On June 15, the Senate Finance and House Energy and Commerce Committees held hearings to examine a Medicaid reform proposal submitted by the National Governors Association.
In his opening remarks, Senate Finance Committee Chair Charles Grassley (R-IA) underscored the financial implications facing the Medicaid program: “Medicaid has overtaken Medicare as the largest health care program and it is rapidly growing as a share of state budgets doubling since 1990 while education spending has remained flat…Between 1998 and 2003, combined federal and state spending on Medicaid grew by more than 55 percent. When you take into account [the Congressional Budget Office] CBO’s forecast for the next ten years, combined Medicaid spending from 1998 through 2015 will grow by more than 275 percent. Spending in the year 2015 will be almost triple what it was in 1998.”
Pointing to the high costs associated with reforming Medicaid, Ranking Member Max Baucus (D-MT) expressed his concern that the FY2006 budget resolution (H. Con. Res. 95) would require Congress to cut $10 billion from the program over the next five years (see The Source, 4/29/05). In addition, he addressed reauthorization of the 1996 welfare reform law (P.L. 104-193), which is due to expire on June 30, 2005. Noting that a bill (S. 667) to reauthorize the Temporary Assistance for Needy Families (TANF) program has not been scheduled for Senate consideration, he stated, “I know that Chairman Grassley shares my sense of frustration. As governors who administer state TANF programs, you must also be frustrated. And I assume you would not support moving TANF through the budget reconciliation process.”
Governors Mark Warner (D-VA) and Mike Huckabee (R-AR), chair and vice chair of the National Governors Association, presented their recommendations on Medicaid reform before both committees. Pointing to the impact the program has on state budgets, they stated that Medicaid “now represents about 22 percent of the average state budget and is a larger percentage than all elementary and secondary education. If you add health care spending for state employees and other programs, state health care spending totals about one-third of all spending, and is equal to spending on all education elementary, secondary and higher.” The governors also addressed deficiencies in the program: “First is that the Medicaid program is increasingly serving populations with very serious and expensive health care needs. Low-income frail seniors, people with HIV/AIDS, ventilator-dependent children, and other individuals with serious mental and physical disabilities represent only about 25 percent of the Medicaid population, but account for more than 70 percent of Medicaid’s budget. The average cost of providing health care to seniors and people with disabilities is more than six times the cost of providing care to pregnant women and children.” They also noted that Medicaid caseloads have increased by 40 percent over the last five years and the consumer price index for health care has been growing at a rate 2 to 3 times higher the average price index.
Arguing that Medicaid reform should be a part of a comprehensive reform of the entire health care system, the governors said that Congress “should establish a National Health Care Innovations Program to support the implementation of 10 to 15 state-led, large-scale demonstrations in health care reforms over a three- to five-year period. States would serve as the lead entity for these demonstrations, but they would partner with the private sector…Using information technology to control costs and raise quality would be a core objective of these demonstrations.” They also urged Congress to enact a refundable tax credit for health care costs, an employer tax credit for small businesses, and a federal tax deduction and credit for individuals purchasing long-term care insurance. With regard to Medicaid reform, the National Governors Association proposal would improve the prescription drug program, amend the asset policy for individuals needing long-term care coverage, instate cost-sharing rules similar to those under the State Children’s Health Insurance Program, and allow states flexibility in determining services covered under Medicaid.
Executive Director of the National Academy for State Health Policy Alan Weil presented the results of an 18-month project on Medicaid reform, explaining that the final report’s recommendations “identify opportunities for improvement in all areas of the Medicaid program and include calls for simplifying and expanding eligibility, increasing program flexibility for optional populations, improving coordination and integration with the Medicaid program and private insurance, adjusting current financing mechanisms, and providing states with tools to manage the long-term care system and, in the process, rebalance the institutional and home and community-based care systems.” The workgroup, consisting of state officials and national health experts, recommended that Medicaid provide comprehensive health care coverage to all individuals with incomes below the federal poverty line. Under the proposal, individuals meeting the new eligibility requirement would be entitled to the same acute, primary care, and long-term care benefits provided under current law. In addition, Medicaid would continue serving low-income children and pregnant women.
Jeanne Lambrew, a senior fellow at the Center for American Progress, urged Congress to reform the entire health care system, stating, “We agree with the Institute of Medicine: we should commit to covering all Americans by the year 2010. Fixing only Medicaid will not prevent a further erosion in private coverage, and vice versa: stabilizing private coverage will not be sufficient to meet Medicaid’s coverage and financing deficits. And the vexing problem of health costs in the U.S. can only be addressed by looking at the entire system. To this end, our plan calls for expanding coverage to all, improving it for all through better quality and efficiency, and paying for these investments through a small, dedicated value-added tax.” In examining the National Governors Association’s recommendations, Dr. Lambrew said that the administration’s proposed $1,000 tax credit for health insurance “will be insufficient for policies that typically cost much more than that, and individuals with health problems are unlikely to find an affordable policy if they are offered any policy at all…Moreover, a number of economists suggest that this specific tax credit could cause a drop in employer coverage and shift toward the individual market and, inadvertently Medicaid, thus increasing costs. Lastly, in both the health and long-term care policies, most of the tax subsidies would go to people who already have insurance.”
