Obama administration asks states to cut costs without dropping Medicaid coverage By Marilyn Werber Serafini Kaiser Health News Tuesday, February 22, 2011; 12:58 PM The Obama administration is deploying squadrons of in-house experts to help budget-strapped states figure out how to save money on Medicaid, the health program for the poor that has been a source of rising tensions between state capitals and Washington. In recent weeks, both Democratic and Republican governors have been pressing the administration to be flexible in enforcing a requirement in the new health-care law that bars states from tightening eligibility for the program between now and 2014, when an additional 16 million people will be eligible for the program. Some states want to tighten eligibility now to curb spending. Health and Human Services Secretary Kathleen Sebelius has a difficult balancing act. The former governor of Kansas wants to improve relations with the governors, who are due Saturday in Washington for a big meeting. But she also wants to expand Medicaid, not shrink it. Her dilemma was recently underscored by a request from Arizona to effectively cut 250,000 people from Medicaid in September. Sebelius told Gov. Jan Brewer that the state didn't need federal permission to do it; rather, it can let expire the federal waiver under which Arizona is providing the coverage. But she said late last week that she hopes the state doesn't reduce eligibility. "Our strong preference is for Arizona to maintain coverage," Sebelius said. The federal government stands ready to continue paying 66 percent of the cost of health care, in accordance with the terms of the waiver and to help the state pursue other approaches to this budget problem. In an effort to encourage other governors to save money without dropping coverage, Sebelius has been pointing out other options - and offering to dispatch staffers to provide on-site assistance. New York, which is in the midst of overhauling its Medicaid program, quickly raised its hand, according to Paul Dioguardi, director of intergovernmental affairs at HHS. "They wanted us to spend a full week with them," he said. Dioguardi said several other states also asked for help. Cindy Mann, director of the federal Center for Medicaid and State Operations, is headed to Delaware this week. Carl Karnofsky, spokesman for Delaware's Department of Health and Social Services, said his state decided to accept HHS's offer of help because Medicaid is "the biggest cost driver we have and we're just trying to figure out how to best leverage the federal money we have and to continue to serve the people that need the help." Medicaid, on average, consumes about one-fifth of state budgets, and extra stimulus funding from the federal government runs out at the end of June. Meanwhile, the new health-care law sharply limits states' ability to trim current Medicaid rolls. "What we want to do is help states while making sure we are keeping ourselves on the roadmap for implementation of the Affordable Care Act," Dioguardi said. We're trying to be thoughtful about strategies states can implement to go after what the real costs are. For example, Dioguardi said, some states are looking for advice on how better to coordinate care for people who qualify both for Medicaid and Medicare, the federal health program for the elderly and disabled. These patients tend to be among the costliest in the Medicaid population. In another effort to smooth things over with states, Sebelius also will soon provide guidance to states on Medicaid reimbursement rates for doctors and hospitals. Several states are considering reducing Medicaid payments to providers, but there's concern that slicing rates too deeply could cause some doctors to close their doors to Medicaid patients. The HHS guidance is intended to help states decide which cuts go too far. Already, doctors get less money for their services from Medicaid than they do from Medicare and private insurance, and advocates for the poor say recipients sometimes have trouble getting appointments with primary-care doctors. The health law will increase Medicaid payments for primary-care physicians so that the rates are equal to Medicare reimbursements. The federal government will pick up the entire cost for the extra payments in 2013 and 2014. After that, states will have to decide whether or not to continue with the higher payments. Jessica Marcy contributed to this story. Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health-care policy organization that isn't affiliated with Kaiser Permanente.