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Dems May Seek to Add Temporary Medicaid Spending Hike to Stimulus Package

By John Reichard, CQ HealthBeat Editor

January 16, 2008 -- Democratic leaders are discussing the possible inclusion of a temporary increase in federal Medicaid payments in the economic stimulus package they hope to quickly move through Congress and send to President Bush, a congressional aide said Wednesday.

The provisions under discussion are along the lines of temporary federal Medicaid payment increases signed into law by Bush in 2003, the aide said. Bush went along with the temporary increases totaling some $10 billion to obtain congressional approval of an economic stimulus package that included some $350 billion in tax cuts.

The 2003 law (PL 108-27) provided temporary increases in fiscal years 2003 and 2004 in the "FMAP," or federal medical assistance percentage, the term for the federal portion of payments for the federal-state Medicaid program.

Increasing the FMAP moving into a recession would help states maintain Medicaid eligibility levels at a time when more people are likely to become uninsured because of job loss and seek enrollment in the Medicaid program, said David Parrella, the director of the Connecticut Medicaid program and the chairman of the National Association of State Medicaid Directors. Otherwise, Medicaid funding would be at greater risk of budget cuts. "Health care costs are the biggest line item in every state's budget," he noted. "As states enter economic hard times, if you cut any substantial money from state budgets you have to go where the money is."

A proposal to increase federal Medicaid matching rates even temporarily would surely meet with Republican objections, although not necessarily fatal ones. Asked Wednesday his reaction to including temporary Medicaid increases in the stimulus package, HHS Secretary Michael O. Leavitt said, "I don't think Medicaid and Medicare were intended as jobs programs. They were intended to be programs to help those who have serious economic disadvantages and we ought to focus on it as such."

"Increasing Medicaid payments is a great way to expand entitlement spending, but would do little or nothing to actually improve the economy for working Americans," added a House Republican aide. "It is just a simple cash transfer to states, with no connection to the areas of greatest need or any requirements that the money actually be spent in ways that help improve the economy."

The Bush administration has become increasingly aggressive about cracking down on Medicaid spending through regulatory changes and disapproval of certain state expansion plans. However, GOP congressional aides said Wednesday they don't necessarily assume that the White House would veto a package containing temporary Medicaid increases if it were part of an economic stimulus package that included tax cuts.

Temporarily increasing Medicaid payments is "a likely approach to take in the stimulus package," said a Senate Republican aide. Regarding a potential veto, the aide said "that is speculative," noting that the White House did not veto the 2003 economic stimulus package containing tax cuts and temporary Medicaid increases.

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