The House Goes Home for Christmas: Its Top Priorities: Slash Health Care, Nutrition, and Federal Pay, Raise Taxes on Working Families, Preserve Pentagon Spending, and No Fingerprints on Tax Increases Even for the Very Rich

If you are reading this, the world did not come to an end on December 21.  Congressional action did, though, at least through Christmas.  Despite predictions by Speaker Boehner (R-OH) and Majority Leader Cantor (R-VA) that there would be enough Republican votes for Boehner’s plan to raise tax rates on income over $1 million, their caucus rebelled.  Without enough votes for passage, Speaker Boehner cancelled the vote, and the House went home.  They might come back before New Year’s, if a deal can be put together to avert the spending cuts, tax increases, and loss of unemployment benefits for 2 million long-term jobless people that will mark the start of 2013.

The House did cast votes on Thursday evening.  They re-adopted a bill they had passed last spring, which replaced the $110 billion in automatic spending cuts scheduled to start January 1 with a large number of domestic cuts.  That bill went nowhere last spring, and the President and Senate Majority Leader Reid (D-NV) confirmed its fate will be the same now.  The new-old bill, The Spending Reduction Act of 2012 (H.R. 6684), passed 215-209, with no Democrats voting for it and 21 Republicans joining all 188 Democrats to oppose.

The bill was not originally part of Speaker Boehner’s plan for Thursday.  He had hoped there would be enough support to pass an amendment he called “Plan B”, continuing the current tax rates for everybody except millionaires, whose income tax rates would rise to where they were before the Bush tax cuts were enacted.  Because other favorable treatment for millionaires and multi-million dollar estates would remain, those with incomes over $1 million would still get tax cuts averaging $50,000 each.  Treatment of 25 million low-income working families with children was not so favorable – they would see their taxes rise by an average of $1,000 each.  (For more detail, see below.)  Even Grover Norquist, originator of the anti-tax pledge that has a stranglehold on most Republicans, said that passing Boehner’s “Plan B” would be okay, because it would be preventing a tax increase on everybody else.  But that wasn’t enough to gather the near-unanimity among Republicans necessary to pass Boehner’s bill with little or no Democratic support.

Republican House members either objected to raising any taxes on anyone, balked at passing something that did nothing to stop the looming Pentagon and domestic spending cuts, or both.  To mollify enough of them, the Speaker agreed to let the House vote again on the bill to replace the “sequester,” or automatic spending cuts.  In voting for this, the majority made its priorities clear.  The bill would eliminate all the $55 billion in Pentagon sequestration cuts in 2013 and would replace about $38.5 billion in across-the-board cuts to domestic appropriations, in part by substituting $19.1 billion in spending reductions to be achieved by lowering the total cap on appropriations for FY 2013.  Medicare cuts of about $16 billion that were originally included in sequestration would stay in place.   The money lost by stopping the Pentagon cuts and some of the domestic reductions would be made up (and then some) by more than $217 billion in cuts over 10 years  to SNAP/food stamps, Medicaid, premium subsidies and other funding for the new health care law, the Child Tax Credit, and several consumer protection measures.  It also raised nearly $88 billion in revenues over 10 years by requiring federal employees to pay more of their retirement costs.  (More details about these provisions below.)

But although the House passed these spending cuts, it did not win over enough Republicans to get a majority for the Plan B increase in millionaire tax rates.

So what’s next?  Despite repeated assertions on the House floor by House Budget Committee Chair Ryan (R-WI) and others that President Obama has not come out with specific spending cut proposals in his deficit reduction plan, the President has put forth several offers in his negotiations with Speaker Boehner.  The President’s most recent proposal includes tax cuts for everyone, but reduces the tax breaks at the top, for a new revenue total of $1.2 trillion over ten years, and cuts spending by $930 billion, plus another $290 billion in debt interest savings.  Some of the savings are highly controversial among Democrats (see below).  If a solution is to be found, either before or soon after the beginning of the new year, it appears less likely to be achieved by legislation that can draw majority Republican support in the House.  Another option – passing a plan in the House with bipartisan support (lots of Democrats and some Republicans.  It remains to be seen whether Speaker Boehner will exercise leadership in pressing for that, or leave it to others to work around him.  In announcing the House’s departure, the Speaker did not seem to be signing up for a renewed battle to win over his caucus.  Instead, he said “Now it is up to the president to work with Sen. Reid on legislation to avert the fiscal cliff.”

Taxes

Taxes were a major issue during the Presidential campaign with a focus on the ’01 and ’03 Bush-era income tax rates set to expire at the end of this year.  On November 14, newly off an election victory where he campaigned for higher taxes on incomes over $250,000 and with opinion polls solidly favoring his position, the President at his first post-election news conference reiterated his position on income tax rates and pressed for $1.6 trillion in revenue as part of a comprehensive deficit reduction deal.  Democrats were buoyed by the President’s approach.  Republicans had strongly resisted any increase in personal income tax rates but some conceded that the election results would likely mean rates for high-income taxpayers would go up.  Others pressed for no rate increases and instead talked in vague terms about tax reform that included closing unspecified tax loopholes and ending some tax deductions.  In return they also wanted deep cuts in spending.

The President presented a more detailed deficit reduction plan on November 29, outlining nearly $1.6 trillion in addition tax revenue over 10 years.   Tax rates for income of less than $250,000 would remain the same while the two top rates of 33 and 35 percent would revert back to 36 and 39.6 percent; the rate on capital gains would increase from 15 percent to 20 percent and dividends from 15 percent to the ordinary income tax rate; the maximum value of tax deductions would be lowered to 28 percent (someone in the 35 percent tax bracket can currently deduct up to 35 cents for every dollar in deductions) and additional limits would be placed on itemized deductions for higher-income taxpayers; and the estate tax would revert back from its current $5 million exemption level and maximum rate of 35 percent to its 2009 exemption level of $3.5 million and 45 percent maximum rate .  The tax package would also continue the expansions made in the 2009 economic recovery act to the refundable Child Tax Credit and Earned Income Tax Credit (EITC) for low-income working families; extend for one year the 2 percent payroll tax cut for individuals; provide a one-year fix to the Alternative Minimum Tax (ATM), keeping new taxpayers from being hit with an average income tax increase of $2,250 according to the Tax Policy Center; and extend a number of business tax breaks.

In response to the President’s plan Speaker Boehner, the Republicans’ lead negotiator in deficit reduction talks with the President, offered $800 billion in revenue through limiting tax expenditures in tax reform that would occur next year.  His plan did not specify which tax expenditures would be limited.  Many of the most costly expenditures in terms of lost revenue are very popular and have powerful lobby shops supporting them, for example the home mortgage interest deduction, making them politically difficult to reduce significantly.

Under earlier House Republican tax proposals and plans proposed by Speaker Boehner, the 2009 improvements in the Child Tax Credit and EITC would be allowed to expire.  This means that 12 million families benefiting from the Child Tax Credit would see their taxes go up by $800, on average.  Six million families would pay an average $500 tax increase because of cuts to the EITC.

In early December deficit reduction talks between Speaker Boehner and the President continued.  On December 17, the President presented a new proposal containing both new savings on the spending side and a reduction in revenue.  The proposal reduced revenue by increasing from $250,000 to $400,000 the income threshold at which the lower tax rates would be extended.   The 33 percent income tax rate would be extended rather than reverting back to 36 percent.

Speaker Boehner seemed to be making a significant move toward the President on revenue when he indicated that he would let tax rates on income over $1 million expire.  However, coupled with extending the Bush-era tax rates on income up to $1 million, extending limits on certain tax deductions set to end on January 1, taxing dividends at 20 percent rather than at the rate of regular income, and continuing the current generous estate tax provisions, people with incomes of over $1 million would receive an average tax cut of $108,500 according to the Tax Policy Center.

In a high-risk strategy Speaker Boehner decided to take this so-called “Plan B” to floor of the House for a vote on December 20.  When conservative Republicans revolted, Speaker Boehner pulled the bill knowing that it would not pass.  It is not yet clear what the impact of his failure to pass the bill will have on future talks with the President.  Democrats and the White House are urging him to return to the negotiating table with the President.

See Citizens for Tax Justice report from December 20 comparing Speaker Boehner’s “Plan B” and the President’s original and December 17 proposals at: http://www.ctj.org/pdf/latestfiscalcliff.pdf.

The Real Cliff:  Unemployment Insurance About to Expire, Leaving 2 Million With No Help

The House spectacle before the abrupt departure was remarkable both in showing what the majority wanted to do and what it didn’t care to tackle.  Although 4 in 10 of the unemployed today have been out of work for more than six months (most for more than a year), and have run out of state unemployment benefits, the House took no action to continue the federal Emergency Unemployment Compensation program for the long-term jobless.  It will expire at the end of December.  Two million will be denied unemployment benefits right away, followed by another million by the end of the March in 2013.  The proportion of the long-term unemployed has risen dramatically over the years.  After the 1980’s recession, 26 percent of the unemployed were out of work six months or more.  The President’s plan includes the extension of unemployment benefits for a year, at a cost of $33 billion.

Shrinking the Adjustment for Inflation:  “The Chained CPI”

One of the most controversial provisions in President Obama’s deficit reduction package is a change in the way the Consumer Price Index (CPI) would be calculated for purposes of calculating benefits for Social Security, and also affecting many other low-income programs that rely on annual inflation adjustments for eligibility or benefit levels.  In what ultimately turned out to be abortive negotiations with Speaker Boehner, the President responded to the demand that benefits to entitlement programs be cut by agreeing to this change, which is called the “chained CPI.”  It reduces the inflation rate by assuming that when certain prices go up, consumers are likely to switch to other comparable but cheaper products.  Some research questions whether the elderly, or low-income people generally are able to make such substitutions as easily as the population as a whole.  According to the Center for Economic and Policy Research, after 10 years, the Chained CPI would result in a 3 percent cut in Social Security benefits, about 6 percent after 20 years, and nearly 9 percent after 30 years.  For an average worker retiring at 65, this reduced measure of inflation would result in benefits being cut $1,130 a year at age 85.  Women would be disproportionately affected, because they live longer and are more likely to be poor.  The Administration’s Chained CPI proposal, which is estimated to save $130 billion over 10 years, does provide exemptions for low-income elderly and disabled making use of Supplemental Security Income (SSI), but that alone does not offer adequate protection to low-income people.  If the revised calculation is applied to the federal poverty guidelines, it will lower the annual increases in the poverty line, which would be likely to reduce benefits or shrink eligibility for means-tested programs.  Many progressive groups, including labor, have strenuously opposed making use of the Chained CPI.

SNAP in Farm Bill and House Bill 

Prospects for a 5-year reauthorization of a farm bill including the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) before this Congress ends on January 2 has all but disappeared. There is not time for action on a separate bill and prospects for attaching it to the elusive larger deficit reduction package are fading.  The full Senate passed a 5- year farm bill extension in June with $23 billion in savings over 10 years, including $4.5 billion in cuts to SNAP.  In July the House Agriculture Committee approved bipartisan farm bill legislation with $35 billion in savings over 10 years, including $16 billion in cuts to SNAP.  The House Republican leadership has refused to allow a floor vote to happen because some Republicans want deeper cuts to SNAP while many Democrats do not support any cuts to the program.  The commodities provisions in the two bills that subsidize farmers also split members, more along geographic than party lines.  The Senate bill tends to favor northern commodities like corn and soybeans and the House bill rice, peanuts and wheat grown in the southern states.

Absent a full reauthorization, there is faint hope that a shorter-term extension of the current farm bill might pass.  The SNAP program will continue to operate uninterrupted without an extension of the full bill because the rules governing the program will not expire and funding was included in the continuing resolution through March 2013.  However, some programs would be affected.  Dairy subsidies would revert back to a 1949 law, likely doubling milk prices.  Dairy products are a large portion of the Women, Infants and Children (WIC) federally-funded nutrition program, and the price increase would lessen the buying power of WIC recipients.

The Spending Reduction Act passed by the House on Thursday night included $32.3 billion in cuts to SNAP/food stamps.  The House majority would return SNAP benefits to their old level of about $1.30 per meal, an amount judged by nutrition experts to be inadequate.  While current law would have started that reduction in November of 2013, this bill moves it up to February.  Recent analysis estimates that this cut will result in a loss of $8 – $10 per person per month.  The House will also deny SNAP to 2 million people who now get benefits because their low incomes qualify them for programs such as Temporary Assistance for Needy Families.  This change will also result in 280,000 low-income children losing free school meals.  In addition, the House agreed to make it harder to streamline eligibility for SNAP benefits, which now can be received without additional documentation if certain households already qualify for Temporary Assistance for Needy Families (expected to cut assistance to 1.8 million individuals).  This change will also result in 280,000 low-income children losing free school meals.  These restrictions were estimated last spring to save $11.7 billion over 10 years.  Further, this bill would reduce SNAP benefits to people who now receive a small benefit from the Low Income Home Energy Assistance Program, said last spring to reduce SNAP spending by over $14 billion.  Despite this time of high unemployment, the House would drop certain federal spending for SNAP employment and training programs (saving about $3.1 billion over 10 years) and would end federal bonus payments to states to encourage good performance in administering SNAP.

Health Care Spending Reductions

The President’s most recent offer calls for $400 billion in savings in health care programs over 10 years, said to come mainly from Medicare, with relatively little from Medicaid (although details were not available).  The House Spending Reduction Act keeps the $16 billion in Medicare cuts scheduled to take place as part of the automatic FY 2013 cuts imposed by the Budget Control Act ( 2011 legislation that set up the “sequestration” cuts to start in January 2013 if Congress could not agree on a deficit reduction plan).  In addition, the House bill slashes health care premium subsidies under the Affordable Care Act for 350,000 people, and cut Medicaid funding to Puerto Rico and other territories even though Puerto Rico, despite its disproportionate poverty, receives far lower federal Medicaid payments than any state (a high of 35 percent in 2010; states receive no less than 50 percent of Medicaid costs).  The amendment also allows states to make cuts in their Medicaid programs below the levels in place when the Affordable Care Act passed, which could reduce eligibility or benefits for millions of people.  Further, it includes a number of funding cuts aimed at undermining the Affordable Care Act (the major new health care legislation now being implemented).  These savings are estimated at $47.3 billion over ten years by the Congressional Budget Office.

The President’s plan is said to assume at least one-year funding for continued higher payment levels to physicians under Medicare.  Their payments were supposed to be cut by Sustainable Growth Rate (SGR) reductions passed by Congress some years ago, but Congress has not been willing to implement these cuts.

Debt Ceiling

President Obama has been emphatic in not wanting to undergo another crisis negotiation in which Republicans insist on spending reductions commensurate with increases in the debt ceiling.  The debt ceiling is expected to be reached within the next month or two.  If Congress does not authorize continued borrowing, the crisis would stall spending, spook federal bond-holders, with threats of catastrophe for our economy, according to people like Federal Reserve Chair Ben Bernanke.  Holding spending on domestic priorities hostage to deeper and deeper cuts to get the debt ceiling increased would be very dangerous to human needs programs.  Obama’s position initially would have reduced Congress’ role in debt ceiling increases permanently; more recent proposals have called for a two-year debt ceiling increase.

Appropriations

The President’s most recent offer called for cuts of $100 billion to defense and $100 billion to non-defense appropriations over 10 years, beyond the $1.5 trillion in cuts to these programs already set in motion over the next decade.  These cuts are much lower than the approximately $1 trillion in additional Pentagon, domestic, and international program cuts that are now scheduled to start in January and continue over 10 years.  Still, domestic appropriations are being cut deeply already, affecting education, housing, child care, WIC, Head Start, home energy assistance, and much more, and many groups oppose any further cuts.  On the other hand, many military spending experts believe that much more could be cut from military spending than the $100 billion called for in the President’s plan.

As noted above, the House spending reduction bill cuts appropriations by another $19.1 billion in FY 2013 by lowering the appropriations cap by that amount.  The bill also prohibits further military cuts.

The post CHN: The House Goes Home for Christmas appeared first on Coalition on Human Needs.

On June 28, the Supreme Court made an historic decision: they upheld the individual mandate in the Affordable Care Act. This news came with a bitter pill for low-income advocates, however – that states now have the option to refuse to expand Medicaid to cover people with incomes up to 133 percent of the poverty line, choosing to forego federal funds provided to them for this purpose.

The Medicaid expansion is fully funded by ACA for its first three years (after which the federal match phases down to 90 percent by 2020). If a state chooses not to expand Medicaid however, many low-income people will remain uninsured. The Affordable Care Act was designed assuming that those individuals with incomes below the poverty line would be covered by Medicaid. Based on this assumption, Congress set the income eligibility range for subsidies aimed at helping people purchase coverage in insurance exchanges at 100 to 400 percent of the poverty line. If a state does not accept the Medicaid expansion, individuals living below the poverty line who are not now covered by their state’s Medicaid program will not be eligible for premium subsidies either.  The Congressional Budget Office estimates that because some states will refuse to expand Medicaid, 6 million people will not receive health coverage through that program.  Of these, CBO expects 3 million with incomes from 100 – 133 percent of the poverty line will get subsidized coverage through their state’s insurance exchange.  The remaining 3 million will fall into the “coverage gap” – left without any coverage at all. For further details, see this piece from Robert Greenstein at the Center for Budget and Policy Priorities and this blog post from the Center.

The expansion is a very favorable deal for states, and not only because it is almost fully federally funded. Hospitals also benefit from the expansion because they are ensured Medicaid payment for services that are not currently reimbursed. Essentially, for a small cost to states that would be partly offset by savings in uncompensated care, CBO had estimated that the Medicaid expansion with all states participating would cover an additional 17 million low-income people.

So why are so many states threatening not to take the Medicaid expansion? Governor Rick Perry of Texas, along with Republican governors from at least 10 other states, has announced that he will not expand Medicaid. Many advocates believe their opposition is based on partisan politics or ideology, although these governors claim that states would bear a financial burden by expanding Medicaid (see this color-coded map from ThinkProgress to see which way states are leaning).  The small proportion states would pay is expected to amount to a 2.8 percent increase over their Medicaid costs without the expansion, less the savings from reducing uncompensated care payments to hospitals (because more patients would have insurance).  To most anti-poverty advocates, accepting the expansion seems like a no-brainer for states because of the benefits it provides and the fact that is almost fully funded by the federal government. Health care providers who expected more insured patients through the ACA are already starting to exert pressure on states to accept the option.  How many states will refuse the expansion money is yet to be seen – while they decide, the coverage of millions of low-income Americans hangs in the balance.

The Supreme Court’s validation of most of the health care law does not change the fierce opposition to it among right-wing members of Congress.  The House of Representatives has taken more than 30 votes to repeal the law, all of which have been rebuffed by the Senate.  The House has also attempted to deny the funding required to implement the law, most recently by cutting about $8 billion from the Department of Health and Human Services in the appropriations bill that was approved by a House subcommittee (see Appropriations article, this issue).  The Senate and the President will prevent the law from being de-funded, but the partisan attacks on the law can be expected to continue.

The post CHN: Medicaid Expansion Favorable for States, Yet Some Still Refuse to Cooperate appeared first on Coalition on Human Needs.

The Medicaid program is a critical source of health care coverage for low-income children, some of their parents, seniors, and people with disabilities.  An estimated one in five Americans enrolled in the Medicaid program in 2011.  Medicaid, along with the Children’s Health Insurance Program (CHIP) which provides health care to children in families with slightly higher incomes, covered 31 million low-income children, 11 million non-elderly low-income parents and pregnant women, 8.8 million non-elderly individuals with disabilities, 4.6 million low-income seniors and 3.7 million seniors with disabilities.  But people who do not fit the above categories have not qualified for Medicaid, no matter how poor they are.  The Affordable Care Act will change that, allowing all whose incomes are low enough to receive health care through Medicaid.

Under the ACA, the federal government would pay 100 percent of the cost of expanding Medicaid for the first three years and 90 percent or more of the cost thereafter.  The states who are plaintiffs in the Supreme Court case are calling the Medicaid expansion coercive.  That was met with some skepticism during oral arguments.  Justice Kagan asked what was coercive about states receiving a “boatload” of federal dollars to implement the expansion.  There is plenty of precedent for Medicaid expansions that have required states to share the costs.  States always have the option to drop out of the program; they have not because Medicaid provides vital services with the federal government paying a generous share of the cost.  If the Medicaid expansion in the ACA is declared unconstitutional it would have alarming implications for all of Medicaid, not just the new provisions, and could throw into question other programs in which states are required to pony up funds as a condition of receiving federal funds.  For more information on Medicaid’s role under health care reform see this Kaiser Family Foundation issue brief .

The Court is expected to make its ruling on the constitutionality of the provisions in the Affordable Care Act in late June when the session ends.

The post CHN: Stakes Couldn’t Be Higher for Low-Income Uninsured appeared first on Coalition on Human Needs.

Most budget-watchers believe the answer to the first question is “no” – House Budget Committee Chairman Paul Ryan (R-WI) is expected to unveil his proposal at a speech before the American Enterprise Institute on Tuesday, with Committee action expected the next day.  As for the second question, while the full House would be expected to pass the budget in a party-line vote, Senate Majority Leader Reid (D-NV) has already announced the Senate will not vote on a budget resolution.  So there is no chance that the Ryan budget will be adopted by Congress.

Still, elements of Chairman Ryan’s proposal may prove influential.  In order to accommodate the House’s restive right wing, it is likely that the House budget will call for FY 2013 appropriations levels set lower than the caps already agreed to by Congress in the Budget Control Act.  That deficit reduction law limited FY 2013 appropriations to $1.047 trillion.  Some of the more right-wing members want the total reduced to $1.028 trillion.  Others, in the more extreme Republican Study Committee, have proposed slashing FY 2013 spending to $931 billion, or $116 billion less than the level Congress previously approved.   Republicans on the House Appropriations Committee, however, would prefer to stick with the cap already enacted.  Washington’s best guessers are expecting the Ryan budget to wind up at the $1.028 trillion level.

Senate Budget Committee Chair Kent Conrad (D-ND) plans to adhere to the $1.047 trillion spending limit.  If the House goes $19 billion or more below the enacted levels, the House and Senate will eventually have to negotiate the difference in the appropriations bills that must pass by September 30 (or be temporarily extended at that time).

The House Budget Resolution will do more than set appropriations totals.  It will also make other sweeping recommendations for cuts in mandatory programs such as Medicaid and SNAP (food stamps).  Last year, the Ryan budget proposed turning these two basic entitlements into block grants with fixed funding levels.  The Medicaid cut alone would be $1.4 trillion over 10 years.  The commonplace wisdom is that this year’s budget will repeat these proposals.

Last year’s House budget also made substantial reductions and structural changes in Medicare.  The new budget is expected to propose major changes to Medicare once again, but the proposal may be different.  Chairman Ryan has recently teamed up with Senator Ron Wyden (D-OR) to recommend a new system of “premium supports” that would subsidize insurance costs, allowing Medicare beneficiaries to opt for the current fee for service approach or other private insurance coverage.  Last year’s version did not allow beneficiaries to continue in the current program.  However, analysts are skeptical about whether the subsidies provided will really be enough to allow retirees to afford the current program, thereby forcing them into more limited insurance packages while also increasing their costs.  Last year’s plan would have doubled the individual’s costs (from $6,150 in 2022 under current law to $12,500 under the proposed plan).  The shifting of costs from the federal government to individuals in Medicare will be something to watch for in the new version of Medicare in this year’s House budget plan.  Last year’s plan featured such a shift, with modest federal savings (federal costs would be $8,000 for a 65-year old entering Medicare in 2022 under the new plan versus $8,600 under current law) but dramatically higher total costs ($20,500 in the new proposal as compared to $14,750 under current law) because of the reliance on more expensive private insurance.

With automatic across-the-board cuts in annually appropriated programs scheduled to begin in January 2013 unless Congress acts to reduce the deficit by other means, the expected massive cuts in the Ryan budget (last year totaling $4.3 trillion over ten years) would serve as one blueprint for avoiding the across-the-board cuts.  Two elements likely to be missing from any Ryan plan are a revenue increase and increased military savings.  While the President’s budget also seeks to replace the automatic January 2013 cuts with other forms of deficit reduction, his plan includes $1.5 trillion in revenue increases and nearly $500 billion in defense cuts over the next ten years.  Such a balanced package makes it possible to minimize the cuts to human needs programs.  The Ryan budget, if it lacks such balance, will inflict deep cuts in needed services.

The post CHN: Federal Budget Next Steps: House Budget Resolution Expected This Week appeared first on Coalition on Human Needs.

Cuts to Federal Medicaid spending as proposed by the Administration would likely take shape in one of two ways, blending Federal matching formulas (FMAP) or phasing out “provider taxes”. Unfortunately both proposals shift costs to states and beneficiaries and do not actually make the program more efficient or provide better care. Under the proposal to blend FMAP, the Federal government would replace the current formulas with one single match rate. Under current law, federal funding for Medicaid matches state contributions, and varies both depending on the rate set for specific programs (like the Children’s Health Insurance Program) and on the states’ per capita income. Blending matching formulas would essentially provide one match rate for each state.

But this is not only about streamlining formulas; funding would be subtracted from the new rate, so states would receive less money than under the old system.  The Center on Budget and Policy Priorities details how this proposal would translate here. The second source of Medicaid cuts could be done through phasing out the “provider-tax” – which would limit how states raise funds to help pay their Medicaid costs.  If states can no longer tax hospitals or other health care providers, they will have more difficulty meeting federal match requirements, and therefore will lose federal dollars.

Shifting health care costs to states and/or beneficiaries would be detrimental to millions of low- and –moderate income families during a particularly difficult economic period. Although the amount and means of making Medicaid cuts remains unclear, it is important to recognize that Medicaid per-patient costs are low compared with private insurance; there is not much room to cut without depriving people of services or asking them to pay more.

The post CHN: Threats to Medicaid Continue as Deficit Negotiations Intensify appeared first on Coalition on Human Needs.

Today Medicaid provides health coverage to low- to moderate-income children, parents, seniors, and people with disabilities and is administered by the states and federal government.  Medicaid is the primary source of funding for long-term care for seniors, who comprise one-quarter of the beneficiaries but account for two-thirds of Medicaid spending.  The federal government pays a fixed share (percentage) of the cost of Medicaid depending on the state (50 percent for New York, a wealthier state, and 74 percent for Mississippi, a poorer state), no matter how high the cost of providing the service.  States pay the remainder of the cost.  As a condition for receiving federal funds, states must serve certain populations including children 6 years of age and younger in families with incomes of up to 133 percent of the poverty line, and low-income seniors and people with disabilities who receive Supplemental Security Income (SSI) benefits.  States’ Medicaid programs must also provide certain mandatory benefits like hospital and physician care and Early Periodic Screening, Diagnostic and Treatment services for children.

Severe cuts in Medicaid could come in either of two ways legislatively (both being discussed by some in Congress) – by placing global funding caps on overall federal spending or by direct restructuring of the program into a block grant.  The bottom line would be the same – devastating cuts to Medicaid.  Funding caps would limit spending to a fixed percentage of the Gross Domestic Product (GDP).  One proposal, the CAP Act (S. 245), sponsored by Senators Bob Corker (R-TN) and Claire McCaskill (D-MO), would limit total federal spending to no more than 20.6 percent of the GDP.  Currently spending is between 24 and 25 percent of GDP.  If the cap were not reached through legislation, it would trigger automatic, across-the-board cuts (a so-called ‘sequestration’) to discretionary and mandatory programs to close the gap. If the caps were tight like those in S. 245, the cuts would be so deep to Medicaid that it would necessitate a radical restructuring of the program, likely by changing it to a block grant.  The House-passed Budget (also referred to as the Ryan plan, named after Budget Committee Chairman Paul Ryan (R-WI)) and the budget offered by Senator Patrick Toomey (R-PA) both block-grant Medicaid, cutting the program by $771 billion and $1.1 trillion respectively over 10 years.  On May 25 the Senate rejected both of those budgets (see article “The Senate Rejects a Bunch of Budget Plans;
Action on the Floor Still a Sideshow to Biden Debt Ceiling Negotiations” about these votes in this issue).

Under a block grant the federal government would pay only a fixed dollar amount of the state’s Medicaid cost, with the state responsible for all costs that exceed that amount.  Block grant proposals typically give states more flexibility over programs.  In the case of Medicaid, states would likely be able to cap enrollment, substantially scale back eligibility and coverage and raise the out-of-pocket costs of beneficiaries. Many governors, particularly Republican governors, favor the flexibility that a Medicaid block grant provides.  Under a block grant, states would still be required to continue paying a share of the cost, referred to as ‘maintenance of effort’.  But by gaining authority to cut benefits or eligibility beyond current law, states could reduce the growth in their Medicaid costs.  They would be doing so at the expense of low-income individuals and families.

Over time funding caps or block-granting would shift costs to states, to beneficiaries and to providers, because neither would keep pace with the actual cost of the program.  Most block-grant proposals allow for an annual adjustment to reflect some degree of growth.  The Center on Budget and Policy Priorities estimates that under the Ryan plan, federal funding for Medicaid would rise about 3.5 percentage points per year less than under the current program.  (See theCBPP report.)  The difference compounded over time would be substantial and not enough for the states to maintain their programs without significantly increasing beneficiaries’ share of the cost, cutting payments to providers, cutting eligibility or benefits or a combination thereof.  Block-granting Medicaid would be particularly problematic in times of economic downturns when federal spending would not increase to respond to the growing needs.  Limiting funding to a fixed dollar amount as a block grant does also restricts the ability of Medicaid to cover higher health care costs resulting from new medical treatments or a new epidemic.

Under the Affordable Care Act (ACA) passed last year, beginning on January 1, 2014, states will be required to expand Medicaid to all non-elderly individuals with incomes up to 133 percent of the poverty line.  Converting Medicaid to a block grant would not leave room for this expansion, fatally undermining ACA.  A newly-released Kaiser Commission report finds that if ACA is repealed and Medicaid is converted to a block grant like the one proposed in the Ryan plan, federal spending would be reduced by 34 percent over the 10-year time period from 2012 to 2021, and enrollment in the program would be reduced by 48 percent. (See Kaiser report for state-by-state cuts.)

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On August 5 the Senate passed H.R. 1586 by a vote of 61-39. The two Republican Senators from Maine, Susan Collins and Olympia Snowe, joined all Democrats in voting for the measure. The bill provides $10 billion for education jobs and $16.1 billion to extend for six months the increased federal Medicaid matching rate provided to states through the American Recovery and Reinvestment Act (ARRA). Without the extension the increased Medicaid matching rate would have expired on December 31, 2010. The additional aid to states comes at a critical time. A recent analysis by the Rockefeller Institute of Government shows that for the first time total employment by state governments has dipped below its level at the start of the Great Recession (see full analysis). A total of more than 300,000 state and local government jobs have been lost since August 2008, reports the Economic Policy Institute (EPI). H.R. 1586 is expected to help restore some of these losses. EPI estimates that the Medicaid funds will save 158,000 jobs, but more than half of these will be in the private sector (see EPI paper). The Department of Education estimates that the $10 billion for education will save 161,000 educators’ jobs. For a breakdown of education jobs saved by state click here.

To the dismay of advocates, H.R. 1586 is paid for in part by cutting short a boost in SNAP (food stamp) benefits provided in ARRA. Families would begin receiving reduced SNAP benefits in April of 2014. According to the Food Research and Action Center (FRAC) a family of four can expect its benefits to drop about $59 a month. ARRA had been written to avoid a precipitous drop in SNAP benefits from one month to the next. The increased benefits were to continue until the automatic annual inflation adjustments in regular SNAP benefits increased their value to match the ARRA levels. Although originally it was estimated that this would occur in 2014, lower than expected inflation delayed the point at which the regular benefits would meet the ARRA levels to 2018. Stopping the ARRA SNAP levels generated $11.9 billion to pay for H.R. 1586. Other offsets used to pay for H.R. 1586 include closing foreign tax credit loopholes, reducing prices paid for certain drugs by Medicaid programs, and making rescissions from previously appropriated programs. In order to secure the needed 60 votes, this bill changed the nature of the offsets from previous versions of the legislation. Certain tax breaks for corporations were allowed to continue, and cuts to navy spending said to adversely affect Maine shipbuilding were dropped from the bill.

Over 1,400 organizations from around the country have signed a letter to Congress voicing opposition to reducing SNAP benefits to pay for any other legislative priorities, regardless of the merits of those priorities. (See letter with current list of signers.)

House Speaker Nancy Pelosi reconvened the House, for a special session the week of August 9 to approve the increased Medicaid and education funding for states without delay. The House voted on the measure August 10, 247-161. Although House Members voiced concern over the SNAP cut, the House had no alternative but to vote for the Senate’s bill in order to avert tens of thousands of school system layoffs just before the start of the new school year and to prevent Medicaid service and job cuts. Anti-hunger champions including House Agriculture Appropriations Subcommittee Chair Rosa DeLauro (D-CT) and House Hunger Caucus Co-Chair Jim McGovern (D-MA) vowed to seek the restoration of SNAP benefit levels before the cut takes effect.

Other pending job measures advocates hope will pass when Congress reconvenes in September are an extension of the TANF Emergency Fund and funding for jobs for youth. Without an extension the TANF Emergency Fund program, which has allowed states to create more than 240,000 temporary subsidized jobs, will expire at the end of September. A potential vehicle for the remaining job measures is the stalled small business loan fund bill; another is the package of extensions of popular tax cuts that many in Congress would like to revive. However, the future of all these provisions is still uncertain as a minority in the Senate can tie up legislation and the remaining days for action in September are few.

The post CHN: Congress Enacts Medicaid and Education Aid Urgently Needed by States appeared first on Coalition on Human Needs.

Backed by House and Senate leadership, these domestic provisions were initially opposed by the President and some of his allies in Congress.  But the work of advocates and the bad news of growing unemployment strengthened the hand of the majority in Congress to hold firm for adding 13 weeks of extended unemployment insurance to the supplemental spending bill, at a cost of $8.2 billion over 10 years.  Similarly, there were strong advocacy efforts to improve education benefits for GI’s, to help states cope with the aftermath of flooding and tornadoes, and to stall a set of Medicaid regulations that would significantly reduce benefits and/or increase state costs.  The final vote on the domestic items in the Senate was 92-6 on June 26 (http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=0016). The House had previously passed this package with a similarly overwhelming 416-12 vote on June 19 (http://clerk.house.gov/evs/2008/roll432.xml).  Such veto-proof majorities spared Congress from having to negotiate further reductions in their domestic priorities.

Although advocates feel very good about these victories, the President’s veto threats did cause Congress to scale back some of its original domestic proposals.  Initially, both House and Senate approved a 13-week extension of unemployment insurance for all those who had exhausted their state benefits, plus another 13 weeks in states with jobless rates above 6 percent.  The second 13 weeks in high unemployment states was dropped to get the President’s support.  Similarly, language was included to restrict the extended benefits to those who had worked for 20 weeks or more. Since many states with antiquated systems ignore a worker’s most recent 3-6 months of earnings, this provision will exclude some workers (disproportionately young and low-income) who really have well over 20 weeks of work.  In other instances, states have approved UI benefits for low-income workers with relatively few weeks of work, but their benefits have also been low and of short duration.  The federal extension would have only given such workers half of their state benefit after it was exhausted.  Still, UI opponents made grossly exaggerated claims about how many weeks of UI could be received after only a couple of weeks of work, and the restrictions were included.

The 13 weeks additional weeks of UI benefits is extremely important because close to 4 million workers either have already exhausted their 26 weeks of state benefits or will do so by March 2009.  (For more information and state impacts, see the National Employment Law Center’s statement, http://www.nelp.org/docUploads/Updated%20Press%20release.doc).

The supplemental spending bill also delays the implementation of six different Medicaid regulations put forward by the Bush Administration, preventing them from taking effect any earlier than April 1, 2009, and thus allowing the next Administration to decide what to do with the proposals.  These regulations would deny federal Medicaid funds to states for such services as transportation of students with special health needs to school-based health services, certain rehabilitation services, and some case management for children in foster care or others with disabilities.  If these regulations are implemented, children and other vulnerable people will lose benefits, states will face greater expenses at a time when shrinking revenues are forcing state budget cutbacks, or a combination of both.  Congress had also sought a moratorium on a regulation to restrict federal reimbursements for routine hospital outpatient services, such as vaccinations or annual check-ups, but that regulation was not included among the moratoria finally agreed upon. (For more information about the Administration’s proposed regulations, seehttp://ccf.georgetown.edu/index/cms-filesystem-action?file=policy/medicaid%20regs/overviewofmedregs.pdf).

The GI education benefit would provide in-state college tuition and a housing stipend to veterans who have served at least 36 months, at a cost of $63 billion over 10 years.  Veterans have 15 years to use this benefit and can transfer an unused portion to a spouse or dependent.

The full cost of the legislation through the end of FY 2009 is $186.5 billion, of which $161.8 billion is for the FYs 2008-2009 costs of the wars.  The domestic provisions for that same period cost $24.7 billion, and also include $2.7 billion for disaster relief for the Midwest and to rebuild levees destroyed by Hurricane Katrina.

The post CHN: Victory: 13 More Weeks of Unemployment Benefits;Congress Enacts and President Signs Bill Adding Domestic Items to War Funding appeared first on Coalition on Human Needs.

The bill’s prospects in the Senate are not as clear. Senate Majority Leader Harry Reid (D-NV) fast-tracked the bill on April 24 by invoking a parliamentary rule that allows for it to be brought directly to the Senate floor, bypassing committee review. Senator Max Baucus (D-MT), Chairman of the Finance Committee with jurisdiction over the Medicaid program, agreed with Senator’s Reid approach.  This means that the bill could be taken up as early as this week. However, this may not happen since Senate Democrats are still searching for sufficient Republican votes to override an expected Administration veto.

Due to the uncertainty in the Senate, House leaders are also considering other vehicles to attach moratoria on the Medicaid regulations. A potential vehicle is the war supplemental spending bill, which Congress plans to consider as early as next week.

August 17 SCHIP Directive

On a related note, the Government Accountability Office and the Congressional Research Service found that the Centers for Medicare and Medicaid (CMS) violated federal law when it issued a directive last August restricting states from covering children through the State Children’s Health Insurance Program with family incomes above 250% of the federal poverty level (FPL) unless they meet certain standards. According to the Congressional Review Act, before such a rule can take effect, it must be submitted to Congress for review, which CMS did not do. The August 17 directive has affected at least 23 states.

Senators John Rockefeller (D-WV) and Olympia Snowe (R-ME) have asked the Administration to rescind the August 17th directive and work with Congress to reach a consensus. The Senators are also the authors of a bill, the “Economic Recovery in Health Care Act of 2008”, S. 2819, that would suspend the Medicaid regulations and the August 17 directive until April 1, 2009 and provide state fiscal relief to target states experiencing budget shortfalls.

The post CHN: Congress Continues Push to Suspend Harmful Medicaid Regulations appeared first on Coalition on Human Needs.

The regulations are described by the Department of Health and Human Services as ensuring the integrity of Medicaid by preventing states from using funds inappropriately but instead would harm America’s vulnerable populations, including children, seniors and people with disabilities. Congress has already imposed delays on some of the proposed regulations, but these moratoria will expire within the next few months if no additional action is taken.

Among the regulations delayed by the Dingell bill is one that would deny federal funds for activities by school personnel to enroll eligible poor children in Medicaid, or for transporting children with disabilities or special health needs to school if they receive health services there.  Another would disallow federal Medicaid funds for case management for children in foster care or with disabilities or chronic health conditions.  Another regulation would end federal Medicaid funding for graduate medical education at teaching hospitals.  The Congressional Budget Office estimates the regulations would reduce federal Medicaid funding to states by at least $20 billion over a five-year period.   The cost to the federal government in FY 2009 for delaying implementation is estimated at $1.65 billion.

States, beneficiaries, and providers have voiced their concerns about the negative impact the regulations will have on the services they offer or receive.  They are concerned that shifting costs to the states, at a time when many are expected to face budget deficits, will force   a host of cuts to vital resources and services, hurting Medicaid beneficiaries and weakening the already damaged health care system.  For example, children placed in out-of-home care are at high risk for physical and mental health issues for a number of reasons.  Case management assists children in foster care with getting the services they need.  According to studies, the impact of the Targeted Case Management services on children in foster care is overwhelmingly positive.  The proposed rule would undermine the success of these services on this vulnerable population.  Furthermore, the regulations are expected to cut services to people with disabilities severely.  Advocates for children with disabilities are skeptical that school systems will be able to replace the lost funding, especially as so many are already squeezed financially.

There is bipartisan interest in continuing or establishing moratoria on these regulations in the Senate, as well as the House.  Senators Rockefeller (D-WV), Snowe (R-ME), and Kennedy (D-MA) introduced a similar bill, S. 2819, which was referred to the Committee on Finance on April 3.

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