Sweeping reforms to the Medicaid program have been debated in the Congress over the past 16 months, but nothing has been enacted, nor does there seem to be any quick resolution in sight.
While nearly all federal officials in Congress and the Administration agree that the program needs to be reformed, the congressional debate during the 104th Congress has been driven by budgetary, rather than policy considerations.
The Republican congressional leadership pledged to balance the federal budget by the year 2002. In order to do that, they had to go where the money is. Since Social Security and defense spending were left off the table, the next biggest programs where savings could be extracted included Medicaid and Medicare.
To reach a balanced budget, the Congress first determined the amount of savings needed, and then left it to the various authorizing committees to determine how to change the policies to create the savings.
Medicaid has been a tempting target. The program is reaching nearly $100 billion annually in federal funds and is growing at 10 percent each year. To achieve savings, the Congress proposed to reduce the federal growth in the program by capping the amount of money it would contribute to it each year.
By gradually phasing down the rate of growth the federal government would accept from the current 10 percent to four percent by 1998, there would have been $182 billion in savings — a significant factor in reaching a balanced budget by 2002. This reduction would leave a state with an average of 30 percent less in federal Medicaid funds in the seventh year of the proposal.
But to cut the program by such an extent required the federal government to agree to allow the states to create their own health programs with minimal federal rules. If implemented, individuals would no longer be guaranteed federal Medicaid benefits. States, operating with a capped block grant, would determine their own eligibility rules and financing. Many governors, whose budgets are also being overrun by Medicaid costs, agreed that a withdrawal of federal funds in exchange for control over the program was a deal they were willing to accept.
President Clinton countered by proposing that Medicaid be cut by $54 billion over the same time period. He supports maintaining the guarantee that eligible individuals retain coverage. In addition to increased use of managed care, he proposed paying states a per person grant for each eligible individual as a way of controlling federal costs while retaining the entitlement.
The negotiations died in December of last year, and there was little likelihood that anything would happen in 1996 until February when the National Governors’ Association unanimously adopted a six-page proposal melding the Republican proposal to block grant the program with a federal guarantee to benefits for certain individuals.
As with any agreement in principle, however, negotiation over the details between the governors and also with the Congress have put a damper on the initial enthusiasm that a deal could be reached.
The same policy issues of guaranteeing benefits to individuals and the overall financing of the program continue to be the issues holding up reform of the program. The concerns NACo has about potential cost shifts to counties remains.
As providers of care to those without any other private or public health insurance, a limitation on the amount of funds the federal government is liable for and the ability of states to determine the eligibility and the amount of benefits for some individuals may leave counties with a new financial liability.
The chances for an agreement on Medicaid this year grow dimmer each week. The political campaigns, along with the wrangling over the 1997 fiscal budget blueprint and increasing reluctance by the GOP to push unpopular budget issues, such as slowing Medicaid’s growth, may squeeze out opportunities to address Medicaid this year.