Chalk up another one for the Bush administration, which has managed to anger many of the nation's governors and consumer groups and embarrass some moderate Republicans with its plan to turn the federal share of Medicaid into a block grant. Speaking of chalk, you could use it to draw an outline around this dead-on-arrival idea.
It's hard to fathom what is behind some of the recent health policy machinations at the White House. The president and Tommy Thompson one day announce plans to expand health coverage and the next come out with another idea that will have the net effect of reducing the number of people with insurance.
What other conclusion can be made from the Medicaid plan? Even Thompson, in describing the initiative, said that states would have "carte blanche" to "alter" coverage for some 15 million Medicaid beneficiaries.
These recipients covered under optional programs include children in families that earn up to 200% of the poverty level-or a little more than $29,000 for a family of four-the parents in those families, poor pregnant women, and some disabled and elderly people who earn just enough not to be covered under the mandated portion of the program. In other words, people for whom there is supposed to be a safety net.
The "sweetener" for states in this scheme is $12.7 billion in additional federal funds spread over the first seven years; Medicaid is a $257 billion-per-year program. This sounds good until you realize it is one of those "budget neutral" proposals. After seven years, the federal funding of Medicaid would fall off sharply.
Providers have a lot at stake here. The optional Medicaid coverage includes billions of dollars spent on hospital inpatient care and physician services. Providers often deride the program's low reimbursement rate, but much of what it covers would otherwise be uncompensated care. Medicaid provides 41% of the revenue of safety-net hospitals and a third of the revenue for community health centers.
It was interesting to listen to some of the congressional comments made at the winter meeting of the National Governors Association last week. Sen. John Breaux of Louisiana, a Democrat often closely aligned with President Bush on domestic policy, said of the president's Medicaid plan: "You will have drastic slashing of optional programs," including prescription drug coverage. Senate Majority Leader Bill Frist
(R-Tenn.) also was reluctant to embrace the president's stand. Frist wants to rescue Medicaid by cutting the huge costs of prescription drugs for the elderly out of that program through a new Medicare prescription drug plan. In the absence of that, he said he backs new short-term federal assistance for state Medicaid programs instead of drastic change.
There is no doubt that states are in a bind. Medicaid enrollment rose 8% and costs were up 13% last year. States are facing a combined budget deficit of $26 billion this year and a projected deficit of $68 billion next year.
As of December 2002, 21 states planned to reduce or freeze their Medicaid payment rates to providers, 25 were set to reduce acute-care benefits, and 27 states had plans or had already reduced or restricted eligibility for the program.
There are some optional services that may have to be restricted while the nation's healthcare system grapples with excessive cost increases. But prudent pruning of services is different than turning Medicaid into a block grant that would be slashed when governments are pressed for revenues. It is precisely when the economy weakens that people at the economic margins need that safety net.
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