The Abercrombie administration intends to tighten eligibility and reduce benefits for adults in QUEST, eliminating an estimated 3,000 people from the state’s health plan for the poor, but has walked back limits on hospital stays that would have been the most restrictive in the nation.

State spending on QUEST has increased significantly but has not kept up with enrollment growth and costs during the state’s economic downturn. Enrollment in QUEST, the state’s version of the federal Medicaid program, has grown by 34 percent since June 2008, according to the state Department of Human Services. The health plan now covers 282,000 people, or roughly 1 in 5 Hawaii residents.

The Abercrombie administration hopes the eligibility and benefit changes will achieve $150 million in savings over the next two fiscal years — $75 million in state money and $75 million in federal money. The state spends about $800 million a year on QUEST, with an equivalent amount coming from the federal government, for about $1.6 billion in total.

The changes, which require federal approval, would not take effect until July.

Patricia McManaman, director of the state Department of Human Services, said the department has sought to shield some of the most vulnerable in QUEST. Children, pregnant women and the aged, blind and disabled would be spared.

"The governor is committed to ensuring that Hawaii’s poorest residents receive comprehensive health care. And we believe that this plan addresses that need," McManaman said.

"We’re appreciative, and the governor is appreciative, of the input from the community, from the providers, and from others on how to best shape this plan going forward.

"We’re confident that this plan will meet 99-plus percent of the needs of the community."

The department wants to restrict eligibility for adults in QUEST to 133 percent of the federal poverty level, or $28,356 in annual income for a family of three. Existing eligibility for the health plan is 200 percent of the federal poverty level, or $42,640 for a family of three.

Under the new income threshold, an estimated 3,000 adults would lose QUEST coverage in July and would have to find private health insurance. Social service advocates believe many of these people are the working poor, such as part-time workers or independent contractors who do not qualify for private health insurance through their employers.

The department also wants to limit inpatient hospital stays for medical and surgical services to 30 days a year, and cap hospital stays for behavioral health services at 30 days. The existing health plan contains no limits.

An earlier version of the proposal would have capped inpatient hospital stays for medical reasons at 10 days a year, which received national attention because it would have been the toughest restriction in the nation. McManaman said the state reconsidered after talking with social service advocates and the federal Centers for Medicare & Medicaid Services, which regulates federal health programs and had reservations about the restriction.

The department also wants to drop coverage for outpatient physical, occupational and speech rehabilitation, orthotics and optometry.

Many social service advocates anticipated that the state would make eligibility and benefit changes to Quest after enrollment and spending surged because of the recession. During the Lingle administration, department officials described QUEST as a "Cadillac" health plan whose generous benefits could not be sustained in its present form. A temporary infusion of federal economic stimulus money meant to help states contain increasing Medicaid costs helped Hawaii balance the state budget over the past two years.

Mary Talon, a Wahiawa activist on health care issues for Faith Action for Community Equity, a social service interest group, said she was relieved the state did not adopt tougher restrictions.

"We have enough problems as it is for our people that are under-insured or not insured at all," Talon said.

Part of the state’s "shared response" to QUEST’s funding challenges involves health insurers and health plans such as the Hawaii Medical Service Association, Kaiser Permanente and AlohaCare. Earlier this year, the state cut medical service payments meant for providers by 3 percent, although insurers and health plans have apparently absorbed the reduction rather than pass the cut on to doctors already reluctant to accept Medicaid patients. The state has also reduced administrative fees for insurers and health plans by 3 percent.

"The state has clearly been working diligently to be as generous as the fiscal situation allowed, and on behalf of our members, we appreciate it," John McComas, chief executive officer of AlohaCare, said in an email. "The wisdom of the decision is that people who need care will get it without the costs being shifted to the rest of the population."

State Sen. Suzanne Chun Oakland (D, Kalihi-Liliha), chairwoman of the Senate Human Services Committee, said she expects Quest enrollment to decline when the economy improves.

"Because once the economy is better and people are working, they would have private insurance again. They wouldn’t be on Medicaid," the senator said.

"Medicaid is there as a safety net, especially when it’s bad times and people can’t afford it."

Slimming down QUEST

Enrollment in the health plan — the state’s version of the federal Medicaid program — has surged during the state’s economic downturn, and now accounts for about 1 in 5 Hawaii residents. Spending increases have not kept pace with enrollment growth and costs. The state plans to tighten eligibility requirements and reduce adults’ benefits:

Eligibility

» Tighten eligibility to 133 percent of the federal poverty level, or $28,356 for a family of three. Existing eligibility is 200 percent of the federal poverty level, or $42,640 for a family of three.

» An estimated 3,000 adults would no longer be covered.

Benefits

» 30 inpatient hospital days for medical reasons. Existing plan allows for unlimited hospital days.

» 30 inpatient hospital days for behavioral health services. Existing plan allows for unlimited hospital days.

» No physical, occupational or speech rehabilitation.

» No orthotics.

» No optometry.

Exempt

Existing benefits would remain intact for children, pregnant women, and the aged, blind and disabled.