STATES GET A HANDLE ON MEDICAID BETTER ECONOMY, FEDERAL-LAW CHANGES HELP.

Byline: HARRISON SHEPPARD Staff Writer

SACRAMENTO -- For the first time in many years, California and other states have been able to control spending on Medicaid services thanks to an improved economy and changes in federal law.

While California's Medi-Cal program is still growing, a combination of prescription drug discounts, a strong economy and changes in federal law have brought that growth rate to more manageable levels this year, state officials said Monday.

``(The growth rate) has slowed down and it's continuing to slow down, which is actually great news when you look at health care costs,'' said Stan Rosenstein, deputy director of Medi-Cal Care Services in the state's Health and Human Services agency.

The 2006-07 budget for Medi-Cal is $13.8 billion. That reflects a growth rate of 7.3 percent this year, down from 9.6 percent in fiscal year 2005-06.

Rosenstein said given the state of health care costs, any growth below 9 percent is a positive sign. By comparison, he said, premiums for private health insurance are growing at a faster rate.

Most of California's increase is attributed to a growth in health care costs, while the caseload has stayed comparatively flat. There are approximately 6.7 million people on Medi- Cal, up from 6.5 million in 2003-04.

Federal officials recently indicated Medicaid spending nationwide has dropped this year for the first time since the program was created, USA Today reported Sunday, citing federal Bureau of Economic Analysis figures. During the first nine months of this year, federal Medicaid spending fell by 1.4 percent.

But some independent experts and California officials said the federal figures do not reflect the full costs associated with the program, which they said is still technically growing across the country, but at a slower rate than in the past.

For example, several experts noted that one reason for the dramatic national change was that the federal government shifted some costs for prescription drug coverage from the state programs to the federal Medicare program.

But then, in a move that was not reflected in the figures, it took back a nearly equal amount of money from the states in what was dubbed a ``clawback.''

``It's almost a wash with the clawback,'' said Vic Miller, a senior fellow at the research group Federal Funds Information for States. ``You're taking it out of the Medicaid program, but you're having to put it somewhere else.''

Some states even complained that the clawback formula penalized them more than it helped.

In California, Rosenstein said the clawback ended up costing the state about $54 million more than the savings.

But the clawback aside, experts said Medicaid is slowing for many reasons, including an improving economy that has led to more people getting jobs and obtaining private insurance. Also the federal government tightened some of its administrative rules for Medicaid coverage.

Rosenstein said California has also been able to negotiate prescription drug discounts and rebates with drug manufacturers and pharmacies in recent years.

Medicaid covers the poor and some elderly and its costs are shared by the states and federal government, while Medicare is primarily designed for the elderly and is entirely funded by the federal government. Medi-Cal is California's version of Medicaid.

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