States want to spend less on Medicaid

By ANDREW DAMSTEDT   |   May 10, 2005 at 4:06 PM
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WASHINGTON, May 10 (UPI) -- Governors and state legislators have been working on proposals to cut costs in Medicaid spending to help control its growth and save billions of dollars

But nothing is official -- at least not yet.

A New York Times article revealed the proposals by the National Governor's Association and the National Conference for State Legislatures that would require some beneficiaries to pay more for care and give states more rights to limit services.

The article also reported that the governors endorsed the idea of tax credits, to help individuals and small businesses buy insurance. State Legislatures proposed the idea to give states a fixed amount of federal money for long-term care.

State legislatures have proposed that the federal government give states a fixed amount of federal money for long-term care that would automatically increase each year. They also want to limit the ability of elderly people to qualify for Medicaid coverage in nursing homes.

Medicaid covers more than 50 million people nationwide. It was started to help low-income families but it now offers coverage to pregnant women, persons with disabilities and for seniors in nursing homes. Medicaid accounted for 21.4 percent of total spending of state's budgets in 2003, the National Association of State Budget Officers reported, surpassing primary and secondary education spending.

The Kaiser Commission on Medicaid and Uninsured reported that in 2003 the United States spent $275.5 billion on Medicaid, making it the nation's largest health insurance program. The United States projected budget for Medicaid in 2006 is $338 billion, with $193 billion being paid by the federal government.

The NGA's proposal, marked "for comment only - not for distribution," has been circulated among members of the media and congressional offices. The NGA says that most of the points made in the New York Times article are correct but the proposal is still undergoing revision and could be ready in the next couple of weeks.

The proposed draft is not the official policy of the NGA until the executive committee or the full body of governors reaches a supermajority vote, the NGA said in a statement. The goal of the draft proposal is to create a bipartisan plan for Congress to consider independent of the federal budget and reconciliation process.

A letter circulated with the 12-page proposal from the NGA Chairman and Vice Chairman stated, "Medicaid reform must be driven by good policy and not the federal budget process."

Congress passed a budget resolution April 28 that cut Medicaid spending for the first time in nine years. Medicaid will reduce its spending by $10 billion over four years beginning in 2007.

Ron Pollack, executive director of Families USA, a 23-year-old national organization for health care consumers, said the cutbacks made by Congress were troublesome because numbers were driving policy-making decisions.

"We should decide what we want the role of Medicaid to be in the future rather than establishing arbitrary (cost) reductions in the program," Pollack said. "What Congress did was put the cart before the horse."

The New York Times article reported that some beneficiaries would pay more for care and states would have more latitude to limit the scope of services. States would not have to provide the same comprehensive set of benefits to all Medicaid recipients but would be able to limit benefits for some people, like commercial insurers and the Children's Health Insurance Program.

Governors also believe that Medicaid overpays for prescription drugs and Medicaid should be allowed to extract savings from drug manufacturers. Governors want Congress to increase discounts and rebates that drug companies are required to provide state Medicaid programs.

There was also a plan to charge higher co-payments to families with incomes above certain levels.

The current position of the NGA, which hasn't changed since the leaks of the proposed drafts, is that Medicaid is costing states too much money, making it difficult for states to fund other programs like education, law enforcement and transportation.

And reforming Medicaid has been a top priority for governors because of a resolution passed at a governor's meeting in 2003 with the governors agreeing that states should no longer be responsible for health care for individuals currently enrolled in both Medicare and Medicaid. They argue that Medicare should provide all of the health care for these six million individuals enrolled in both programs.

Charles Milligan, executive director for the Center of Health Programs at the University of Maryland, said the biggest challenge facing Medicaid is that the enrollment growth has created budget challenges for state and federal governments.

"I think it is a very unique moment in history," Milligan said, "because there is a consensus growing between state and federal governments and Democrats and Republicans that flexibility is required. Treating the Medicaid program as distinct subgroups is required given the size the program has grown to."

Milligan gave a presentation to state legislature's last December on the challenges that face Medicaid. He said state legislatures saw it as inevitable that the Medicaid program had to change if the program was expected to continue to cover more than 50 million people nationally.

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