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Unfinished Business—Economic Stimulus and SCHIP

Although the timing and outcome of comprehensive health care reform is uncertain, two health policy issues are likely to receive congressional action early in 2009: enhanced Medicaid payments as a component of economic stimulus and reauthorization of the State Children's Health Insurance Program (SCHIP).

Economic Stimulus: A First Priority for Congress

On November 19, a panel of the nation's top economists testified before the U.S. Senate Budget Committee that government fiscal policy is the only engine of growth capable of preventing the country from sliding deeper into recession. Mark Zandi, chief economist at Moody's, recommended that the stimulus package be at least $400 million (2.5 percent of gross domestic product). Some stimulus policies, he testified, result in a significant 'bang for the buck,' including extending unemployment insurance benefits, temporarily increasing Food Stamps, general aid to state governments, and increased infrastructure spending. Other options—including most tax cuts—are net losers in terms of economic stimulus and should be avoided, Zandi said. [1] President-elect Obama has said he is willing to sign a stimulus package on his first day in office—congressional leaders are saying February is more likely—and his advisors have suggested it will include additional spending in the range of $850 billion, primarily in infrastructure spending. In addition to traditional projects such as roads and bridges, the Obama plan is expected to invest in green technology and other non-traditional infrastructure projects, possibly including health information technology.

The National Governor's Association and National Conference of State Legislatures have requested direct relief for states, including a temporary increase in the federal medical assistance percentage (FMAP) totaling $40 billion over two years. Two bills in Congress are the likely starting point for an FMAP negotiation. HR 7110 would increase current FMAP levels one to six percentage points, depending on each state's economy, for 14 months and cost $14.7 billion. SB 3689 would provide an across-the-board eight percentage point increase for all states for 15 months and cost $37.8 billion. Both bills ensure that no state's Medicaid FMAP will decrease, require states to maintain eligibility thresholds to receive the increase, and apply the stimulus-enhanced FMAP to Medicaid only, not SCHIP or disproportionate share hospital payments. President-elect Obama has said he supports FMAP relief in the stimulus bill, but has not yet committed to details.

SCHIP Reauthorization: Early Action Planned

House Speaker Nancy Pelosi has said SCHIP legislation "will probably be one of the first bills we would put on the President Obama's desk." [2] Although there has been speculation that SCHIP might be rolled into comprehensive health care reform as a strategy to encourage action on broader reform, child advocates and key congressional leaders say it is important to keep SCHIP separate. Rep. Pete Stark, who has jurisdiction over the SCHIP reauthorization as chairman of the House Ways and Means Health Subcommittee, has said SCHIP is his first priority, and that he wants Congress to act soon to avoid the March 2009 expiration of the current program [3] Chairman Stark has also cautioned that the terms of an SCHIP expansion previously approved by Congress and vetoed by the Bush Administration might have to be changed given the downturn in the economy. As written, the bill could result in more children becoming eligible for the program than Congress anticipated when the bill was originally approved—and cost significantly more than originally proposed. As a result, the income limits in the vetoed bill might have to be adjusted, Stark said. [4]

[1] M. Zandi, Chief Economist and Cofounder Moody's, "The Economic Outlook and Stimulus Options," before the U.S. Senate Budget Committee (November 19, 2008).
[2] Nancy Pelosi, quoted in an interview on National Public Radio (November 5, 2008).
[3] Pete Stark, in an interview by John Reichard for CQ HealthBeat (November 17, 2008).
[4] Ibid.

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