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Medicaid may be on the chopping block
by Lawrence M. O'Rourke
McClatchy Newspapers


December 13, 2004

Washington -- If President Bush and Congress want to cut the federal deficit starting next year, as they say they do, then Medicaid has become a choice place to look.

Medicaid, the nation's largest health care program for the poor, disabled and nursing home residents, appears headed for the chopping block in 2005.

Strengthened by the election, the Republican majority on Capitol Hill looks ready to join President Bush in putting a lid on federal Medicaid spending, according to members of Congress and state officials.

"Republicans are real sincere about cutting the budget, and that makes Medicaid vulnerable," said Rep. George Radanovich, R-Calif., a member of the Energy and Commerce Committee, where Medicaid legislation starts.

Many congressional Republicans want to get to a balanced federal budget even faster than Bush, who has promised to cut the deficit in half over the next five years, Radanovich said.

"The big entitlements, including Medicaid, are on the table," he said.

Rep. Anna Eshoo, D-Calif., also a member of the Energy and Commerce Committee, agreed.

"Medicaid could be on the table next year, including cuts in program services," she said. "The president has already proposed turning the program into a block grant and eliminating the intergovernmental transfer program that is so vital for hospitals serving low-income individuals and families in California. I will oppose this."

Cutting health care programs is a tough go on Capitol Hill.

Americans, while supporting deficit reduction, are overwhelmingly against targeting Medicaid for big cuts, said Linda A. DiVall, a GOP pollster.

When asked where Congress should cut spending, survey respondents start with trimming the tax cuts enacted by Republicans during the first Bush term, and follow with cuts in foreign aid, corporate tax breaks, the war in Iraq and welfare, DiVall said.

"Medicaid, Social Security and Medicare are the untouchables," she said.

But Medicaid cuts have to be put into the mix if the Republicans are to accomplish other 2005 goals announced by Bush, budget analysts contend. State government officials say they are bracing for a bruising battle over Medicaid next year.

Congress will have many high-ticket items on its agenda next year. Bush has called for a reform of the tax code that almost certainly would result in lost revenue. Bush wants to overhaul Social Security, a process that could force the federal government to borrow an estimated $2 trillion to fill the gap between lost tax revenue and the benefits promised taxpayers 55 and older.

While the president on Thursday ruled out tax increases to finance any Social Security changes, aides say his views on Medicaid will be contained in the budget he unveils in February.

As he met in the Oval Office with a panel of advisers on Social Security, the president declared: "We will not raise payroll taxes to solve this problem."

Rep. Robert Matsui of California, a leading Democratic spokesman on Social Security, said that the president left open the possibility of borrowing to pay for Social Security privatization.

"Hiding the truth about benefit cuts or fleecing the public on massive borrowing would have a disastrous effect on the economy, not to mention the trust of the American people," Matsui said.

The size and timing of Medicaid reductions has not been set, administration and GOP officials said. They said the cuts might be accomplished through a cap on federal spending put in place gradually over 10 years, leaving states time to adjust by raising state taxes or lowering benefits.

Medicaid experts said the Bush proposal probably will be structured to show continued increases in federal outlays for Medicaid, but at less than the inflation rate.

Medicaid is regarded as a likely target for reductions at the federal level because it is now the largest government health care program, costing federal and state governments about $300 billion a year, more than Medicare. Medicaid pays about 17 percent of U.S. spending on hospital care, according to the Centers for Medicare and Medicaid Services.

The federal government matches state spending for the services Medicaid covers, with the federal matching rate ranging from 50 percent to 77 percent of benefit costs.

DiVall said that only 7 percent of the Americans she polled think the government is spending too much on Medicare, and only 6 percent say the same about Medicaid. That contrasts to 59 percent who favor reductions in tax cuts for those with over $200,000 a year in taxable income, according to DiVall.

Medicaid costs, like other health costs, are being driven higher by inflation in the costs of goods and services, an increase in prescription drug use and costs, and expanding enrollment, according to Diane Rowland, executive director of the private Kaiser Commission on Medicaid and the Uninsured.

A new federal report said that Medicaid is "excessively overpaying" for prescription drugs. Five large retail pharmacies paid an average of 22 cents for five widely prescribed generic drugs but received 56 cents in reimbursement from Medicaid, according to a study by the Department of Health and Human Services inspector general.

"The system is broken and needs to be fixed," said Rep. Joe Barton, R-Texas, chairman of the Energy and Commerce Committee. "The federal government could save hundreds of millions of dollars per year if states would bring drug reimbursement more in line with what it actually costs pharmacies and other health care providers to purchase these drugs.


Distributed by Scripps Howard News Service.



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