"Medicaid is really driving the states' budget problems," says Scott Pattison, executive director of NASBO. But states have few ways to rein in Medicaid costs.

Because Medicaid is a joint federal-state program, federal law prohibits states from tightening mandatory income eligibility standards. Some states have dropped optional state programs, such as payments for eyeglasses and adult dental care. Some are considering reducing payments to doctors, hospitals and nursing homes. In some states, nursing homes warn that they could be forced out of business if payment rates are cut. Some states are seeking waivers from federal requirements so they can shrink Medicaid rolls.

Ironically, however, cuts in programs that help older people stay in their homes could result in more people having to move into nursing homes, which typically cost twice as much. For example, one way California is curbing spending is by reducing the number of hours it will pay home aides to help people bathe, dress and eat. It is also considering reducing or eliminating funding for the Adult Day Health Care program.

"It's a very scary time for seniors who are in need of support services to stay in their homes," says Marilyn Ditty, executive director of Age Well Senior Services Inc. in Laguna Woods, Calif. "Cutting these programs may be a short-term solution, but the cost to the state over the next few years would be much greater."

Age Well is a nonprofit that provides a range of services to seniors in Orange County. The program helps fragile older people with significant health problems — such as diabetes, stroke and heart conditions — manage their health while staying in their own homes. Patients receive medical treatment, physical therapy, social services and meals. The program, which has more than 300 centers statewide and serves about 27,000 people, costs each patient about $72 to $86 a day, paid by Medi-Cal, California's Medicaid.

Few patients could afford the services themselves, so cutting state support could force many into nursing homes, says Ditty, a gerontologist for 30 years.

Across the country in rural Meadville, Pa., Cindy Hall, who manages the Medical Assistance Transportation Program in Crawford County, is also concerned about potential cuts. The program is funded by state and federal money and uses volunteers to drive Medicaid patients to doctors and treatments. The volunteers, who are retirees, are reimbursed for mileage — more than 900,000 miles a year. The budget is $1.7 million.

"We have a lot of people out there who are sick and couldn't get to doctors" without MATP, says Hall. There's no taxi service in the county.

Also in Meadville, Lorie Darcangelo is bracing for cuts in the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). Darcangelo directs a three-county WIC program that serves 4,000 women and children. The state health department has told Darcangelo to expect a reduction.

Next: Some analysts see hope down the road. >>