforded Medicaid the resources to adequately treat patients. Those days are over. Unless we fundamentally reform Medicaid, Governor Mead's budget cuts will leave patients suffering in waiting lines in want of care.