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Crisis Faces State’s
Most Vulnerable Elderly

Thousands of older Arkansans face a crisis. Medicaid programs like ElderChoices and Personal face drastic reductions or perhaps elimination. A combination of rising health care costs and shrinking state revenues is the culprit.

A report from the National Conference of State Legislators reveals that States face unprecedented budget shortfalls. The news gets worse for budget planners. “The magnitude of next year’s budget gap is startling,” said NCSL President Angela Monson, a state senator from Oklahoma.

The unthinkable is happening. On February 1, 2003 the state of Oregon stopped paying for the care of 4,100 frail Oregonians who need help with bathing, dressing and other tasks of daily living according to The Oregonian. An additional 4,800 people will soon have their services cut off.

The same story could be repeated in Arkansas. For the forth time in this fiscal year declining revenues have forced policy makers to make budget cuts.

The outlook for next year is gloomy. Faced with increasing demand and increasing health care costs, the Arkansas Department of Human Services requested a $100 million dollar increase in state funding. Most of the money would be used to shore up the Medicaid program.

Medicaid helps thousands of Arkansans with their health care needs. For low income elderly and people with disabilities, it helps cover Medicare’s co-payments and deductibles, nursing home care, prescription drugs, personal care and other forms of home care. For children, it covers a wide range of services and preventive care. It ensures pregnant woman get proper prenatal care.

Governor Huckabee included the $100 million for DHHS in his Executive Recommendations to the Arkansas Legislature. To fund the increase in the DHHS budget, education and other state services, a 5/8 cents sales tax increase was proposed.

As of February 25th no consensus among legislators has been reached regarding how to raise additional revenues. Like Oregon, this may lead to the loss of services to thousands of Arkansans. Older people may be hit the hardest. Federal law requires States to provide care to children as a condition of participating in the Medicaid program. Most programs for older folks are “optional,” meaning the State does not have provide them as a condition of participating in Medicaid.

This is not to say children will be spared from some cuts. Services to people with developmental disabilities could be eliminated along with services to older people. Inpatient psychiatric services to children could be eliminated.

The impact of the cuts will be substantially greater than $100 million dollars in services. Arkansas receives about three dollars from the federal government for every one dollar of state revenues. Therefore the $100 million in state funding matches $300 million in federal dollars for a total impact of $400 million.

The Families USA foundation points out these dollars pass from one person to another in successive rounds of spending: “For example, health care employees spend part of their salaries on new cars, which adds to the income of employees of the auto dealership, enabling them to spend part of their salaries on washing machines, which enables appliance store employees to spend additional money on groceries, and so on.” Economists call this the “multiplier effect.”

Because of the three-to-one matching rate, Arkansas has one of the highest rates of return per dollar invested in the Medicaid program. Families USA estimates, because of the multiplier effect, the total fiscal impact on the state to be greater than $2 billion dollars if the $100 million in Medicaid funding is not secured.

While economists can debate the total fiscal impact of cutting Medicaid services, the immediate impact of cuts will be felt by recipients and their families. Not since the Medicaid program was introduced have such dramatic reductions loomed on the horizon.

Hope for the best, but prepare for the worst.