Medicaid Getting Battered On Various Gov’t Fronts

Medicaid emerged from a difficult couple of weeks in the Senate with more support than had been anticipated by health advocates.

Early in March, the Senate Budget Committee instructed the Senate Finance Committee to produce savings of $3 billion in entitlement spending.

The result, according to Sen. Max Baucus (D-Mont.), could have been a reduction in the federal share of Medicaid of $11 billion over five years because of the need to “pay for” the loss of revenue due to increases in child and marriage tax credits.

APA Medical Director James H. Scully Jr., M.D., wrote to the Senate leadership on March 10 to “express [APA’s] deep concern about Medicaid cuts. . . .”

APA Vice-President Steven S. Sharfstein, M.D., said, “Medicaid is the largest payer of psychiatric care and treatment in the nation for adult patients with severe and persistent mental illness and for kids with mental disorders. Cutbacks in Medicaid have a disproportionate impact on our patients, on their access to psychiatric treatment, and the quality of care in community settings.”

The Senate voted 53-43 in support of an amendment submitted by Baucus that had the effect of voiding the instruction to the Senate Finance Committee. Eight Republicans voted for the amendment.

As of press time, according to Families USA, action on Medicaid had shifted to the House of Representatives, where an anticipated budget resolution would require at least $2.2 billion in Medicaid cuts.

Twenty-nine Republicans in the House have written to the chair of the House Budget Committee, Rep. Jim Nussle (R-Iowa), urging him not to cut Medicaid.

President Bush’s Fiscal 2005 budget proposes a reduction of $1.5 billion in net federal funding for Medicaid and a reduction of nearly $16 billion over the 10-year period from 2005 through 2014, according to an analysis by the Commonwealth Fund (CF).

Most of the reductions would come about by closing a “loophole” permitting states to pay city- or county-owned health care facilities more than the actual cost of health services for Medicaid beneficiaries and to receive extra matching funds from the federal government and paybacks from the facilities.

The change would have the effect, however, of reducing Medicaid funds available to the states.

The 2005 budget request also calls for a reduction of $380 million a year in funds paid to states for administrative expenses.

At a National Governors Association press briefing in February, Democratic governors Kathleen Sibelius of Kansas and Jennifer Granholm of Michigan charged that the Centers for Medicare and Medicaid Services (CMS) was adding “new bureaucratic hurdles” to approval of waivers, which allow states flexibility in whom and what they cover.

Sibelius said, “This is all about money,” according to the CF report.

At a December meeting of the National Conference of State Legislatures, Chuck Milligan, a principal with the Lewin Group, told attendees that the Bush administration wants to revive efforts to turn Medicaid into a modified block-grant program.

He also said that CMS had been reluctant recently to approve states’ requests for Medicaid waivers. “[S]omebody at CMS said at a meeting a few months ago [that] it somewhat undermines the arguments that you need legislative block grants if you get the flexibility through waivers” (Psychiatric News, January 16).

The Bush administration’s block-grant proposal would enable states to cut services and populations served by Medicaid more easily and would reduce the long-term federal commitment to the program.

Despite these efforts to curtail the federal contribution to Medicaid, CMS is blocking actions by states that are trying to cut Medicaid costs by forming purchasing pools to negotiate lower costs for prescription drugs.

Michigan, Vermont, and South Carolina formed such a pool over a year ago, but the plan is still “under review” by CMS.

Vermont Gov. James Douglas (R) wrote in a letter to Tommy Thompson, secretary of Health and Human Services, “Unfortunately, when we answer one set of concerns or questions, CMS invariably finds an entire new set of questions that serve to delay implementation further,” according to a March 1 editorial in USA Today.

South Carolina abandoned the purchasing-pool effort, according to Robert Kerr, its director of Health and Human Services, because federal officials used the state’s application to demand answers about another Medicaid issue.

He said, “They were holding the multistate pool agreement hostage.”

A spokesperson for Thompson said that the states had not complied with federal rules on how to hire private contractors to negotiate the discounts.

These actions come at a difficult time for state governments.

According to a January issue brief from the Kaiser Commission on Medicaid and the Uninsured (KCMU), the nation’s economy has improved significantly, but that improvement is not likely to translate soon into fiscal relief for the states.

In addition, the short-term measures, such as issuing bonds, which many states used to ease their fiscal difficulties, will exacerbate the problems over the long term.

KCMU Executive Director Diane Rowland said, “Federal fiscal relief has clearly staved off deeper cuts this year, but the June [2004] end of fiscal relief is likely to bring more-aggressive cost containment next year.”

“Is the State Fiscal Crisis Over? A 2004 State Budget Update” is posted online at www.kff.org/medicaid/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=30459. “Some Governors Claim Waiver Approval Slowdown” is posted at www.cmwf.org/programs/healthbeat11.asp. ▪