Douglas administration drafts plan to curb Medicaid deficit

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(Host) The Douglas administration is drafting a plan to deal with the state’s growing Medicaid deficit. The proposal will include both a short-term and long-term approach to help reduce the growth rate in spending on this program.

VPR’s Bob Kinzel reports

(Kinzel) There’s no doubt that the Medicaid budget numbers are bleak: the program is expected to record up to a $20 million deficit in the current fiscal year, and if no changes are made this winter, the program is projected to run as much as a $70 million deficit in the 2006 fiscal year. The deficit is the result of many factors, including a higher utilization of health care services, increasing prescription drug costs and rising medical costs.

Administration Secretary Michael Smith is heading an effort to make the Medicaid program more sustainable. Smith says one thing is very clear: spending more money is not going to solve the problem:

(Smith) “We do have to rethink in Medicaid where we’re going and how we’re doing it. You can’t raise revenues high enough and fast enough to keep up with the spending in Medicaid. You’d have to raise taxes enormously each year to keep up with the spending trend in Medicaid.”

(Kinzel) Some states facing a similar problem are considering cutting benefits and/or restricting eligibility levels. Smith says the governor is not supporting either of these approaches.

In the short term, Smith is hoping to use part of this year’s anticipated surplus in the General Fund to offset the projected $15 to $20 million deficit in the Medicaid program. Smith says the long-term solution will probably include greater reliance on the multi-state purchasing pool to buy prescription drugs, expanding the state’s chronic care initiative to help control health care costs and placing higher deductibles or raising premiums for individuals in the higher income eligibility levels:

(Smith) “Now remember at the lower end of the federal poverty level the people that are in those expanded programs they don’t pay a premium. We’ve protected them by not charging a premium but we’ll look at the premium level as we move forward here. I think it’s going to have to be a combination of several things to come together.”

(Kinzel) Senate Finance Chairwoman Ann Cummings says her panel plans to work extensively on health care issues this winter. Cummings says it’s important to study the effect that potential changes could have on the overall program:

(Cummings) “You start to figure out if you raise the premium this much and I’m a healthy young person, it’s cheaper for me to self insure assuming I don’t get really sick. But those are the people you need in the system to make it work. So for every one of these, there’s the kind of – you push in here and it pops out there effect. It’s going to be a difficult year.”

(Kinzel) The administration is hoping to reach a consensus with legislative leaders about the overall goals of the Medicaid program, goals that can then be used to help determine the types of policy changes that will be needed to reduce spending.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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