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Federal Medicaid Payment Hike on the Ropes

By John Reichard, CQ HealthBeat

September 26, 2008 -- Language in a Senate economic stimulus package boosting federal matching payments to state Medicaid programs by $19.6 billion over 15 months helped provoke a White House veto threat Friday, adding to doubts that any added congressional infusion of funds to head off state Medicaid budget cuts would take place this year.

The language was in trouble in any event because it was part of a larger supplemental spending package (S 3604) that failed to attract enough votes Friday to win a cloture vote needed to get it to the Senate floor. The cloture motion required 60 votes to succeed, but only attracted 52.

Meanwhile, Congress was heading into the weekend without wrapping up work on a stopgap spending measure needed to keep health-related and other federal agencies operating once the current fiscal year expires Sept. 30. But the Senate could take up the measure, which includes some added health-related spending, on Saturday.

Senate Finance Committee Chairman Max Baucus, D-Mont., urged lawmakers to bolster Medicaid spending in a floor statement Friday, noting that "during the last economic downturn, Congress increased the federal matching rate for the Medicaid program by about three percentage points for five quarters. This freed up $10 billion for the states so that they did not have to cut Medicaid benefits. And that helped states to avoid cutting other expenditures or raising taxes."

"This bill contains an across-the-board temporary increase of four percentage points in the federal Medicaid matching rate. That would provide every state with much-needed help." In its pitch for the money, the National Conference of State Legislatures (NCSL) said it would help counter the economic downturn, which typically brings rising Medicaid enrollment as the ranks of the unemployed swell.

But in a "State of Administration Policy" Friday, the White House said that S 3604 "will not provide short term stimulus or long term growth for the economy. Instead, the bill would simply increase government spending including self-perpetuating entitlement spending by tens of billions of dollars." The statement added that "if this bill were presented to the President, he would veto it." The statement said that the added Medicaid money "will not stimulate the U.S. economy, but instead shift additional costs from state governments to the federal taxpayer."

Medicaid advocates weren't giving up on the spending boost, despite the failure of the measure to get to the Senate floor, said Joy Johnson Wilson, health policy director at NCSL. She noted that the House had yet to act on its own economic stimulus package containing added federal Medicaid money. According to a House Appropriations Committee summary, the House stimulus package would temporarily increase the percentage of federal Medicaid matching funds to the states by one to four percent, to assist with rising costs at a time of increasing enrollment.

"These funds will prevent cuts to health insurance and health care services for low-income children and families, as well as generate business activities, jobs, wages, and state sales tax revenues that sates would otherwise not see," the committee summary said. The House was expected to vote on the measure late Friday afternoon.

But with a veto threat hanging over economic stimulus legislation and lawmakers trying to wrap up business for the year, options available to Medicaid advocates were limited.

Wilson nevertheless said "we're hopeful and we want it. We're hanging in there." She said other potential legislative vehicles remain for the Medicaid money, including the stopgap spending measure needed to keep the federal government operating and a Senate version of legislation extending certain tax provisions.

But Senate leaders will be under pressure to keep the stopgap measure free of economic stimulus language to avoid a protracted battle over funding needed to keep the government going.

The version of the stopgap spending measure passed by the House Wednesday, which took the form of House amendments to Senate amendments to HR 2638, funds most government programs at fiscal 2008 levels until March 6. There are some exceptions, however.

It provides $41 billion for Veterans Health Administration, $4.1 billion more than the current level and $1.8 billion more than was sought by the White House. Much of the added spending would go to medical services for veterans.

The VHA also would receive more money to provide next-generation prosthetics to disfigured veterans. The bill would provide roughly $1.6 billion, $250 million above the amount enacted in fiscal 2008 and $116 million more than the White House sought for prosthetic support and sensory aids.

An additional $510 million would be allocated for trauma and mental health research and other studies that aim to improve the quality of life for injured and aging veterans.

The stopgap measure also would include $150 million in additional funding designated as emergency spending for salaries and expenses of the Food and Drug Administration. Advocates for increased funding for the agency said the boost is not nearly enough in light of increasing public health threats facing the agency.

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