Bush’s Budget Shifts Costs of Health Care to the States

[Editor’s Note: This article summarizes the Center on Budget and Policy Priorities’ report on President Bush’s new budget. See Leighton Ku et al., Center on Budget and Policy Priorities, “The Administration Again Proposes to Shift Federal Medicaid Costs to States,” Feb. 14, 2007.]

While paying lip service to our nation’s health care crisis, President Bush’s proposed budget includes drastic cuts in Medicaid, shifts health care costs to the states, and shortchanges the State Children’s Health Insurance Program (SCHIP). His proposal to scale back suggests that his administration believes that too many Americans have health care.

Medicaid

The Bush administration proposes to scale back federal Medicaid funding by “$24.7 billion over the next five years and $60.9 billion over ten years through a combination of legislative changes and regulatory action.” The president’s budget accomplishes these far-reaching cuts by reducing and eliminating federal matching funds for states’ Medicaid costs. States would have to choose among “three options for making up the loss of federal Medicaid funds: cutting back on their Medicaid programs by reducing eligibility, benefits, or payments to providers; cutting back on other state programs and using those funds to replace federal Medicaid dollars lost; or increasing taxes.” If governors are unable to find the funds to balance the difference or if they cannot garner the support to raise state taxes, Medicaid patients risk losing services or coverage altogether.

Four-fifths of Medicaid savings stem directly from shifting costs to the states. For example, the administration’s budget would reduce the federal matching rate for all administrative costs to 50 percent, regardless of new, costly federal regulations, such as the citizenship documentation requirement. [To learn more about how the Sargent Shriver National Center on Poverty Law is tackling the citizenship documentation problem, click here.] The president’s budget sets the “federal matching rate for the cost of targeted case management services to a flat 50 percent” and reduces payments to states that previously pooled federal Medicaid funds to administer other federally funded programs. The aforementioned reductions would result in an $8.2 billion savings for the federal government.

Bush’s budget legislatively limits a single person’s individual home equity to $500,000 nationally in order to qualify for long-term care services. This figure is currently set at $750,000.

The Bush administration also proposes regulatory amendments, which will save an estimated $12.7 billion over the next five years and $31.4 billion over the next ten years. The administration’s budget proposes eliminating reimbursements for services rendered to the uninsured, phasing out compensation for administrative and transportation services pertaining to the programs covered under the Individuals with Disabilities Education Act, limiting federal contributions for certain rehabilitation services, and stopping Medicaid payments for the costs of graduate medical education programs.

President Bush’s annual budget drastically reduces federal reimbursements for essential Medicaid services and shifts the cost and political burden to state governments. Governors and state legislatures would be forced to choose either to succumb to federal cutbacks and eliminate Medicaid programs or to raise taxes to offset the loss of federal support.

SCHIP

Covering children is common sense and compellingly moral. People all over America agree that it is time to secure and expand SCHIP. Nevertheless, President Bush has actively thwarted states’ innovativeness with a proposal that will cover fewer children.

The president’s budget fails to deal with the long-term SCHIP funding shortfall. Over the next five years, SCHIP will incur a $7 billion deficit. The national shortfall will exacerbate the program’s fiscal saliency: “By 2012, some 46 states would face a total shortfall of $2.9 billion.” At present many states, including Illinois, use SCHIP dollars to cover children in families with incomes above 200 percent of the federal poverty level and to cover parents of low-income children. These population groups would be in serious danger of losing their coverage. President Bush has encouraged state leaders to come up with innovative ways to address the health care crisis but is hindering their efforts by promoting cutbacks in Medicaid and SCHIP.

Insuring all children is an inexpensive, cost-effective investment in our future and will have long-term financial benefits for our nation’s fiscal health.
 
Conclusion

The Bush administration’s budget suggests that low- and middle-income families are not the president’s priorities. By limiting the federal government’s commitment to the Medicaid and SCHIP programs, his budget shifts health care costs to the states, impedes state governments from retaining covered members, and stifles the states’ capability of expanding health care coverage. The Sargent Shriver National Center on Poverty Law calls upon Congress to reject the president’s Medicaid cuts, fund SCHIP in full, and put America on a path to cover all children.

For an  analysis of President Bush’s annual budget, go to http://www.cbpp.org/.