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States struggle to pay for Medicaid

End of cash from stimulus package causes financial problems in budgets

Infused with billions of extra Medicaid dollars from President Obama's economic stimulus package, states have largely burned through the aid and are scrounging for a way to support programs bloated by the sluggish economy.

The majority of states have cut provider payments as they try to make up the lost funding and grapple with budget imbalances in fragile economies, according to an annual study of state Medicaid programs released Thursday by the Kaiser Family Foundation.

It's a double-whammy this year. On July 1, states lost the extra federal funding that reached $100 billion over three years and helped them pay for increased Medicaid enrollment. And while Medicaid growth has slowed, enrollment in the federal-state health-care program for the poor hasn't receded as unemployment remains above 9 percent.

"While the relief was enormously helpful, states are still battling persistently high unemployment rates," said Robin Rudowitz, associate director of the Kaiser Commission on Medicaid and the Uninsured.

In 2009, Congress sent the states $87 billion in extra Medicaid funding as part of a massive stimulus bill that was intended to mitigate the recession. Legislators extended the aid through July, although it was originally intended to end in December 2010. At that point, states were far from recovery, Ms. Rudowitz said.

"When the relief began in October 2008, compared to when it was scheduled to end in December 2010, all states had higher unemployment rates than when the relief began," she said.

While the relief has boosted Medicaid spending over the last few years, state legislatures are dramatically pulling back now that they have to fork over more of the funding themselves.

Medicaid spending grew an average of 7.3 percent in the 2011 fiscal year that ended July 1. But state lawmakers authorized, on average, 2.2 percent spending growth for 2012, one of the lowest rates on record, the study found. Eleven states plan to decrease their Medicaid spending.

Concerns about paying for Medicaid run high. Officials in more than half the states reported a 50 percent chance of a Medicaid budget shortfall and almost 25 percent indicated a shortfall would be almost certain in 2012.

Many are turning to provider reimbursements to find savings, since accepting Washington's stimulus funding meant the states weren't allowed to restrict Medicaid eligibility, nor could they tighten enrollment procedures to make it more difficult to obtain coverage. Last year, 39 states cut provider rates and 46 states reported plans to do so next year.

Valerie Harr, a director for the New Jersey Department of Human Services, said she watched Medicaid enrollment in her state increase 22 percent from July 2008 to June 2011.

"On a good day, I feel [as happy as] the Dick Van Dyke character Bert in 'Mary Poppins,'" she said. "On a bad day, I can feel like a sherpa climbing Mount Everest."

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