Michigan hospitals and doctors are criticizing a budget proposal by Gov. Jennifer Granholm which would continue an eight percent cut to Medicaid reimbursement rates implemented in the current budget and create a new assessment on physicians to help the state pay for its Medicaid program.

Granholm is seeking to cover a projected shortfall of $1.5 billion for the fiscal year beginning October. 1. Michigan has seen state revenue drop sharply as a result of the state suffering a recession more severe than that hitting the rest of the country.

“These cuts will ultimately threaten healthcare access, not only for the Medicaid and uninsured populations, but for all Michiganians who rely on Michigan hospitals,” Michigan Health & Hospital Association President Spencer Johnson said in a written statement.

About one out of six residents of the state are covered by Medicaid.

The Michigan Medicaid program reimburses hospitals 74 cents for each dollar of care delivered, while paying physicians just 50 cents. Because of this disparity, the number of physicians treating Medicaid patients has declined in recent years.

A proposed physician assessment that would allow the state to increase Medicaid payments to physicians by 80% drew quick opposition from the Michigan State Medical Society.

“This budget proposal rehashes the old, failed proposals that would increase the cost of doing business in Michigan and drive people away to find opportunities in other states,” said a release from the MSMS. Also included in the budget proposal is creation of an Office of Health Services Inspector General to reduce Medicaid fraud and abuse, and repeal of a state law protecting pharmaceutical companies from product liability suits.