Is Medicaid a Priority? Lawmakers Argue the Cost of Care

Republican lawmakers battled recently over Medicaid, and the fight held up the fiscal 2006 budget resolution. Many Republicans, including President Bush, want to cut Medicaid spending growth by $40 billion over the next ten years. Others want to reform Medicaid, but worry that spending cuts would amount to a drastic reduction in health care services to the neediest Americans.

What is Medicaid?

Medicaid is a joint federal and state program that has provided healthcare to low-income citizens since 1966. All citizens who meet state eligibility requirements are entitled to Medicaid health care, so the program serves people of all ages, including children and the elderly.

States decide who is eligible for Medicaid, how much money to spend on the program, and how it will be structured within the federal limits. The federal government then matches state funds.

Since federal dollars take care of 57 percent of Medicaid costs, states are worried about the possible cuts. If Congress cuts Medicaid funding, states will have to pick up the slack or cut benefits.

The cost of care

Medicaid costs have risen drastically in recent years. In 1995, Medicaid spending totaled $159.2 billion and in 2003, it came to $275.5 billion. Why is the cost of care rising so much more quickly than inflation?

• More beneficiaries. The post 9-11 economic downturn caused many Americans to become unemployed and lose their health insurance. Greater numbers of low-income or no-income families equate to more people on Medicaid.
• Longer life spans. Technology is helping people to live longer, but that means more people on the Medicaid program for longer periods of time.
• The rising cost of healthcare. Everything from ambulance rides to doctors’ visits is going up in price, causing all health care, including Medicaid, to become more expensive. In particular, the rising cost of prescription drugs is a growing expenditure for Medicaid programs.

Both Republicans and Democrats recognize that Medicaid’s growth rate is unsustainable and that reform is needed. However, the details of these reforms are at issue.

Bush reforms - what The White House wants to do

In addition to cutting Medicaid funding by $40 billion over the next ten years, the Bush administration wants to prevent people from getting rid of their assets in order to qualify for the Medicaid program.

Some middle-class people who need health care will spend down, shield, or give away assets (often to children, so that they can still access them) in order to qualify for Medicaid health insurance, often to pay for long-term care.

The Bush administration says that this practice has gotten out of control and that Medicaid is strictly a program for the poorest Americans; it’s not meant for the middle class.

But critics argue that nursing home costs are prohibitive to the middle class, even to those with substantial assets. With the bill coming to $4,000 - $7,000 a month, most families can’t maintain long-term care.

But someone has to pay, whether it’s the family or the taxpayers, and with the cost of health care on the rise, it looks like very few can afford the bill.

Senate battle

Not all Republicans wanted to cut Medicaid spending. Senator Gordon H. Smith of Oregon pushed the Senate to create a commission that will study ways to overhaul Medicaid. Smith believes that reforms can save money without drastic cutbacks.

Smith was at odds with Senate Budget Committee Chairman Judd Gregg of New Hampshire, who held firm to the idea of major cuts for Medicaid. The two agreed to a $35 billion savings in mandatory spending, instead of $41 billion. Much of that amount is likely to come from Medicaid, but various committees in Congress will authorize specific program cuts according to budget resolution recommendations.

The philosophy of cutting back

The proposed cuts to Medicaid have a broader context. The Bush administration would like to limit the growth of many federal programs, including Social Security, Medicare, benefits for retired federal employees, and disability compensation for veterans.

Cutting back on these programs would help to decrease the national deficit, which hit a record high of $413 billion in 2004. Bush has promised to cut this number in half by the end of his term in 2008 and believes that the best way to do this is to restrict spending on expensive social programs.

Entitlement programs amounted to 54 percent of the 2004 budget, and without reform, the Congressional Budget Office says that they will consume 58 percent of the budget by 2014.

But even though entitlement programs like Medicaid are getting more expensive, the ballooning deficit is largely due to less revenue (tax cuts) and greater spending (homeland security and the operations in Iraq and Afghanistan).

Any decision to cut back on social programs is the result of a specific philosophy: public money should be used for defense, security, and national infrastructure, but most workers should save and pay for health care, childcare, and other human services themselves.

Do you agree with this philosophy? How do you want your tax dollars to be spent? Does your representative know your opinion?

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Posted on: 4/29/2005