The New York Times
July 6, 2002
By Milt Freudenheim
With Congressional passage of a Medicare drug benefit still far from certain, about half the states are at least considering joining a Bush administration program that will provide federal matching money to extend drug coverage to elderly people whose incomes are modest but too high for Medicaid.
Some states are shunning the program, however, warning of financial risks for their Medicaid budgets and the low-income people they already serve.
So why are some states concerned? Because under the new federal program, which will provide each participating state a waiver from Medicaid law, there will be a federal subsidy ceiling that will rise no higher, over the five-year span of the waiver, than the total federal contribution for Medicaid that a state received before the new drug program.
In other words, from Washington’s perspective the new program will be “budget neutral”: for each dollar that a state receives under the program, it must find a dollar of savings elsewhere in the government’s contribution to Medicaid.
Cindy Mann, a Medicaid expert at the Kaiser Family Foundation:
“The waivers put all the risks onto the states and the beneficiaries. That is a fundamental change in the way the Medicaid program is normally financed.”
Comment: The policy implications are important from two perspectives: the implications for the current Medicaid and Medicare programs, and the implications in the future once we have a universal program of health insurance.
Medicaid is a critically under-funded program. Since states must participate in the funding, the current state budget crises are only compounding the problem. The insistence of the Bush administration that this expansion of prescription coverage be budget-neutral within the Medicaid budget merely pulls more funds away from already critically under-funded Medicaid services. Providers will bail out not because their profits are diminished, but rather because they cannot sustain the increasing losses. Starving a program of funds is a devious method of assuring its demise.
Unfortunately, the administration has established a similar policy for our Medicare program. They insist that any changes be budget-neutral. For instance, they have stated that any new Medicare prescription benefit must be paid for out of reductions to other providers. With a 5.4% decrease in physician payments this year, and more cuts scheduled for each of the next few years, further reductions though the budget-neutrality policy simply cannot be tolerated. Thus Medicare will be further starved of funds, easing the way to the administration’s goal of turning Medicare over to the marketplace. Spartan benefits with unaffordable cost-sharing will be inevitable for the majority of beneficiaries.
What about budget-neutrality once we have a program of universal health insurance? Isn’t one of the promises of a single, universal program that we can control health care costs into the future? Global budgeting promises budget neutrality, with appropriate adjustments for inflation (and for technological expansion, if that is our priority).
Why is global budgeting acceptable in a single payer program, but undesirable in our existing Medicare and Medicaid programs? The answer is very simple. We have more than enough resources to fund comprehensive services for everyone, but first we would have to eliminate the administrative waste characteristic of our current system. Maintaining expenditures at the current 14.7% of our GDP would assure adequate funding for health care forever.
But then why is global budgeting failing for Medicare and Medicaid? The answer is that we have failed to adequately fund the two most expensive risk pools in the nation, Medicare, composed of the high-cost elderly population and those with long-term disabilities, and Medicaid, composed of low-income individuals with greater medical needs. If we are to isolate high-cost individuals in exclusive risk pools, we must fund those pools much more generously than we do the risk pools for the remaining healthy individuals. But we don’t do this. We under-fund Medicare, and critically under-fund Medicaid, while we over-fund private health plans in order to generously support this superfluous industry.
We see where our national policy priorities currently lie. Isn’t it time to re-prioritize?
