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Waxman: Administration's Remaining Months to Bring 'Assault' on Medicaid

By John Reichard, CQ HealthBeat Editor

November 1, 2007 -- Regulations proposed by the Bush administration would slash inner city health care, end programs to help mentally ill adults function on their own, and end school-based efforts to help seriously ill and poor children enroll in Medicaid, witnesses said at a hearing Thursday held by the House Committee on Oversight and Government Reform.

The Bush administration is planning other similarly damaging regulatory proposals in its remaining months in office, charged Committee Chairman Henry A. Waxman, D-Calif. But Republicans defended the regulatory goal of reining in what they depicted as runaway Medicaid spending. "If you wait for the Congress to act on this, there won't be any money left in the federal budget," countered the panel's senior Republican, Thomas M. Davis III of Virginia.

Six regulations set in motion by the Bush administration over the past 10 months amount to a "thinly disguised assault on the health care safety net" and are completely at odds with congressional intent, Waxman said. "This is clearly lawless regulation, not anchored in statute. It does not have the support of the Congress and it deserves no deference from the courts."

Waxman said the regulations would: restrict coverage of rehabilitation services for Medicaid-eligible people with disabilities; eliminate the ability of schools to provide administrative services such as enrollment, eligibility counseling, and referrals to Medicaid; drop Medicaid funding for severely disabled children to schools where they receive Medicaid services; restrict what states may cover as outpatient services under their Medicaid programs; end Medicaid payments for graduate medical education (GME); and limit how states raise money to pay their part of Medicaid costs.

Dennis Parella, chairman of the National Association of State Medicaid Directors, told lawmakers that "it is surprising that this philosophy should come at a time when most experts in the field would say that the nation's health care system is in a state of crisis.

"The emergency rooms of our teaching hospitals are bursting at the seams as they try to provide both emergency and non-emergency care to the 47 million Americans who have no health insurance," Parella testified. "A greater awareness of autism spectrum disorders and mental illness among very young children has placed a strain on the entire mental health system. Persons with disabilities are struggling to find more creative alternatives to live independent and productive lives. A retrenchment by Medicaid will only make those struggles more difficult for millions of Americans at a time when no comprehensive reform of the health care system is even on the horizon. We are apparently unable to agree on what income level should qualify a child to receive assistance with health care under SCHIP [the State Children's Health Insurance Program], much less comprehensive health reform."

Barbara Miller, a Maryland woman who said she suffers from bipolar mood disorder, described treatment services she has received that would be "in jeopardy" under one of the proposed regulations. "When I first started participating in rehabilitation services in 1990, I received 'Assertive Community Treatment' at a house where I lived with several other people. Staff would come out regularly to check on me, measure progress on my treatment plan, and see how I was responding to medications. They also provided training about living with mental illness to the pastor and his wife who ran the house." After she moved out to live on her own—"a huge step for me," she said—Miller received counseling to help her make the transition and the option of participating in "groups where people could support each other and not become isolated," she said. These rehabilitation services "are important because they prepare people with serious and persistent mental disorders to go back to work and cope with life in the community." If the federal government withdraws funding, "many more people with serious mental disorders will end up in emergency rooms, inpatient hospitals, nursing homes, or the prison system."

Twila Costigan, a program manager for the Intermountain Adoption and Family Support Program in Helena, Montana, said that rehabilitation services that would be cut under the regulations bring hope into the lives of seriously emotionally disturbed children who otherwise would be neglected in residential treatment facilities. The services help the children live in foster care in part by helping foster parents take care of them, she said. The children involved "have experienced trauma, abuse, neglect, and abandonment from their family of origin."

Alan Aviles, president of the New York City Health and Hospitals Corporation, said the Medicaid cost limit regulation—suspended by Congress until May of next year—would "dismantle significant components of our ambulatory care system and scale down our emergency departments" in New York City. The overall hit on the city alone would be $400-to-$500 million over five years, he said. "It's inconceivable we could continue to run the public hospital system in our city with that massive amount of underfunding."

The regulatory proposals would deliver a "devastating fiscal blow" to emergency departments "from which recovery may be impossible," said Angela Gardner, an emergency physician in Galveston, Texas. Gardner, testifying on behalf of the American College of Emergency Physicians, said the situation is already so dire that her facility could not provide a hospital bed to a man with a brain tumor who arrived in a coma. Gardner indicated that the man was likely to die as a result. "He will have his neurosurgeon, but he will not have a bed," she said. "Cutting our programs is not going to give us beds."

Sheldon M. Retchin, CEO of the Virginia Commonwealth University Health System in Richmond, said that the proposed rule to eliminate Medicaid Graduate Medical Education funding would lead to reductions in funding for training positions" for doctors who care for Medicaid patients. "We believe strongly that if Medicaid's support for teaching hospitals and medical schools deteriorates, then their very missions will be in great jeopardy," said Retchin, who testified on behalf of the Association of American Medical Colleges. "With 47 million Americans uninsured, and another 40 million on Medicaid, the safety net is stretched tight and teaching hospitals are holding the corners."

One of the proposed rules would limit Medicaid enrollment help for the vulnerable, said Denise Herrmann, a St. Paul, Minnesota, school nurse representing the National Association of School Nurses. "Many families served by school nurses live day-to-day and are stressed in making ends meet." They lack telephones, computers, and transportation and some are homeless. "Some are unable to read, and many are under-educated. Applying for Medicaid is an overwhelming task. School nurses identify the children who are most vulnerable and then help them find the best way to receive health care. Without Medicaid reimbursement for that type of school nursing activity, fewer needy children will receive health care services." Herrmann added that without the ability to file with Medicaid for these types of administrative expenses, some school districts will eliminate school nurse positions altogether.

However, states have a long history of devising Medicaid financing arrangements that "inappropriately increase federal Medicaid matching payments," testified Marjorie Kanoff of the Government Accountability Office. These schemes threaten the fiscal integrity of the Medicaid program, she said. Dennis Smith, head of the federal Medicaid program at the Centers for Medicare and Medicaid Services, said the proposed rules aim to protect the fiscal integrity of Medicaid.

He noted that the Clinton administration also took steps to curb state schemes to inappropriately boost federal Medicaid matching payments. "We believe these rules reflect the long-standing work of CMS and others, such as GAO and the OIG [Office of the Health and Human Services Inspector General] to restore greater accountability to the Medicaid program while safeguarding limited resources for actual services to those individuals who rely on the Medicaid program," Smith said.

"I think I've done what my predecessors have done," Smith said. For example, some of the activities described by Herrmann would not have been funded in the Clinton administration, he said. Medicaid reimbursement has covered things like "juvenile wilderness camps" and "small engine repair," he said. Medicaid covers the cost of direct care but "there are things that have been pushed ... beyond the edge" of what should be reimbursed. Smith added that interpretations by witnesses at the hearing of what the regulations would do go "further than what the rules actually say."

Connecticut Republican Christopher Shays expressed incredulity that the cuts made by the proposals would have such a dire effect. "I am hard pressed to know how terrible things will happen," he said. Over a five-year period, the cuts would trim just $11 billion on a total of $1.2 trillion in federal spending, he said. "I don't want to blow this hearing out of proportion." Davis of Virginia also noted that Medicaid faces huge spending increases in coming years. "A blank check just isn't going to solve it," he said.

However, Democrats said those cuts would hit those least able to withstand them, and the lawmakers appear intent on passing legislation to block the regulations—but they face the challenge of coming up with offsetting cuts or tax increases elsewhere in the federal budget to pay for the legislation if they stick to pay-as-you go budgeting rules.

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