Medicaid's Maladies

In theory, the four-year-old Medicaid program gives states what amounts to a blank check from the U.S. Treasury. In practice, the program--designed to finance medical care for the needy--has proved to be a tremendous drain on state treasuries as well. Even though federal handouts cover at least 50% of the costs, several leading Medicaid states --including New York, California and Michigan--have been forced to slash aid to their "medically indigent" because the runaway rise in hospital, drug and doctors' bills threatened to engulf their budgets in red ink. Now Medicaid's first state dropout has taken place.

Faced with the spiraling cost of its program, New Mexico this month cut off assistance to the 63,000 people on its Medicaid rolls. As a result, many elderly Medicaid recipients began an exodus from nursing homes, causing the State Department of Hospitals and Institutions to devise a "disaster plan" to find beds for the displaced. The irony of New Mexico's agony is that it was totally unnecessary. In March, State Budget Chief Waldo Anton (who has since resigned) persuaded the legislature to avoid an expected deficit by canceling Medicaid. He had been told by regional officers of the U.S. Department of Health, Education and Welfare that New Mexico could always rejoin the program later, at a level of services consistent with available money.

Futile Illegality. Almost immediately, HEW officials in Washington said that New Mexico would not be readmitted to the program at the proposed lower level. A state, they said, cannot arbitrarily scale down Medicaid assistance below certain minimum requirements set in Washington. Five services are mandatory: in-patient and outpatient hospital care, doctors' care, X rays, lab tests and nursing-home benefits. The New Mexicans, said HEW, were demanding Medicaid on their own terms, which were not only illegal but self-defeating. Although the state might have saved $1,000,000 by quitting Medicaid and rejoining it with a less costly plan, the immediate effect of its dropout was to make it ineligible for $12,800,000 that it was to receive in the next fiscal year under other federal programs for indigent patients. With or without federal funds, the state must care for those patients. Thus chastened, the state's Department of Health and Social Services asked to re-enter Medicaid on the original level, and HEW officials accepted the capitulation.

Anticipating the sort of problems that have plagued New Mexico, eleven of the 50 states have never joined the Medicaid program. At least four of them --Virginia, New Jersey, Tennessee and North Carolina--are fairly certain to, sign up by the Jan. 1, 1970 deadline; after that date, nonmembers stand to lose federal funds that support alternative programs for the medically indigent. Alabama, Arkansas, Florida, Indiana and Mississippi are hoping that the deadline will be extended, but are not expected to join Medicaid before Jan. 1 in any case. Two states have special problems: Alaska, which would have to take over from the Public Health Service (PHS) the cost of treating 55,000 Indians, Aleuts and Eskimos; and Arizona, which would have to care for 83,000 Indians (the most of any state) who are now the responsibility of the PHS or of individual counties.

To avert repetitions of the crisis in New Mexico, Congress is currently considering modifications in the Medicaid rules. New Mexico's Senator Clinton P. Anderson, widely hailed as "the father of Medicare" for his legislative labors in its behalf, has introduced a bill that would allow hard-pressed states to reduce their commitments under the program without risking expulsion. That would certainly prove a great boon to many states. What it would do to the medically indigent remains to be seen.

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