Feb 13, 2005 By Marc Levy Associated Press Writer 3 min read

HARRISBURG, Pa. (AP) – If the Rendell administration’s Medicaid cuts in its 2005-06 spending plan seem painful, wait until the 2006-07 budget. That was the message from Estelle Richman, Gov. Ed Rendell’s state secretary for public welfare, as she tried last week to explain the administration’s cost-cutting plan to a room full of advocates for hospitals, nursing homes and the disabled.

Next year, the worrisome trends that prompted $383 million in proposed cuts could create an even stickier situation for an administration that is trying to avoid increasing taxes, kicking people off Medicaid, or rolling back the range of services covered.

The problem is, Medicaid rolls continue to expand, the deficit-ridden federal government is getting stingier with Medicaid spending and no one expects the cost of health care and pharmaceuticals to stop rising faster than state tax collections.

“Next year promises to be an even more challenging year because I’m not sure how many tricks are left,” Richman said in a Friday interview.

Consider these things:

– The costliest of Medicaid recipients, the elderly in nursing homes, are joining Medicaid rolls at a much faster rate than children or disabled and chronically ill adults. The administration expects about 100,000 more people to join state Medicaid rolls next year, boosting the number of recipients to more than 1.8 million, or one in seven Pennsylvanians.

– The administration’s budget proposal shows Pennsylvania’s share of Medicaid spending rising and the federal share dropping. The administration projects overall Medicaid spending in Pennsylvania will increase by $243 million, or 1.7 percent, to almost $14.3 billion in the 2005-06 fiscal year. The state’s share would go up by $285 million, or nearly 7 percent, to $4.5 billion.

Created in 1965, Medicaid is a federal program to help states pay for medical and long-term care for the poor and disabled. It now serves tens of millions of Americans. In Pennsylvania, the program is so large that for every $3.75 the administration expects to spend in federal and state dollars next fiscal year, $1 will go to Medicaid.

Lawmakers received the administration’s 2005-06 spending plan last week, and will hold hearings on it in the coming months. The 2005-06 fiscal year begins July 1.

Richman called the cost cuts “shared sacrifice” and said the administration did everything it could to spread the pain evenly.

“I’m not sure how much more ‘spread’ I can do without hurting people,” she said.

Under the administration’s proposal, recipients will owe higher prescription co-payments and more will have limits on how many times Medicaid will cover their medical services.

The state will buy drugs only from companies that agree to the biggest discounts and pharmacists will get less money to fill prescriptions for Medicaid patients. And hospitals, nursing homes, and managed care organizations would see lower reimbursement rates for some patients.

It is not yet clear how the Democratic administration’s proposals will wash with a Republican-controlled Legislature. So far, no one is suggesting a tax increase or that the state kick people off Medicaid.

J. Andrew Crompton, counsel to Senate President Pro Tempore Robert C. Jubelirer, R-Blair, agreed the outlook is not good.

He said he expects lawmakers will look closely at the administration’s plans to use $600 million – half from this year’s expected surplus and half from federal dollars that will not be renewed – that it cannot count on for 2006-07 Medicaid spending.

“I think you really leave yourself open for real problems in ’06-07,” Crompton said.

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Marc Levy covers state government for The Associated Press in Harrisburg. He can be reached at mlevy@ap.org.