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Report: House, Senate Medicaid Cuts Could Add to Uninsured

March 10, 2005—The Medicaid spending reductions included in the House and Senate budget resolutions are likely to weaken health care coverage for low-income Americans and increase the ranks of the uninsured, according to two reports released Thursday by the Center on Budget and Policy Priorities.

Both proposals would go farther than the Medicaid spending changes in the Bush administration's fiscal 2006 budget that have already drawn opposition from the nation's governors.

Medicaid is the joint federal–state health insurance program for the poor. Like Medicare, its costs have been growing rapidly in recent years, straining both federal and state budgets.

Bush's proposal would reduce the growth in Medicaid spending by $7.6 billion over the next five years, according to the Congressional Budget Office.

The House Budget Committee's fiscal 2006 budget resolution would require the Energy and Commerce Committee, which has jurisdiction over Medicaid and part of Medicare, to make cuts totaling $20 billion over the next five years. The Ways and Means Committee, which has primary jurisdiction over Medicare, would have to produce $18.7 billion in net savings.

The Senate Budget Resolution would require the Senate Finance Committee to reduce the growth in Medicaid spending by $14 billion.

Hospitals, nursing homes, and other provider groups fear the spending reductions will reduce their Medicare and Medicaid reimbursements, and they have already begun lobbying campaigns opposing any spending reductions in those entitlement programs.

The proposed spending cuts for Medicare and Medicaid are "ill considered and jeopardize the progress we have worked so hard to achieve on behalf of our nation's frail, elderly, and disabled," wrote Hal Daub, president and chief executive officer of the American Health Care Association, which represents nursing homes, in a letter to House and Senate budget committees.

A House Ways and Means Committee spokeswoman said Thursday that committee members haven't yet developed any specific recommendations, but the Budget Committee has given Ways and Means maximum flexibility within its jurisdiction to achieve savings.

House Energy and Commerce Chairman Joe L. Barton, R-Texas, has said he plans to hold hearings on the Medicaid program. His committee is investigating how states have spent Medicaid funds generated by intergovernmental transfers, or IGTs, as well as how much Medicaid pays for prescription drugs.

Senate Finance Chairman Charles E. Grassley, R-Iowa, predicted Thursday that his colleagues would support Medicaid spending reductions. "I believe the votes will be there on the committee and even on the floor," he told reporters.

The bigger question, Grassley said, is whether there will be enough support for the entire budget reconciliation bill, saying "heavy lifting" will be required to ensure the measure survives on the Senate floor.

Center for Budget and Policy Priorities analyses of the House and Senate budget resolutions said the proposed Medicaid cuts would hurt states that are already struggling to fund their share of Medicaid costs.

In analyzing the House plan, the Center stated that "proposals that would reduce the federal commitment to Medicaid and shift costs to states would increase the pressures that states are facing, and likely lead to additional and larger reductions in Medicaid."

Medicaid spending reductions in the Senate bill "are likely to push hard-pressed states to eliminate coverage for a substantial number of low-income people, increasing the ranks of the uninsured and the underinsured," the Center's analysts wrote.

They also noted a new "point of order" in the Senate budget resolution that they said would "heavily and inappropriately skew debates on health care policy and the uninsured."

Future costs to increase Medicaid to cover more of the uninsured would have to be offset but legislation to provide new tax deductions for or other tax breaks related to health insurance (other than refundable credits) would not have to be offset, the Center stated, adding that such proposals "would necessarily be less well targeted on the uninsured population and likely be less effective at reducing the ranks of the uninsured."

The new point of order, the Center stated, "would make it difficult to have a balanced and carefully considered debate about the most effective and efficient ways to deal with the problem posed by 45 million Americans lacking health insurance."

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