October 2005 Action Alert: Medicaid
by The Washington Office of Public Policy
Of all the forms of inequality, injustice in health care is the most shocking and inhumane. — Martin Luther King, Jr.
At the end of October 2005 the House of Representatives Energy and Commerce Committee and the Senate Finance Committee will convene to discuss the possibility of cutting $10 billion in funding from Medicaid as part of the budget reconciliation process. The budget reconciliation process is used “when Congress issues directives to legislate policy changes in mandatory spending (entitlements) or revenue programs (tax laws) to achieve the goals in spending and revenue contemplated by the budget resolution.” This process is an optional procedure and is not required every fiscal year as is the budget resolution.1 After the Committees make their final decisions on the amount of funding that will be cut from Medicaid a final vote will be taken by the entire House of Representatives and Senate. Urgent action is needed to stop funding cuts to “the largest source of funding for medical and health-related services for America’s poorest people.”2
Established in 1965 as part of the Social Security Act, Medicaid is a health insurance program which is jointly funded by the federal government and the states to provide health insurance to low-income children, pregnant women, parents of dependent children, the elderly and people with disabilities.3 Enrollment in Medicaid and SCHIP (State Children’s Health Insurance Program), a program created by Congress to extend insurance benefits to more low-income children, has increased over the past several years. Today about 47 million people rely on Medicaid for their health care. Children are the largest group of Medicaid beneficiaries with about 50% (23.3 million), while adults constitute 25% (11.6 million), older adults 9% (4.4 million) and disabled persons 16% (7.7 million).4 Most Medicaid beneficiaries have income levels which are below the poverty line ($16,090 for a family of three in 2005, or about $1,340 a month).5
The growth in Medicaid and SCHIP enrollments is attributed to changes in the economy and decreases in employer-sponsored health insurance.6 Between 1998 and 2003, enrollment in the Medicaid program increased by 30%.7 In addition, “increases in the number of very old and disabled persons requiring extensive acute and/or long-term health care, increases in drug costs, and increases in payment rates to providers of health care services,” are causing Medicaid to have to stretch its dollars even further.8
Funding for Medicaid comes from both the Federal government and from state governments. The amount the Federal government pays to each state for Medicaid, known as the Federal Medical Assistance Percentage (FMAP), is determined yearly for each state by a formula that compares the state’s average per capita income level with the national average. By law, the amount of funding the Federal government provides to states cannot be lower than 50% or greater than 83%. The Federal government also provides funding to states for expenditures on the administration of the program.9
States are faced with the challenge of rising costs and budget shortages. According to a fifty state survey conducted by the Kaiser Commission on Medicaid and the Uninsured, “Medicaid was under intense pressure to control costs because it is the second largest program in most state budgets and because Medicaid has been growing faster than other state programs. In response, states have implemented a series of measures designed to slow the rate of growth in Medicaid spending including reductions in Medicaid eligibility, benefits and provider payments.”10 Some proposals have also included, “cutting payments to doctors and hospitals, limiting reimbursement for prescription drugs, capping federal spending, abolishing certain state financing strategies, preventing seniors and people with disabilities from transferring assets in order to qualify for Medicaid coverage of long-term care, limiting beneficiaries’ right to sue state Medicaid programs for violating federal law, limiting covered services, cracking down on fraudulent providers, and increasing charges to low-income beneficiaries.”11 In efforts to save money, the federal government approved plans submitted by Florida to change its Medicaid system. The changes offered by the state of Florida are considered to be the biggest changes ever made in Medicaid and “are expected to become a model for other states seeking to save money.”12 The plans submitted by Florida changes “Medicaid’s traditional coverage where the state pays health-care providers for a defined set of benefits to one where private managed care organizations set up health-care plans and beneficiaries choose the plan that best suits their needs.”13
Medicaid has provided many benefits to low-income people who otherwise would not have access to health care services. A state’s Medicaid program must offer certain services as required by law. These include; inpatient and outpatient hospital services, prenatal care, vaccines for children, physician services, Nursing facility services for persons over 21 years old, family planning services and supplies, rural health care clinic services, home health care services, laboratory and e-ray services, pediatric and family nurse practitioner services, nurse-midwife services, federally qualified health-center and ambulatory services and early and periodic screening, diagnostic and treatment services for children under 21 years old.14
Since 1997, the number of uninsured children has dropped from 23% to 15% because of Medicaid and SCHIP.15 One in four children relies on Medicaid for health care coverage.16 Medicaid’s long-term support coverage provides much needed support for senior citizens and people with chronic illnesses and disabilities. People living in rural areas rely on Medicaid for medical services and jobs.17 Medicaid is also crucial to the African American community. Medicaid covers 44% of African American children, 72% of poor African American children, 38% of poor African American adults, and 38% of poor African American seniors.18
Earlier this year Congress voted to reduce the budget by $35 billion by reducing entitlement spending over the next five years. Currently Congress is debating raising the cuts from $35 billion to $50 billion. The spending cuts would primarily come from Medicaid and other programs such as food stamps, child care, Medicare and student loans.19 The cuts, as part of the budget reconciliation process, are what is being debated in Congress this month and will be voted on in early November. One bipartisan proposal introduced by Senators Chuck Grassley (MT) and Max Baucus (IA) along with members of Congress from the states hit by Hurricane Katrina, which may be attached to the budget reconciliation bill, would allow for immediate Medicaid coverage to low-income Katrina survivors. “Without the need for a waiver, states could immediately enroll low-income Katrina survivors in Medicaid. The Federal government would pay 100% of the cost of coverage and administration, ensuring that states get the assistance they need immediately.”20 Numerous attempts were made in September to pass this proposal to expand Medicaid coverage to Katrina survivors but the proposal has been opposed by the Administration and leaders of the Senate.21
The Committee on Energy and Commerce
1 U.S. House of Representatives Committee on Rules website. http://www.rules.house.gov/archives/bud_rec_proc.htm
2 Center for Medicare & Medicaid Services, U.S. Department of Health and Human Services website. http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.as
3 Scott, Christine. Medicaid: The Federal Medial Assistance Percentage (FMAP). Congressional Research Service Report for Congress. June 15, 2005.
4 Center for Medicare & Medicaid Services, U.S. Department of Health and Human Services website. http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp
5 Ku, Leighton. Medicaid: Improving Health, Saving Lives. Center on Budget and Policy Priorities. August 17, 2005.
7 The Medicaid Commission. Report to the Honorable Secretary Michael O. Leavitt, Department of Health and Human Service and the United States Congress. September 1, 2005.
8 Center for Medicare & Medicaid Services, U.S. Department of Health and Human Services website. http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp
9 The Medicaid Commission. Report to the Honorable Secretary Michael O. Leavitt, Department of Health and Human Service and the United States Congress. September 1, 2005.
10 Smith, Vernon, Rekha Ramesh, Kathleen Gifford, Eileen Eillis, Robin Rudowitz, Molly O’Malley. The Continuing Medicaid Budget Challenge: State Medicaid Spending Growth and Cost Containment in Fiscal Years 2004 and 2005 Results from a 50-State Survey. Kaiser Commission on Medicaid and the Uninsured. October 2004. pg. 1
11Dorn, Stan and Avram Goldstein. Medicaid on the Chopping Block: Dangerous Times for Health Care and Economic Stability. Joint Center for Political and Economic Studies. September/October 2005. pg. 15
12 Gomes, Alan. Florida Medicaid Plan Gets Nod. The Palm Beach Post. October 20, 2005
14 Center for Medicare & Medicaid Services, U.S. Department of Health and Human Services website. http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp
15 Mann, Cindy, Jocelyn Guyer and Joan Alker. A Success Story: Closing the Insurance Gap for America’s Children Through Medicaid and SCHIP. Family Coverage Matters Issue Brief. Georgetown University Health Policy Institute Center for Children and Families. July 2005.
16Why Medicaid Matters. Medicaid Matters. http://www.medicaidmatters2005.org/why.php
18 Dorn, Stan and Avram Goldstein. Medicaid on the Chopping Block: Dangerous Times for Health Care and Economic Stability. Joint Center for Political and Economic Studies. September/October 2005. pg. 15
19 Neal, Terry M. The Cutting Cost of Spending. The Washington Post. October 20, 2005.
20 What to do Now. Federal Update and Action Steps. Medicaid Matters. http://www.medicaidmatters2005.org/what.php
21 Carey, Mary Agnes. Senate Panel Targets Medicare for Spending Cuts as House Keeps Focus on Medicaid. Congressional Quarterly. October 14, 2005.
Date posted: Oct 24, 2005