Bush Administration’s $140B, 10-Year Plan To Reduce Uninsured Population Would Use Savings From Medicaid

President Bush in his fiscal year 2006 budget proposal will recommend spending an extra $140 billion over 10 years to expand health coverage to U.S. residents while simultaneously reducing Medicaid spending by tens of billions of dollars, HHS Secretary Mike Leavitt announced Thursday, the Washington Post reports (Connolly, Washington Post, 2/4). The plan, "while short on details, offer[s] the clearest roadmap yet for the Bush administration's plans to change Medicaid and extend health insurance to more of the estimated 45 million" uninsured U.S. residents, Knight Ridder/Contra Costa Times reports (Pugh, Knight Ridder/Contra Costa Times, 2/4). The Bush administration hopes to expand health coverage to 12 million to 14 million uninsured U.S. residents by 2015 by enrolling more children in public health insurance programs and providing tax credits to help individuals and businesses purchase health insurance. The Post reports that about half of the $140 billion would cover the refundable tax credits (Washington Post, 2/4). According to Knight Ridder/Times, the plan also "renews earlier Bush proposals," including association health plans -- which allow small businesses to join together to purchase lower-cost employee health coverage -- and wider use of health savings accounts (Knight Ridder/Contra Costa Times, 2/4). The plan also calls for building more community health centers, according to Leavitt (Washington Post, 2/4). Additional details on the proposal will be released when Bush presents his budget proposal to Congress on Feb. 7 (Appleby, USA Today, 2/4).

Medicaid Overhaul
Bush's budget proposal is expected to include efforts to reduce "wasteful Medicaid spending," which could "help offset the cost of the additional coverage," according to the Knight Ridder/Contra Costa Times (Knight Ridder/Contra Costa Times, 2/4). Earlier this week, the Bush administration said it expected to save $60 billion over 10 years through Medicaid spending reductions. However, according to CQ Today, Bush's budget proposal is thought to include "a Medicaid overhaul" plan that would limit spending growth increases to an average of 7.3% annually, resulting in savings of $120 billion over 10 years, CQ Today reports. Previously, the Bush administration had projected an average annual Medicaid growth rate of 7.8%. According to sources familiar with the budget proposal, new savings would result from a combination of major policy changes and small revisions of earlier cost estimates (Adams, CQ Today, 2/3). Leavitt said $10 billion of the anticipated savings would be funneled back into the SCHIP program (USA Today, 2/4).

Fewer Restrictions for Optional Beneficiaries?
According to CongressDaily, Leavitt "hinted" that Bush's budget outline will include a proposal to cap federal spending on beneficiaries and services that the government considers optional (Rovner/Heil, CongressDaily, 2/3). In return, states would have more flexibility to determine benefits for optional beneficiaries (CQ Today, 2/3). Optional beneficiaries generally include children, adults and seniors in households with incomes higher than mandatory federal minimums (USA Today, 2/4). Optional beneficiaries account for 30% of Medicaid's 50 million beneficiaries but will make up 66% of Medicaid's projected $325 billion in expenditures in 2005, according to Knight Ridder/Contra Costa Times (Knight Ridder/Contra Costa Times, 2/4). Currently, states must provide mandatory minimum benefits to optional beneficiaries and obtain an HHS waiver to deviate from federal rules governing that population. The Bush proposal would eliminate the waiver requirement and allow states to shape coverage for optional beneficiaries, subject to federal guidelines (CQ Today, 2/3). Leavitt said, "In the past, we have assumed that optionals need to be served in exactly the same way as mandatories. We want to provide (states) the ability to use the resources they have better" (CongressDaily, 2/3).

Nursing Home Care
Leavitt also "implied" that the Bush administration "hopes to drastically loosen" a requirement that states provide long-term care to Medicaid beneficiaries through nursing homes, the Post reports. Currently, states must obtain a waiver from HHS to provide Medicaid coverage for home- or community-based care. Eliminating the waiver requirement, which would require congressional approval, should result in improved care and lower costs, Leavitt said Thursday (Washington Post, 2/4). States have said that nursing home costs are a primary driver of Medicaid spending growth, with the elderly and nursing home residents accounting for 42% of Medicaid costs annually (Marks, Christian Science Monitor, 2/4).

Other Proposed Medicaid Savings
Reports of other proposed savings include:

• $40 billion through the elimination of "creative accounting," which Leavitt said "most" states employ, to maximize Medicaid reimbursements (USA Today, 2/4);
  
  
• $15 billion over 10 years through a legislative change to the formula Medicaid uses to purchase prescription drugs; and
  
  
• $4.5 billion through preventing people from shifting their assets to qualify for Medicaid coverage of nursing home care (McDonough, AP/Las Vegas Sun, 2/3).
  

Leavitt Comments
Leavitt said of providing coverage for an additional 12 million to 14 million uninsured U.S. residents, "That would be a historic step forward to make that much progress in a decade" (USA Today, 2/4). He added, "The job the president has given me is to help Americans live longer and healthier but to do it in a way that allows us to maintain our economic competitiveness as a nation" (Washington Post, 2/4). Leavitt emphasized that Medicaid will not be transformed into a block grant program and that the federal government will maintain entitlement status for aid provided to mandatory Medicaid beneficiaries. He said, "The president is being very aggressive in trying to provide access to more people" (CQ Today, 2/3).

Prospects for Health-Related Proposals
According to the Washington Post, many of the proposals in Bush's budget recommendations "have been offered by the Bush [administration] in the past, eliciting little interest on Capitol Hill and deep skepticism about how many more Americans would be covered" (Washington Post, 2/4). The Knight Ridder/Times reports that the Senate blocked legislation passed by the House that would have allowed association health plans (Knight Ridder/Contra Costa Times, 2/4). In addition, the proposed tax credits for the uninsured to purchase their own health coverage have been included in Bush's budget for the past several years, "with lawmakers showing little inclination to enact them," CongressDaily reports (CongressDaily, 2/3). Ron Pollack, executive director of Families USA, said the proposals are "phantom expenditures," adding, "These are the same tired and ineffective proposals relating to the uninsured. I don't expect that money to be spent" (Washington Post, 2/4).

Prospects for Medicaid Changes
Most Senate Republicans are expected to support changes to Medicaid that increase state's flexibility, while some Democrats likely will resist most proposed cuts, according to CongressDaily. On Thursday, a Senate Republican aide said, "There is no appetite, at least in the Senate, for a draconian cap that passes along costs to the states." The aide said that lawmakers could mark up proposed changes to Medicaid within three months if Congress quickly adopts a budget resolution that includes the Bush administration's proposals (CongressDaily, 2/3). Meanwhile, the nation's governors are pushing lawmakers to oppose capping federal contributions to Medicaid because such a move "primarily shifts the financial burden onto the states, most of which are struggling to keep their Medicaid costs in check," the Monitor reports. In December 2004, the National Governors Association sent a letter

to congressional leaders urging them to reject any Medicaid reform proposals that shift additional costs to states (Christian Science Monitor, 2/4). "Governors feel we can find ways to more efficiently serve our people, but reform should not be code for cutting folks off the rolls or simply cost-shifting to the states," Virginia Gov. Mark Warner (D), chair of NGA, said (USA Today, 2/4). NGA said it would not comment on Bush's new budget proposal until officials can review the details (AP/Las Vegas Sun, 2/3).

Other Reaction
"We could well be on a collision course where state revenues are not expanding enough to meet the needs of the program at the same time the federal contributions are being cut back," Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said, adding, "The end result will be fewer people or services covered. There's no safety net below Medicaid." Ken Thorpe, a professor of health policy at Emory University, said, "We can't just shift all the risks downstream to the states while the feds limit their exposure year to year" (Christian Science Monitor, 2/4).

More information on Medicaid is available online in a kaisernetwork.org Issue Spotlight.