Medicaid fix could hurt most vulnerable

Author: Robert Dodge

Published: May 10, 2005

At the top of Congress' to-do list: reduce the federal deficit. But amid the desire to cut spending, the nation's most vulnerable may be in the budget cutters' cross hairs - poor children, the elderly and the disabled.

In looking for savings, lawmakers have taken the politically risky step of aiming their deficit-cutting efforts at Medicaid. The strategy means fewer sacrifices for middle- and upper-income Americans and largely leaves intact President Bush's tax cuts.

The 2006 budget resolution, which serves as a blueprint for writing tax and spending bills, includes an additional $106 billion in tax reductions.

The Bush administration denies that Medicaid is being cut, arguing that its rate of growth is being slowed. Health and Human Services Secretary Michael Leavitt said specific proposals to curb spending were designed to curtail abusive and wasteful practices that have increased the federal match paid to state governments.

"This is not a discussion about cutting. Anybody who would suggest that we are cutting would not be reflecting the real dollar reality," Leavitt said.

Critics argue that society's weakest will be most at risk.

"Medicaid protects the most vulnerable - pregnant women, children, people with AIDS - and to take a pound of flesh from them is morally bankrupt," said Jonathan Oberlander, professor of social medicine at the University of North Carolina at Chapel Hill.

In going after Medicaid, political analysts said Republican congressional leaders picked a program whose low-income beneficiaries were relatively less politically active.

"The poor and the disadvantaged do not vote," said Rogan Kersh, a political science professor at Syracuse University who follows health-care issues.

But he adds an important caveat: "Going after entitlements is almost always a loser in American politics."

The budget resolution approved last month by Congress calls for nearly $35 billion in cuts from the government's mandatory entitlement programs between 2006 and 2010. The largest of the savings is $10 billion from Medicaid, which will not be implemented until 2007.

Identifying the specific savings will be left to House and Senate committees, setting the stage for an emotional debate during the rest of the legislative year.

With 53 million beneficiaries, Medicaid has become the largest health-care program, even surpassing Medicare, the program for the elderly. Created in 1965, Medicaid provides care for low-income people, uninsured children and some parents and pregnant women, as well as chronic and long-term care for the low-income elderly and people with disabilities.

Medicaid pays for nearly 50 percent of all nursing-home care and funds 55 percent of treatment for HIV/AIDS.

"All of these groups would be at high risk for either losing coverage or access to essential benefits if federal Medicaid financing were restricted," said an analysis by the nonpartisan Kaiser Family Foundation.

The National Governors Association projects that the states and federal government will spend $330 billion on Medicaid this year. And with Medicaid representing 44 percent of federal revenues awarded to the states, the governors are opposing Republican proposals for savings.

Medicaid has contained spending, limiting annual per capita growth to 6.7 percent between 2002 and 2004. That compares with 12.5 percent for private health insurance premiums.

But its overall costs continued to soar as enrollment grew by nearly 40 percent since 2000, because the recession left many families without health coverage, squeezing states.

For instance, Texas officials report that Medicaid expenditures rose 90 percent between 1994 and 2003 - outpacing the 65 percent growth in the state budget.

Medicaid costs also have risen because the elderly increasingly use the program to obtain long-term care not covered by Medicare. Long-term care accounts for 35 percent of Medicaid spending.

The upcoming debate will contrast the needs of the elderly, children and disabled with the desire by the White House and Republican leaders to reduce the federal deficit and extend the president's tax cuts.

Republicans will be under pressure to explain why they want to forgo $70 billion to extend Bush's capital gains and dividend tax cuts while proposing to cut health benefits for poor children, the elderly and disabled.

Finding specific savings will partly fall to Rep. Joe Barton, R-Texas, chairman of the House Energy and Commerce Committee. And he argues that repealing any of the 10-year, $1.8 trillion Bush tax cuts would undermine the economy and mean less tax revenue to pay for federal programs.

"It would be counterproductive. I am trying to grow the economy, not contract it," Barton said.

According to an analysis by the nonpartisan Urban-Brookings Tax Policy Institute, nearly 60 percent of the Bush tax cuts go to taxpayers earning more than $100,000 annually, and 17 percent go to those earning more than $1 million.

Supporters argue that the wealthy pay the most taxes and tend to save or invest their tax cuts in growth-producing investments. But Rudy Penner, a former director of the Congressional Budget Office, said upper-income individuals also spend tax cuts on a wide variety of goods, including such luxury items as boats and jewelry.

"How much ends up going into investment is controversial," said Penner, a budget expert at the nonpartisan Urban Institute.

The unfolding debate has left health-care administrators worrying about the effects on hospitals that serve children and the poor.

Ron Anderson, president and chief executive officer at Parkland Memorial Hospital in Dallas, said his hospital was still suffering from cuts by Congress in the 1990s and more recently by the state. He fears local taxpayers may not be sympathetic to picking up the costs if federal funds get tighter.

"It comes down to local taxpayers, and they are just as conservative as the people in Austin and Washington who do not want to raise taxes," Anderson said.

The Bush administration proposed to save money by cracking down on accounting gimmicks used by the states to boost their federal match. They also proposed making it more difficult for seniors to qualify for long-term care and cutting prices the government pays pharmaceutical makers.

Some public health officials are concerned that Congress may force decision-making on the states. To do so, lawmakers would convert Medicaid into a block grant program - luring states with greater flexibility and upfront money but ultimately containing growth with strict spending caps.

In addition to living with fewer resources, that also could force states to make painful choices between funding health care for poor children and long-term care for the elderly.

Leavitt said the Bush administration has no intention of turning Medicaid into a block grant program. But Democrats are suspicious, perhaps with reason: Barton said he sees some benefits in such a proposal.

The Republican congressman said states would get more flexibility, permitting innovations such as allowing the elderly to get long-term care at home. "I do not mind using the term block grant, although my Democratic friends hate it."