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Medicaid Commission Releases Report

SEPTEMBER 1, 2005 -- The Bush administration's Medicaid Commission released its recommendations Thursday for reducing the growth in Medicaid spending by $11 billion over the next five years.

The proposals, which include tougher asset transfer rules, changing the way states pay for drugs, and establishing tiered co-payments for beneficiaries, were approved by the commission Aug. 19.

As part of the budget reconciliation process, the Senate Finance Committee and the House Energy and Commerce Committee must compile a list of potential cuts to the program by Sept. 16 to meet a $10 billion savings target for Medicaid, the federal-state health insurance program for the poor.

Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, said the recommendations were "constructive" and would be considered as the committee works to develop legislation to met its budget reconciliation target. But Grassley did not say which of the commission's recommendations might be included. "That decision will be made by members of the committee," he said in a statement.

The panel's ranking Democrat, Sen. Max Baucus, D-Mont., said while he did not believe all of the $10 billion in savings should come from Medicaid, "I believe some of the commission's ideas have merit, and may warrant consideration."

Last month, a spokeswoman for Grassley said the chairman prefers a Medicaid-only approach to hitting the $10 billion target.

Leighton Ku, a senior fellow at the left-leaning Center on Budget and Policy Priorities, said the proposal to allow states to increase beneficiaries' co-payments for some drugs "could be a very serious obstacle" to some beneficiaries receiving medical care. "The commission is essentially...making it harder for some people to get medications," Ku said.

Currently, co-payments of up to $3 can be imposed for prescription drugs, doctors visits and other services, but certain categories of beneficiaries, such as pregnant women and children, are not charged co-payments. The recommendation to increase those co-payments would save Medicaid $2 billion over the next five years, according to the Centers for Medicare and Medicaid Services, which oversees the Medicaid program.

Other recommendations in the panel's report include:

  • Allowing states to establish pharmaceutical prices based on the average manufacturer price rather than based on the published average wholesale price, a move that will save $4.3 billion over the next five years, according to CMS.
  • Giving Medicaid managed care health plans access to the drug manufacturer rebate program now available to other Medicaid health plans. CMS estimates that will save $2 billion over the next five years.
  • Making it tougher for beneficiaries to transfer assets to avoid paying nursing home costs, with savings at about $1.6 billion.

The Medicaid commission report released Thursday is one of two the panel must prepared for Congress. The second, which is due Dec. 31, 2006, will focus on long-term recommendations to help make Medicaid sustainable for future generations.

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