Cuts That Hurt?

Balancing the Budget by Cutting Health Services

September 24, 2004

Maryland has a severely underfunded health system. Over the last two years, an additional 150,000 Marylanders have lost health insurance. In 2003, more than 750,000 Marylanders went the entire year without health insurance coverage. Yet, the response to this increase has been to reduce access to publicly funded health services.

In 2003, the General Assembly limited access to the child health insurance program. Later in 2003, Governor Ehrlich cut $80 million from the Medicaid program by lowering payment rates to nursing homes and hospitals, limiting hospital stays for low-income Medicaid recipients who have significant health care needs, and a host of other smaller budget cuts. (Click here to read our analysis of the Governor's midyear 2003 cuts)

Due to chronic underfunding Maryland's health system does not meet the needs of tens of thousands of Marylanders:

Maryland's Medicaid income eligibility limits for parents are among the lowest in the U.S. A single parent who earns slightly more than $500 in a month earns to much money to qualify for this health insurance program for low-income Marylanders.

Some of the payment rates to doctors for providing services to Medicaid patients have not increased in decades. For example, the Maryland Medicaid payment for a left heart catheterization is $80 (compared to a commercial rate of $2,308.33); the Maryland Medicaid payment for 3D Reconstruction Tumor is $30 (compared to a commercial rate of $1,788.15).

More than 10,000 Marylanders with developmental disabilities are on a waiting list to receive community based services.

Amid this context of low eligibility levels for individuals, low reimbursement rates to providers, and tremendous demand for mental health, substance abuse, developmental disability and community health services it becomes challenging to identify potential program savings that don't result in harmful cuts impacting some group of Marylanders with significant health care needs.

On Thursday, September 23, 2004, the Baltimore Sun and Washington Post both reported that the Department of Health and Mental Hygiene had prepared a list of potential program cuts that would reduce direct expenditures by a total of $480 million. This list was in response to Gov. Ehrlich's request that agencies come up with plans to cut spending by 12 percent.

The Department of Health and Mental Hygiene has a General Fund budget of $3.1 billion. Of this amount, $1.8 billion is for Medical Assistance (mostly Medicaid) and $1.2 billion is for mental health, substance abuse, developmental disability and community health services.

To meet the 12 percent cut mandate, the Department would need to reduce spending on health services in these programs by $370 million.

The box above includes links that allow you to see the potential cuts. The cuts include:

Close four mental health clinics around the state for a savings of $26 million and other mental health service cuts of $43 million.

Eliminate support services for 5,312 people with developmental disabilities for a savings of $26.9 million.

Reduce wages of developmental disabilities direct care workers by 12 percent for a savings of $6.7 million. Direct care aids earn less than $10 an hour and their wages are well-below that of their counterparts who work in state institutions.
Eliminate the health insurance program for children in families with incomes between 200 percent and 300 percent of the federal poverty level for a savings of $2.8 million. Because the federal government pays for 65 percent of the costs of this program, this cut would also result in a loss of $5 million in federal funds.
Eliminate the Maryland Child Health Insurance Program for all children for a savings of $47 million. This cut would result in a loss of $87 million in federal funds and leave approximately 100,000 kids without health insurance.
Eliminate the "medically needy" program for a savings of $115 million (and a loss of $115 million in federal funds). "Medically Needy" refers to people who are not quite poor enough to qualify for Medicaid but who have enormous health expenses that lowers their income to Medicaid levels. This population tends to be low-income people who are older or who have severe disabilities.
Reduce breast and cervical cancer diagnosis and treatment for women with incomes between 150 percent and 250 percent of the poverty guidelines, for a savings of $2.5 million. The Department states that "the impact would be that an estimated 1,200 uninsured, low-income clients would face financial barriers to care for breast and cervical cancer treatment services and may die as a result."
Reduce sexual assault evidence collection funding for a savings of $400,000. Under this cut, victims of sexual assault would be billed for lab services.

These are from a list of potential cuts, and not proposed cuts. It is not uncommon for agencies to put together lists of potential cuts that include items that policymakers would not propose or support. However, if the Administration fully intends to reduce agency budgets by 12 percent then cuts similar to those that appear on the list likely would be included.

Maryland already has a financially strained public health financing system. Eligibility and service levels are very low for many services, and payment rates to providers are also well below market rates. There is little that can be cut that would not have serious impact on some group of Marylanders with significant health care needs. MBTPI

See the list of cuts here: