Governors Propose Shifting Costs to Poor
Since the April 28 budget resolution calling for $10 billion in spending cuts to be made by the committees with jurisdiction over Medicaid, advocates have been searching for strategies to prevent cuts in benefits or eligibility. They have identified savings – largely through changes in the ways Medicaid pays for prescription drugs – that would avoid the loss of medical care for people who have nowhere else to turn.

The National Governors’ Association (NGA), looking to lessen the bite that Medicaid takes out of state budgets, has also sought to influence the way Congress makes its $10 billion in cuts. On June 15, the NGA adopted a set of Medicaid policies that, like the advocates, propose changes in the way prescription drugs are financed under Medicaid. But in addition the governors seek new power to shift costs to the low-income recipients of the program.

The NGA wants the discretion to require payments up to 5 percent of income for families below 150 percent of the federal poverty line and 7.5 percent of income for families above that. Also included are provisions that would allow states to “tailor” the set of services provided to different categories of people – even though current law already requires Medicaid only provide services medically necessary to each recipient. Two recent studies published in Health Affairs andsummarized by the Center on Budget and Policy Priorities show that such cost-shifting can result in dramatic reductions in coverage and services provided to low-income people.

Families USA and other health care advocates are promoting three broad proposals for prescription drug savings that would avoid the harm to low-income patients in the NGA plan. First, changing the reimbursement rates to pharmacists for dispensing drugs could save an estimated $5.2 billion over five years (based on available data; estimates used by the Congressional Budget Office for budget scoring would likely differ). Second, changing the formula for calculating Medicaid “best price” and Medicaid rebates could produce estimated savings of $3.2 billion over five years. Third, proposed measures to improve the administration of the drug rebate program could save an estimated $1.6 billion to $3.2 billion over five years.

Advocates are mounting a major effort to educate the public and policymakers about the vital need to prevent the loss of Medicaid benefits. Marking the 40 th anniversary of Medicaid on July 30, advocates in many states will be holding Medicaid birthday parties and sending cards to officials over the next few weeks. Wide participation will be needed in these and other actions to protect Medicaid. For more information about ways to get involved, click here.

On July 8, Health and Human Services Secretary Mike Leavitt named members of the new Medicaid Commission called for in the budget resolution.

The commission, which is largely stacked with alumni of Republican state and federal agencies and conservative think-tanks, must produce by September 1 recommendations for cuts of $10 billion in Medicaid over five years. (Recommendations for more comprehensive changes are due from the commission on December 31, 2006.)

Since the budget resolution requires the House and Senate committees to have cuts ready for a reconciliation bill by September 16, members of Congress will have little time to contemplate at least the short-term recommendations of the Medicaid Commission.

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