State Human Services Director Lillian Koller says there is room in Hawaii's “;Cadillac”; Medicaid package to reduce benefits without significant hardship to adult clients.

A $42 million reduction in Medicaid benefits over the next two years—4.3 percent of the total spent by the state for Medicaid health coverage—was proposed by Gov. Linda Lingle among other actions to address the state's fiscal crisis.

However, legislators and health care advocates are concerned about the impact on low-income families.

“;I'm not certain there is a way to do it (reduce benefits) other than denying services,”; said Senate Health Chairman David Ige (D, Aiea-Pearl City).

“;We would be open to looking at other sources of funds to try to meet the shortfall other than just cutting it out of the budget,”; he said, pointing out for every dollar in state funding cut from Medicaid, the state will lose $2 in federal matching funds.

As an alternative to reducing Medicaid benefits, Sen. Suzanne Chun Oakland (D, Kalihi-Liliha), Human Services and Public Housing Committee chairwoman, suggests “;revisiting the idea of borrowing money from some special funds that could draw down additional federal dollars and make some provision when the economy gets better to replenish funds.”;

She said she talked to Koller about the possibility, pointing out the Hurricane Relief Fund has not been tapped. If the state drew $2 in federal money for every dollar borrowed from the fund to spend on Medicaid, she said, “;That potentially could free up some general funds that could replenish the special fund.”;

Budget and Finance Director Georgina Kawamura said the hurricane fund has about $184 million, but the governor cannot use it without the Legislature's authorization.

Children's benefits and Medicaid eligibility for adults and children will not be affected, Koller said.

But about 112,000 adults are receiving “;Cadillac”; Medicaid benefits—more than most other states with no limit on utilization, she said.

“;It's a package of benefits we can't afford to maintain anymore,”; she said, adding that this is “;an opportunity to do some right-sizing of the program so it is more sustainable over time”; and more in line with other states and commercial health plans.

The total Medicaid budget for the next two years is $2.7 billion in federal and state funds, Koller said. “;We really have a lot of room (for reductions) because our benefit package is so rich, so over-the-top rich.”;

She said the Med-QUEST Division is looking at benefits, utilization and expenditure data to determine where reductions can be made “;that will produce the needed savings without compromising the quality of health care for adults in the Medicaid program,”; Koller said.

Beth Giesting, executive director of the Hawaii Primary Care Association, which administers 14 health care centers statewide, said the 4.3 percent reduction sounds modest, but Medicaid rolls are growing because so many people are without jobs and indigent.

If benefits are reduced, she said, people will be unable to get the health care they need, and more will end up in emergency rooms or hospitals.