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Health care squeeze

Charles N. Wheeler


The checks have been in the mail over the last several weeks from hospitals and nursing homes across Illinois, as health care providers scrambled to meet the deadline for the initial payments under the new Medicaid assessment program enacted in July.

The cornerstone of the fiscal 1992 budget, the program imposes taxes on hospitals and nursing homes and uses the receipts to leverage additional federal aid. Its enactment enabled Gov. Jim Edgar and the four legislative leaders to craft a session-ending budget deal by promising an estimated $640 million federal windfall to avert some of the deep welfare cuts originally proposed by the governor.

Even as the first assessments, totaling some $83 million, are collected, however, the program's future is in grave jeopardy. The Illinois plan and similar programs in some three dozen other states are under heavy fire from budget cutters in the Bush administration. Richard G. Darman, the director of the Office of Management and Budget (OMB), considers them scams designed to garner extra federal dollars without corresponding tax effort by the states. The programs will cost the federal goverment an additional $3 billion this year and at least $5 billion next year, according to OMB estimates.

To stanch the flow of federal dollars, the administration issued new rules in September under which assessment programs would no longer qualify for Medicaid reimbursement after January 1. The move triggered protests from the nation's governors and other state officials, who contend the provider taxes are a legitimate means of raising additional matching funds to help meet rising Medicaid costs, caused in part by expanded coverage mandated by Congress.

Consider Illinois' experience with the program, which now provides health care for some 1.3 million poor people.

Twenty years ago, the state Department of Public Aid spent $453 million for medical services, almost 39 percent of the agency's budget and about 13 percent of total general fund outlays in fiscal 1972, though slightly less than the $462 million in grants under the Aid to Families with Dependent Children (AFDC) program.

Since fiscal 1975, however, Medicaid spending has outstripped AFDC grants and year after year has consumed a greater share of the welfare budget. Last year, the state paid some $2.5 billion for health care for the indigent, more than 60 percent of the total public aid budget, according to the comptroller's office. And while almost one out of every five general funds dollars went for Medicaid in fiscal 1991, the state still began this year with $370 million in unpaid bills from health care providers left over from 1991.

Moreover, despite the enormous increase in Medicaid spending, there are still more than one million Illinoisans who neither qualify for Medicaid nor are covered by other health insurance. Frequently, the medical needs are met in hospital emergency rooms; Illinois hospitals annually provide more than $600 million in uncompensated care, according to the Illinois Hospital Association.

Illinois' situation is not unique; in 1990, Medicaid accounted for 14 percent of all state spending, according to the National Association of State Budget Officers, and analysts predict the figure will grow to 22 percent by 1995.

Perhaps more ominously, a program originally envisioned to provide essential health care for poor women and their children increasingly has come to bankroll nursing home care for the elderly.

A decade ago Illinois spent $392 million for long-term care, about a fourth of its Medicaid budget. By fiscal 1991, long-tem care accounted for $800 million, almost a third of the Medicaid budget. Nationally, more than 40 percent of Medicaid expenditures went for nursing home care in 1989, according to one study, and the demand seems certain to increase with the graying

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of the baby boomers.

Besides turning to assessment programs 10 increase their federal reimbursements, Illinois and many other states have sought to control Medicaid costs by cutting some optional benefits, tightening eligibility or reducing fees to providers often with the unfortunate result of limiting access to care for patients.

Perhaps the most radical approach to cost containment is underway in Oregon, which is seeking federal approval for a program that would ration care based on medical procedures, rather than individual circumstances. In simplistic terms, the plan is designed to cover more people for a relatively limited list of medical procedures, as opposed to the more traditional approach under which a much wider variety of services is available to a more narrowly defined patient base.

Yet even such a bold experiment as the Oregon plan falls short of what public opinion polls suggest is a strong societal goal: the availability of appropriate health care for everyone.

These state efforts to hold down Medicaid spending come at a time of soaring health care costs in general. The controversy over the assessment programs should not obscure what is emerging as a fundamental reality of state budgeting: Illinois and other states will be hard-pressed to reach fiscal stability until the nation finds some way of providing affordable and accessible health care for all its citizens.

While federal mandates that expand coverage have contributed to rising Medicaid bills, the most significant factor, experts say, has been two decades of double-digit inflation in overall health care costs, which by some estimates accounts for about 60 percent of the Medicaid increases. Key reasons for the skyrocketing costs of the nation's health care system, according to one study on health system reform, include high administrative costs, the widespread use of expensive medical technology, and the high incomes of some providers.

But state officials have little ability to curb what are essentially national forces. Until Congress and the White House find a cure for the nation's ailing health care system, Illinois and other states may well be destined to face mounting Medicaid costs and chronic budget woes.

Charles N. Wheeler III is a correspondent in the Springfield Bureau of the Chicago Sun-Times.

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