Analysis: Medicare first, then Medicaid

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Analysis: Medicare first, then Medicaid

By Ellen Beck, United Press International
October 27, 2003

If you think four years of bitter partisan fighting over Medicare prescription drug coverage has been the mother of all healthcare reform battles -- and as of Monday, it still was not quite a done deal -- you need to hold on, because big sister Medicaid is waiting in the wings.

Republican and Democratic policy staffs will barely get to catch a breath after Medicare reform is finished -- presuming at this 11th hour of the legislative year it will get finished one way or another -- before tackling Medicaid, the health insurance program that covers the indigent.

Medicaid often is overshadowed by Medicare in the public's eye and its growth has taken many by surprise. Medicaid is expected to spend $304 billion in 2004, a five-fold increase since 1989. For the first time, it will be bigger than Medicare -- which accounts for $289 billion in 2004 spending -- and sits atop the list of public healthcare programs.

One Republican health policy staffer said the government needs to "get a handle on entitlements so they don't spiral out of control."

Though Medicare is a relatively tidy bundle -- encompassing mostly seniors as beneficiaries and the federal government as the single payer -- Medicaid is a tree with many branches, making reform all the more difficult.

The federal government feeds matching money to 50 different state Medicaid programs, which in turn cover healthcare services for more than 44 million people -- several million more than Medicare.

"Basically, these are state-run programs," said Leslie Norwalk, acting deputy administrator for the Centers for Medicare and Medicaid Services in Washington .

The federal government holds control, however, by forcing states to obtain approval before making any program changes.

Unlike Medicare, Medicaid enrollment is not limited to seniors and a small percentage of disabled. Some 73 percent of beneficiaries are poor women and children, while 27 percent are the elderly, who also qualify for Medicare, and the disabled.

Each state budget sets a Medicaid expenditure level and, through a complex formula, the federal government provides matching money, from 50 percent to 77 percent of what the states spend.

On the surface, the partisan battle looks similar in both Medicare and Medicaid. Democrats want to keep Medicare a single-payer entitlement with no limit on the government's contribution, while Republicans want more private insurance plans bidding for Medicare business and a limit on what the government pays.

Democrats fear the Republicans want to turn Medicaid from a program that provides an unlimited amount of federal match money to a block grant program, thereby defining and restricting the government's participation.

If a fixed amount of money is provided by the government and healthcare costs continue to rise, a Democratic staffer said, "someone is going to be left holding the bag," that is, the states and beneficiaries.

Republicans, on the other hand, want to give the states more flexibility and less government regulation, while trying to push more money toward keeping people out of nursing homes -- which account for $60 billion in Medicaid spending -- and into community programs or home care.

Dig a little deeper into reform and you will find three looming problems to fit into this mix: the 44-million uninsured in America, the vagaries and sometimes unpredictability of state budgets in times of economic troubles, and the small group of 6-million seniors who qualify for both Medicare and Medicaid but eat up a total of $100 billion a year from the Medicaid budget.

The poor economic picture of the past couple of years has forced 38 states to trim Medicaid benefits or drop beneficiaries, forcing some 78,000 people out of the program. Some states, such as Ohio , have reconvened their legislatures multiple times to trim spending and fix budget deficits, and each time Medicaid spending is on the line.

From 15 percent to 20 percent of state budgets is spent on Medicaid and policy experts expect that portion to increase at the expense of other programs. The program accounts for 8 percent of the federal budget, but is expected to consume 20 percent by the 2030s.

"The big part of the picture is the dismal state of the fiscal situation in the states," said Matt Salo, legislative director for health for the National Governor's Association.

Norwalk said the irony of the uninsured is their numbers increase during times of economic troubles, a double whammy for states trying to stretch their Medicaid budgets to include more people without coverage.

The Bush administration has proposed Medicaid reform, but Norwalk said the plan "didn't get the traction we think it deserves," mainly because of the Medicare drug debate and international issues.

The reforms are based partly on the success of the States Children's Health Insurance Program or SCHIP -- an extension of Medicaid programs in some states and separate private programs in others -- which has been hugely effective at getting health coverage for children of the working poor who may not qualify for Medicaid.

The administration also wants to eliminate or streamline the waiver process as much as possible to give states more flexibility in changing or expanding their Medicaid programs to increase enrollment, eligibility or benefits. Last year, Congress approved $2.6 billion in additional Medicaid funding for states, mainly because of their economic troubles, but the authorization expires next April and is not on the administration's radar for renewal.

The House Energy and Commerce Committee has formed a task force on Medicaid and has held five Medicaid reform hearings so far. More are expected. There is a plan on the table to provide extra money for states from 2004 through 2006, but the trade-off would come at the end point when state programs would have to restrict program growth.

Salo said if done properly Medicare reform could be a starting point for Medicaid reform. Part of the Medicare drug bill now in final congressional conference committee negotiations calls for the dual eligibles to have their prescription drug coverage provided by Medicare rather than Medicaid -- which handles it now -- for an estimated $47 billion savings to the states.

The success the Medicare conference committee has dealing with the basic philosophical differences between Democrats and Republicans also can be used as a marker for success in both defining reform goals and getting them accomplished in the Medicaid program.