04/03/2012 02:57 pm ET

Health Care Benefits On The Line As States Struggle With Medicaid Costs

In Pennsylvania, the struggle to keep up with the demand for health care among the state's poor residents means that nearly 90,000 children are losing access to Medicaid benefits.

The administration of Gov. Tom Corbett (R) says it's just cleaning house and striking people from the program whose paperwork isn't in order, but critics see the move as an underhanded effort to reduce state spending by dumping needy children, according to the Philadelphia Daily News. Those 89,000 children all lost Medicaid benefits just in the five months between August 2011 and January 2012, the newspaper reports, citing data from the state agency that runs Medicaid.

State Senator Vincent Hughes (D) of Philadelphia reportedly accused the administration of waging a "war on poor folk," according to the newspaper.

The fight over Corbett's decision to drop the children from the Medicaid program is indicative of states' struggle to provide access to health benefits in the face of shrinking budgets and declining tax revenues. States spend 23.6 percent of their budgets on Medicaid, more than they do on education, transportation, and any other priority, according to the National Governors Association and the National Association of State Budget Officers.

During economic downturns, states are hit with higher demand for Medicaid benefits by the jobless or poor at the same time that their income tax receipts decline because fewer people are working. The federal economic stimulus bill enacted in 2009 provided $103 billion in relief but those funds ran out last June, leading states to cut back on their Medicaid programs. Medicaid is jointly funded by federal and state governments.

Even with rollbacks in eligibility or covered health care services and reductions in payments to medical providers, state spending on Medicaid still grew by 28.7 percent this fiscal year, according to the Henry J. Kaiser Family Foundation.

Colorado is trying to buck the trend by enrolling more of the state's poorest and childless adults into its Medicaid program. Budget issues, however, mean that only 10,000 of the 50,000 people who should be eligible for benefits will get them, the Denver Post reports. Colorado is using a lottery system to determine who gets on and who doesn't.

And in Washington, Gov. Christine Gregoire (D) has been forced to retreat from a novel but controversial plan to rein in Medicaid spending by refusing to pay emergency room bills for people who go to the hospital for "non-emergency" treatments. The Gregoire administration halted the policy on Friday, two days before it was supposed to take effect, after lobbying by hospitals and physicians worried they'd be stuck eating the cost of unpaid bills, the Seattle Times reported.

In addition, Federal regulators rejected a Hawaii plan to control costs by limiting Medicaid patients to 10 days in the hospital during any year, Kaiser Health News reports. The state can restrict hospital stays to 30 days beginning July 1, federal authorities ruled.

Sellers of diabetes test strips are in the crosshairs in Ohio and the administration of Gov. John Kasich (R) says the state's Medicaid program paid $8 million too much for the products last year, according to the Dayton Daily News. The state will consider copying an initiative being rolled out under the federal Medicare program that uses a competitive bidding process to set prices for medical equipment. Ohio pays $35 for a 50-pack of test strips compared to the $15.52 Medicare spends for the same product in Ohio, the newspaper reports.