Cut and Paste: Congress Considers Cutting Medicaid and Adding Tax Breaks

On March 17, 2005, the Senate narrowly passed a bipartisan measure that stopped $14 billion in cuts to Medicaid.

The funding cuts, which were requested by President Bush, were considered unfair by a handful of Republicans who joined Democrats to successfully block that portion of the Bush agenda.

As to be expected, The White House and Senate Majority Leader Bill Frist, M.D. (R- Tennessee) lobbied against the measure, pressuring its sponsor, Gordon H. Smith (R- Oregon) to withdraw it.

The Senate decision to maintain full Medicaid funding is likely to create a conflict with the other body of Congress, the House of Representatives, which passed its budget resolution with the Medicaid cuts in tact. Members of both the House and Senate have to agree on a final budget resolution, which may be delayed by the dispute over Medicaid.

Last year, a disagreement between the House and Senate prevented passage of a final budget resolution, so congressional committees were forced to operate under the previous year’s budget guidelines.

Some Republicans want to send a message

Senator Smith says he won’t hold up the final budget in the name of Medicaid. He offered the amendment in order to send a message to Republican leaders and the American public, to show that not all Republicans favor major cuts to health insurance for the poor.

About 34 million Americans get health insurance through Medicaid, many of them elderly and/or disabled, all of them low-income. The program is shared by the federal government and state governments; the federal government matches the funds that states pay for Medicaid. The states determine the structure of their programs, but they have to serve anyone who is eligible; those who are eligible are entitled to services.

The number of people eligible for Medicaid continues to grow each year, but states will have trouble affording the program if the federal government slashes its funding. That’s why governors across the nation are opposed to the cuts.

Medicaid growth

In Florida, Medicaid already takes up 24 percent of the state budget at $14 billion. The Florida Department of Health and Human Services estimates that by 2009, Medicaid will comprise 35 percent of the state budget at $23.7 billion. By 2015, it will eat up 59 percent of the state budget at $50.4 billion. Florida’s Medicaid administrator says the program needs reform and continued support from the federal government.

In Pennsylvania, Medicaid will be $400 million in debt in 2006 because of federal cutbacks and cost growth. Growing costs are due to rapidly rising prescription drug costs - outpacing all other health care costs - and by a seven percent annual enrollment increase driven by the state’s growing elderly and uninsured population.

Why cut Medicaid?

Republicans in favor of the cuts say that the $14 billion savings would help control the deficit and enforce fiscal discipline.

Both sides recognize that entitlement programs like Medicaid and Medicare are growing so rapidly that their costs may be unsustainable in the future. But fiscal conservatives want to cut back mandatory programs now.

Republican Senator Judd Gregg of New Hampshire, an outspoken proponent of the cuts, insists that the $14 billion cutback will modestly curb Medicaid’s growth while reducing the national debt. But opponents argue that the cuts would shift the cost to overburdened states that would then be forced to cut Medicaid benefits.

Democrats argue that the Medicaid cuts should not be coupled with huge tax breaks. It’s unfair, they say, to pass a budget that slashes health care funding for America’s elderly and disabled while offering $134 billion in tax cuts.

In addition to 44 Democrats and Senator Smith, Republicans Mike DeWine of Ohio, Norm Coleman of Minnesota, Susan Collins and Olympia Snowe of Maine, Lincoln Chafee of Rhode Island, and Arlen Specter of Pennsylvania voted to stop the Medicaid cuts.

Cut and paste

Republicans argue that tax cuts stimulate the economy while mandatory spending increases the deficit. Their philosophy is that government should encourage individual innovation and responsibility and minimize government group programs.

Democrats argue that Republican tax cuts often benefit the wealthy and do little for middle and working-class Americans. Their philosophy is that government should protect the less fortunate through entitlement programs while practicing fiscal discipline.

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Posted on: 4/4/2005