State Capitol Week in Review
From Senator Randy Laverty
May 28, 2010
LITTLE ROCK – The financial outlook for Medicaid improved last month, according to state officials who administer the program.
This year’s Medicaid budget is about $4.2 billion and is estimated to increase to $4.6 billion next fiscal year. Medicaid officials have been concerned about possible budget shortfalls because more people become eligible for Medicaid in a bad economy. Also, the cost of medical services and prescription drugs continues to increase.
Earlier this spring, state officials asked for comments from all sectors of the Arkansas health care industry, seeking recommendations on how to reduce Medicaid expenditures. Comments were received from these areas: pediatrics, hospitals, physicians, pharmacy, mental health, developmental disabilities, nursing, cost and quality control, transportation, medical equipment, home health, women’s health, prosthetics, nursing homes, chiropractics, and residential assisted living.
The recommendations reflect the complex array of interests and the enormous amounts of money generated by Medicaid in Arkansas. For example, the nursing home association asked for a moratorium on new construction.
A contractor hired to hold down costs raised questions about the number of repetitive CT scans and MRIs performed by radiologists who get paid by Medicaid. The pharmacy association suggested ways to encourage physicians and patients to use more generic drugs in place of brand names. Other suggestions encouraged more preventive care and vaccinations for children.
Last month the program got a bit of good news, in the form of new revenue from several one-time sources. The additional revenue will relieve the need to cut services, although Medicaid officials are always under pressure to hold down costs.
The attorney general’s office settled a lawsuit with a major pharmaceutical company over allegedly fraudulent marketing of the anti-psychotic drug Zyprexa. The settlement brought $16 million to the Medicaid program.
The governor placed another $16 million into Medicaid from a rainy day fund. The program received an unanticipated $24 million in stimulus funds from the federal government. Finally, Medicaid officials expect almost $200 million in federal funds if stimulus funding is extended.
According to a memo on the Medicaid web site, “with the improved financial situation and the opportunities and challenges posed by Health Care Reform, the Governor has directed that we move our focus from major reductions to major reforms.” In order to maintain Medicaid services through budget uncertainties and rising health costs, the governor has directed the program to change the system so that it provides “more appropriate care at a better price.”
National health care reform will expand Medicaid programs in all 50 states by making more people eligible. About a fourth of all Arkansas residents, including 63 percent of all children, received Medicaid services last year. Medicaid paid for the delivery of 63 percent of all babies born in Arkansas last year and it paid for 75 percent of nursing home care. In all, 750,000 people in Arkansas received care paid for by Medicaid, through a network of 12,500 providers. The federal government matches state spending on Medicaid at a rate that is slightly higher than 3-to-1.
