The Other Bankruptcy Showdown: State Medicaid Programs

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While all eyes are on the Treasury and its challenge to handle the federal government’s debt, we cannot afford to lose sight of equally disastrous bankruptcies looming on the state level.

Here are three reasons why you should care about state budgets:
1)      Many states are already worse off than the federal government, delaying payments, jacking up taxes, etc. News outlets leaked in January that Congress is quietly coming to terms with state bankruptcies. Pundits might say otherwise, and they will drag it out into a slow-motion ending, but at this point it is really “when” instead of “if.”
2)      Even without a federal default, state defaults will spell disaster on the economy. Health care, construction, education and farming are all married to state governments to some extent.
3)      Part of the federal government’s deficit spending has been pumping money into states. Wonder why the economic stimulus bill in 2009 did not actually create those shovel-ready jobs? Because a lot of that money was given to states specifically to catch up Medicaid bills.
Those stimulus funds run out in July, and states are preparing to simply force providers to do without the money. State programs are already notorious for paying doctors, pharmacies and nursing homes at rates that are nothing but a smidge over cost.
In Massachusetts, for example, more than half of primary physicians refuse to add new patients who rely on state funding. Many have stopped seeing state-dependent patients altogether.
Across the country in Washington, pharmacy chain Walgreens accused the state of paying less than cost for prescriptions – meaning pharmacists actually lose money on every transaction. Walgreens was forced to start refusing new orders from Medicaid patients.
And that was in the good old days when stimulus money was there to help.
States like Illinois and California stall for several months before making payments. While on the waiting list, doctors are presumably expected to pay their bills with pixie dust. Shockingly, doctors don’t seem to enjoy this, and with each passing month more and more of them start turning away future patients.
South Carolina’s solution was to authorize deficit spending for its Medicaid program. No word on where the state will find a handy $100 million laying around to take care of that.
In New Jersey, Republican Governor Chris Christie is looking to save some $300 million by using “managed care” tricks on Medicaid patients.
Managed care is a fancy term for rationing. It means state auditors will impose stricter standards for what counts as “necessary” treatment, encourage doctors to prescribe “cheaper” drugs, shorten the number of days you can stay in a hospital, and slap more copays on top.

Folks, we are watching the slow-motion decline of our government on all levels. Desperate state governments cannot afford to keep doctors and pharmacies in business. And this is but one place where states are failing. We haven’t even started talking about pensions, public schools, highway maintenance, or cities that can’t afford their police departments.
If you have not begun making contingency plans for your family’s future, I recommend now as a good time to start.

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