Medicaid Cuts Hurt the Poor

A tug of war is taking placenot among children, though they may be grievously affected by this contest’s outcomebut between the federal government and the states. The struggle is over Medicaid, the entitlement program that guarantees health care for over 50 million low-income Americans. So far, the cost has been divided between the federal government and the individual states. But now the Bush administration, in its 2006 budget proposal, is seeking to shift more of the cost to financially strapped states, which have already been forced to scale back their Medicaid programs by reducing services and making it more difficult for people to enroll. Because of such measures, many low-income beneficiaries are already unable to obtain needed care. Tennessee offers a dramatic case in point. In January, Governor Phil Bredesen announced that the state is dropping more than 300,000 adults from its hitherto generous Medicaid program, called TennCare.

The basic problem, however, is not so much the cost of Medicaid itself, but rather the rising cost of medical care in general, which is driven by a number of factors: the aging of the population, expensive medical innovations and lack of regulation of skyrocketing prescription drug prices. In addition, many low-wage workers who have lost private insurance coverage have become Medicaid-eligible. (In the case of pregnant women and children in workers’ families, however, Medicaid actually saves money because it reduces the costs of premature and low-birth-weight babies.)


Prescription drug prices are of special concern. Between 1998 and 2002, Medicaid spending on drugs alone almost doubled. A report by the U.S. General Accounting Office has found that Medicaid has been overpaying for drugs because of its failure to verify the price data provided by the drug manufacturers. Lowering drug prices should therefore be a priority, but in this regard the administration has been less than helpful. Last year, it successfully opposed efforts in Congress to allow the Medicare program to negotiate drug prices for the new prescription benefit. Sharon Daly, vice president for social policy at Catholoic Charities USA, told America that if the federal government negotiated drug prices for both Medicare and Medicaid, the cost savings would be huge, adding that if it regulated drug pricesas Canada and European countries doeveryone would reap the savings: private insurers, individuals and employers.

Nursing home care accounts for almost half of all Medicaid spending. Over half a million residents have their costs paid from this source. Besides placing heavy burdens on nursing homes themselves, in terms of meeting their costs, cuts in Medicaid for seniors who need such care would also jeopardize the quality of care that nursing homes provide for their extremely fragile and disabled patients.

Children from poor families are also likely to be adversely affected by cuts in Medicaid on the scale proposed by the administration. They represent the largest single group of beneficiaries and account for a quarter of all children in the country. Similarly, Medicaid pays for over a third of all births. Essential coverage of this kind would be threatened if the cuts caused this and other medical costs to be shifted to states that are already struggling to provide the most basic health care coverage to their poorest residents.

A further ominous note in the president’s budget proposal implies that a cap might be placed on all or part of Medicaid funding as an additional means of achieving savings. But a cap could in effect end the program’s entitlement aspectits virtual core, because it guarantees coverage to all who meet state and federal eligibility criteria. A major part of federal funds would thus be changed into block grants for states, a move that could seriously erode health care coverage.

Because of the growth of the federal deficitlargely attributable to a combination of increased defense costs (especially for the occupations of Iraq and Afghanistan), homeland security and the loss of revenues from the nearly $2 trillion in tax cuts enacted in the last four yearsdomestic programs that help the most vulnerable may seem an easy target for the administration in its deficit-reducing efforts. As matters stand now, the House has approved the budget cuts proposed by the administration, but fortunately the Senate has rejected them. With Congress’s return on April 4, budget conferees are now trying to reconcile the differences in their respective budget plans. But cuts that do harm to an already fragile Medicaid safety netone that provides basic health care for children, poor families, the elderly and people with disabilitiesshould be rejected out of hand.

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10 years 11 months ago
The principle of subsidiarity is invoked many times in editorials or articles in America in regard to programs or policies to benefit the poor (5/2). But they then go on to advocate programs that expand the role of the state and are in direct conflict with the principle of subsidiarity. Worse, such programs are ineffective or downright counterproductive. Federal money trickles down through layers of federal, state, county or city bureaucracies, and only about 20 percent gets into the hands of the poor. And that is for the better programs.

Bureaucrats, administrators, grant writers, consultants and the onerous feedback reports consume most of the money. This may be a good jobs-growth program, but “trickle-down welfare” does little to help the poor. We need to get off these centralized federal programs and truly pursue subsidiarity and support those that get funds directly into the hands of frontline organizations. Involving faith-based charities directly or expanded charitable tax deductions could be solutions.


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