About 4,500 Hawaii residents will be cut from government-funded health services, and most remaining on Medicaid rolls will receive reduced services beginning Jan. 1, the state Department of Human Services announced yesterday.

Human Services Director Pat McManaman says she is "cautiously optimistic" that the 4,500 people will be able to pick up health care by speaking to their employers.

"There’s some individuals in the community whose employers need to step up to the plate and to provide health care services, and they may not be providing them services, in violation of the law," she said.

An additional 100,000 healthy adults under 65 will be affected by reduced services, with limits of 20 outpatient visits, 10 inpatient days and three outpatient surgical procedures a year.

"It’s a reduction that focuses on the core services that meet the most important needs of our recipients" and meets the needs of 99 percent of the people served by the state, said Dr. Kenny Fink, Human Services Med-QUEST administrator.

Although the changes were supposed to save the state $75 million through the next two years, Medicaid enrollment has grown to 271,000, an increase of 60,000 since 2008.

Instead, the state will increase its spending for Medicaid benefits to $787 million in fiscal year 2013, up from $549 million this fiscal year.

McManaman said the decision was difficult but necessary given the fiscal reality the state is confronting, and acknowledged the cuts will "have an impact on the safety net" as well as on federally qualified health care centers, hospitals and other health care providers.

The 4,500 individuals affected are healthy adults, able to engage in gainful employment, not aged, severely disabled, blind or pregnant, she said.

Those losing eligibility are currently enrolled in QUEST Net and QUEST-ACE state programs.

The decrease in enrollment comes because the plan qualifies only those with income less than 133 percent of the federal poverty level. The current plan allows those making up to 200 percent of the federal poverty level to participate.

Under the new plan, healthy adults earning more than $34,194 for a family of four will no longer be eligible for Medicaid. The current limit is $51,420 for a family of four.

McManaman said the changes will focus on the neediest people in the state.

Doctors complained the new proposals do not address problems with the Medicaid system, which deter many from participating.

"I don’t see anything in here that does anything with overly burdensome managed care requirements," said Dr. Stephen Kemble, who practices internal medicine and psychiatry in private practice and at Queen Emma Clinic.

He said that in 1985 most private physicians in Hawaii provided some service to the poor, but because the Department of Human Services now outsources services by contracting with insurance companies to provide Medicaid managed care, few want to deal with the "obstructions."

Dr. Linda Rasmussen, an orthopedic surgeon, said, "The reimbursement is so slow, but then the number of staff I have to hire to fight for reimbursement for payment make one almost want to pull out your hair. It’s almost as if you want to give the service for free to get rid of all that."

Advocates for people served by Medicaid worry some of the 4,500 individuals being cut might have serious medical needs, and that could have dire consequences.

Grayson Wideman, with United Self Help, related how one of his clients, a diabetic, was dropped from a program and had his insulin cut. He found the man extremely disoriented and stayed with him to get him help.

As for the new plan, Wideman said, "They don’t have a set plan for how they’re going to implement some of these things."

The Associated Press contributed to this story.