With Maine’s high health insurance prices hurting family, business and state government budgets, the best path for the state’s Medicaid program is the most economically conservative – to spend the fewest dollars to the greatest effect. That means, foremost, providing coverage for the poor, which Maine can do with mostly federal dollars, so that the poor’s health care costs do not show up on private insurance bills.

The problem of cost shift has been documented by numerous national studies. For instance, Families USA found in 2005 that Maine’s average annual additional cost in family insurance premiums due to health costs for the uninsured was $705. Another indication of this cost shift could be seen here recently when a new category of residents qualified for Medicaid in 2002 and hospital charity-care levels dropped immediately, then rose again when the benefits for this population were reduced in 2005. Nearly half of the health care costs for this group, called noncategoricals in Medicaid parlance, comes from inpatient and outpatient hospital care – if their coverage goes away, their costs shift to private payers.

Noncategoricals are adults below the federal poverty level without minor children at home and who are not disabled. Their low incomes and health histories – about 25 percent of enrollees in the state program have chronic lung disease or diabetes – place them squarely in need of coverage. While Gov. John Baldacci’s budget for the next biennium would reduce the annual budget for this group from $104 million to $90 million, with the federal government paying nearly two-thirds, he would maintain the number of noncategorical residents eligible for Medicaid at 20,000 by moving the Medicaid program to a managed-care system. Legislative Republicans recently responded with a proposal to cap the program at $60 million, dropping the total enrolled to 13,300.

That change would save the state about $19 million over two years, but it would cost businesses and individuals who pay health care premiums. How much it would cost isn’t clear, though without the benefit of the federal two-to-one match on the Medicaid funding, it would not take much cost shifting on premiums to exceed the budget savings.

Republicans similarly propose to increase premiums and co-payments for some families receiving Medicaid – an understandable impulse given the share other families are paying. If legislators can find the right balance between payment levels and losing beneficiaries, they would be helpful. But as an Urban Institute study a few years ago showed and what other states that have tried similar cost-saving measures have found is that when these changes are made, participants either drop out or don’t get care at the right time and place. When that happens, costs are temporarily postponed then come back at a higher rate when participants are sicker and need higher levels of treatment. Maine Equal Justice Partners further argues that Maine already asks Medicaid beneficiaries for higher premiums and co-pays than the other New England states.

The urge by lawmakers to reduce health care costs is commendable, but the key to balancing a health care budget is to find ways for more efficient coverage of more residents rather than postponing costs by dropping coverage for the poor. Legislators would do best this session if they committed themselves to beginning a painstaking review of the system’s costs before they further restricted access to Medicaid.