Democrats eye changes to state Medicaid policies

Bush administration policies granting states unprecedented flexibility to redesign their Medicaid programs likely will be subject to increased scrutiny when Democrats take control of Congress.

Although the senior Democrats poised to assume leadership positions have staked out plans to tackle Medicare and have signaled a willingness to negotiate with President Bush on Social Security, they have been mostly silent on how to reform the third piece of the entitlement puzzle: Medicaid.

But congressional Democrats have long expressed concern about the administration’s use of a process that allows it to waive certain federal requirements regarding whom Medicaid covers, what services it pays for and what share of the cost is borne by beneficiaries.

The Deficit Reduction Act (DRA), which passed this year, further expanded the ability of the states, which manage and partly fund Medicaid, to make changes to their programs.

The administration is likely to press ahead with its policy of encouraging states to change their programs, which could set it on a collision course with skeptical Democrats, said lobbyist Christopher Jennings of Jennings Policy Strategies.

“That will be the area [with] … the most potential for conflict,” he said.

A spokesman for incoming House Speaker Nancy Pelosi (D-Calif.) indicated that Democrats would be monitoring the administration’s application of the DRA provisions on Medicaid.

“We are concerned about various regulations that the administration may issue and are concerned with the implementation of provisions in the Deficit Reduction Act,” deputy press secretary Drew Hammill wrote in an e-mail.

“Democrats are concerned about the substantial changes in benefits and out-of-pocket costs that could be imposed on families under the new Deficit Reduction Act provisions. These matters will be explored in greater detail next Congress,” incoming House Energy and Commerce Committee Chairman John Dingell (D-Mich.) told The Hill in a written statement.

Medicaid costs the federal and state governments an estimated $300 billion a year and covers 56 million people.

Congressional Democratic critics maintain the changes in eligibility and benefits sought by the administration and some states shift the financial burden of the program off the federal government and onto the backs of poor beneficiaries.

Supporters of enhanced flexibility in the design of states’ Medicaid programs counter that the rising costs of the program are unsustainable and that changes need to be made to guarantee that Medicaid benefits are available to the people who need them the most.

An aide to incoming Senate Finance Committee Chairman Max Baucus (D-Mont.) stressed that “it’s too early to talk about specifics on entitlement reform,” but added that Baucus has criticized the administration’s use of the waiver process in the past. Outgoing Chairman Chuck Grassley (R-Iowa) also has expressed concern about the waiver process.

The Department of Health and Human Services (HHS) historically had to approve these waivers and other changes. Since Bush took office, HHS has accelerated the process, and the number of approvals has grown significantly.

Demand from the states has played a role in driving these policies. Governors of both parties have demanded more freedom from their federal partners as Medicaid spending has subsumed a growing share of states’ budgets.

So far, only Idaho, Kentucky and West Virginia have used the authorities under the DRA to change their programs, but others are weighing their options. According to a survey released last month by the Kaiser Commission on Medicaid and the Uninsured, nine states with pending waiver requests said they were changing them in light of the DRA’s enactment.

The release of the administration’s Medicaid Commission report next month also could jumpstart congressional attention to the program.

The controversial panel — which was boycotted by Congress and all but two governors — will recommend that states be given even more freedom to alter their programs without federal approval, according to an article published in The New York Times last week.

Dingell and Baucus immediately dismissed the commission’s findings.

“It is the job of Congress to review the Medicaid program and legislate necessary changes,” Dingell said in a written statement.

In a separate written statement, Baucus said that “many of the recommendations will undermine federal oversight of the program ...”

The administration also has targeted Medicaid as a source of budgetary savings over the last several years. Although Congress rejected the White House’s FY 2007 request for a $35.9 billion reduction in Medicaid spending over five years, the DRA enacted $4.8 billion in savings over a five-year period. Democrats and centrist Republicans blocked attempts at larger extractions.

If the administration seeks savings from Medicaid again in next year’s budget, it will meet similar resistance.

“Medicaid is a very large entitlement program — but it primarily faces shortfalls in meeting medical needs and could not in any meaningful fashion contribute to deficit reduction,” wrote Hammill.

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