DALLAS, Feb. 7 (UPI) -- The Bush administration's proposed cuts in Medicaid spending will not go down well with state governments, although they are united in offering to work with federal officials on a long-term solution to the escalating cost of the program.
Governors and other state leaders were worried that the president's fiscal 2006 budget might mean a reduction in federal funding for the joint health-insurance program for low-income people, and they were not disappointed.
A $60 billion cut is proposed over the next 10 years, with the deepest cuts coming in the latter years, state officials said. The $300-million-a-year program currently serves about 46 million people, many of them nursing home residents and children.
In the past four years Medicaid has become the fastest-growing segment of state budgets. It accounts for about 22 percent of state spending and puts added stress on governors and state lawmakers who must balance their budgets.
In December the National Governors Association warned against shifting the cost burden to the states, which have only recently shown recovery from the worst budget shortfalls since World War II. They offered to work jointly on reforms.
In a statement Monday the governors again offered to work with the Bush administration on solutions but again warned of shifting the fiscal burden to states.
"We hope the administration and Congress will work with states to develop program efficiencies and other policies that can save both the states and federal government money, as opposed to shifting costs to the states through budget cuts, caps or other mechanisms," they said.
Medicaid is growing rapidly because healthcare inflation is at two to three times the general inflation rate and the caseload has grown 33 percent over the last four years, the association said, noting governors have little control over the causes of the rising cost of the program.
"The Medicaid program needs to be rethought and reformed," they said. "It needs to redefine the federal-state role in a way that makes the states' financial commitment sustainable over the long-run."
The Bush administration attempted to soften the cuts in Medicaid funding by stressing proposals for tax credits and other healthcare measures that they said would reduce the growing number of those uninsured.
Health and Human Resources Secretary Mike Leavitt said in Washington that the Medicaid program has a compassionate goal but it has failed to reach its potential.
"It is rigidly inflexible and inefficient. And it is not financially sustainable," he said. "Over the past 10 years, Medicaid spending doubled. And this year, for the first time ever, states spent more on Medicaid than they spent on education."
Leavitt said the administration wants to use community health centers, programs like Children's Health Insurance, health savings accounts and other new devices to expand health insurance to more people.
Leavitt said there would be "no programmatic cuts" in Medicaid, but state analysts said $60 billion would be lost to states because of new administrative formulas the federal government would require in determining funding.
Leavitt said U.S. taxpayers would spend nearly $5 trillion on Medicaid through the state and federal portions of the program in the next 10 years. The president's budget calls for federal spending of $193 billion in fiscal 2006.
The administration also said that Medicaid spending has not been growing as fast a previously estimated, which could result in $75 billion fewer federal dollars going into the program over the 10-year period, according to state analysts.
Many governors and legislatures have been taking their own action in recent years to keep their Medicaid costs in check. Some have cut benefits; others have restricted eligibility or increased co-pays to keep the program within limits.
In Florida, Gov. Jeb Bush has proposed privatizing much of the state's Medicaid program by contracting private health organizations to provide service. In New York, Gov. George Pataki wants to cap county Medicaid costs at 2005 levels and limit future increases.
The bipartisan national organization that represents state legislators appeared to be gearing up for a fight over the apparent cuts in federal Medicaid funding to the states.
"Sitting down and talking about reforms and efficiencies over time would be very useful, but making budget cuts today, without having had that conversation, for the purposes of deficit reduction, are unacceptable," said Michael Bird, federal affairs counsel for the National Conference of State Legislatures in Washington.
Bird said the organization remains open to working on long-term solutions to the troubled insurance program.
"We have a Medicaid task force and we are eager to work with this administration and the Congress to seek changes to the program that produce reforms and greater efficiencies, but without compromising those who need the services," he said.
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