Medicaid Cuts to Have Wide-Ranging Impacts

Two days after releasing his proposed budget for next year, President Bush signs into law Wednesday budget changes for the current fiscal year. The measure will reduce federal red ink by an estimated $39 billion over the next five years. But it also will make changes to the Medicaid health program that could have a bigger impact than the dollar amounts suggest.

President Bush has long favored a greater role for the private sector in health care and a smaller one for the government. But in his State of the Union address last week, he did make this vow: "Our government has a responsibility to help provide health care for the poor and the elderly, and we are meeting that responsibility."

Ironically, one of the ways Republican lawmakers say they're meeting that responsibility is by scaling back the Medicaid health program for the poor. It's now the nation's largest health insurer, with more than 50 million beneficiaries. But its rapid growth has sorely strained budgets at the state and federal levels, which share funding responsibility.

This isn't the first time Congress has scaled back Medicaid spending as part of the budget process. But Medicaid experts like Sara Rosenbaum of the George Washington University School of Public Health say previous bills have largely targeted states or health care providers.

"This is the first time in certainly 30 years, that efforts to try to rein in Medicaid spending have been directed at beneficiaries, and the changes that are contained in this bill completely remake the Medicaid program," Rosenbaum says.

For example, under the new provisions, states would be free to redesign their benefit packages, Rosenbaum says. "These changes go to the heart of what it means to be insured. They are all about allowing states to fundamentally change the meaning of coverage for around 50 million people."

What Rosenbaum calls the dismantling of Medicaid's benefit package is particularly ironic, because historically, the budget process has mostly been used to expand the program. New coverage for poor children and pregnant women, quality standards for nursing homes, and even the State Children's Health Insurance Program were all enacted as part of bills like the one President Bush will sign Wednesday.

Rosenbaum — who helped write most of those Medicaid expansions in the 1980s and '90s — says that for children in particular, coverage has never contracted — until now. "This is the first time in 40 years, that is since the program was enacted, that we actually have policy coming out of Congress that reduces Medicaid's commitment to the poorest children."

And it's not just children who will feel the bill's impact. Low-income seniors who need nursing home care will be hurt, too, says John Rother, policy director of the senior group AARP.

He says Congress "went after people who had already spent down whatever savings they had to qualify for Medicaid, and they're disallowing some of those people from getting any assistance whatsoever, because they've given money to a grandchild or given money to charity."

Rother is referring to a provision that makes it harder for seniors to qualify for Medicaid nursing home care if they've disposed of assets in the previous five years.

Republican lawmakers who wrote the bill say advocates are overreacting, particularly on the changes that affect coverage for children.

Charles Grassley heads the Senate Finance Committee and led the Senate negotiations on the measure. He says the bill does only what the nation's governors asked for. "Governors, including my own governor, said, 'You give us more flexibility, we can save the states money, we can save the federal government money, and we can even serve more people,'" Grassley says.

But New Mexico Democratic Gov. Bill Richardson says these aren't the changes he had in mind. "These are cuts that are actually going to hurt kids in working families, people that pay their bills and deserve health care," he says.

And the bill the president is slated to sign isn't the end of the cuts the administration envisions for Medicaid. The fiscal 2007 budget unveiled Monday calls for an additional $12 billion in reductions over the next five years.

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