Medicaid Cuts

Medicare, the health insurance program for Americans over 65, is getting much attention these days, because of the president’s much-contested plan to provide prescription benefits for low-income seniors. Medicaid, on the other hand, which is supposed to provide medical care for poor people of all ages, is facing changes of a decidedly negative kind that threaten to leave millions with no health benefits at all.

Medicaid covers 45 million people—five million more than Medicare. Its cost has been borne more or less equally by the federal government and the states that administer it. Throughout the boom years of the 1990’s, the states were largely able to cope with the costs—the second largest after education. But now, in a period of economic downturn, they face their worst budget crisis in 50 years as the costs of Medicaid continue to grow dramatically.

There are three main causes for this sharp growth in expenditure: the spiraling costs of prescription drugs, the accompanying upsurge in the price of long-term care for an increasingly aging population and the fact that Medicaid has been serving more and more low-income people. The same is true of the State Children’s Health Insurance Program, which for five years has been providing coverage for children whose low-income families are not quite poor enough to be eligible for Medicaid. Because of budget constraints and a reluctance on the part of the administration to provide fiscal relief to the states for these two programs, cuts are already well under way. The Kaiser Commission on Medicaid and the Uninsured found that 18 states had either tightened Medicaid eligibility rules in 2002 or plan to do so in 2003. Nebraska, for instance, reduced the income level at which families can quality for Medicaid so sharply that an estimated 12 percent will be dropped from the rolls. Similarly, the Oklahoma legislature has given its approval for large cutbacks in the eligibility of children, seniors and disabled persons, removing as many as 80,000 from coverage and all but eliminating the Schip program there.

A report by Families USA has highlighted the value of Schip, citing one study that found that enrollment in a children’s health program, even for a year, brought with it the impressive benefit of a drop to 16 percent from 57 percent among those with an unmet or delayed health care need. The report also points out that pressure to reduce health spending comes at the worst possible time, as family heads lose jobs and, with them, access to employer-sponsored benefits. The administration itself has warned that in the next three years, Schip enrollment may drop by as many as 900,000. This is not only because of the recession; it is also an effect of a so-called “funding dip” that was built into the original Schip funding arrangements as part of the 1997 Balanced Budget Act.

Making the overall picture still darker, Health and Human Services Secretary Tommy Thompson introduced an administration proposal in January to restructure Medicaid in a way that would pressure the states to accept block grants rather than continue with the present system of roughly half-and-half federal-state cost sharing. Advocates like Families USA, however, point out that by placing a cap on Medicaid costs, block grants would limit the states in their ability to respond to increased needs for Medicaid during economic downturns in the future and would put health care at risk for millions of poor people.

Similarly, Sharon Daly, vice president for social policy at Catholic Charities USA, considers the measure “a dangerous proposal.” She told America that because Medicaid is an open-ended entitlement for the states, federal matching funds rise and fall with actual state expenditures. “As state costs have increased to accommodate unpredictable factors—like rising costs of health services for new treatments and new epidemics like H.I.V.-AIDS—as well as factors like the aging of the Medicaid population, along with an increase in eligibility for the working poor,” she said, “the federal share of the costs rose automatically.” But the administration’s proposal, she noted, would create preset limits for 10 years, a situation that would force states to bear any additional costs alone or cut health services for some of the most vulnerable people in the United States.

Last year and again this year, Catholic Charities USA wrote Congress recommending an increase in the government’s matching share of Medicaid spending in the states. Even temporary fiscal relief would help preserve the health care safety net for the poor, the elderly and the disabled. Already torn, and threatened even more today because of ill-advised tax cuts and increased military spending, this safety net for the health requirements of the neediest Americans should be strengthened, not weakened. Bipartisan support in Congress could provide the strengthening that is called for.