February 07,2005

Baucus Troubled by Deep Medicaid Cuts Proposed in President’s Budget

Budget Proposal Includes $60 billion in Cuts to Medicaid Over 10 Years

(WASHINGTON, D.C.) U.S. Senator Max Baucus, ranking member of the U.S. SenateFinance Committee, raised concerns about the new Medicaid cuts included in the president’sbudget, as outlined by Centers for Medicare and Medicaid Services (CMS) Administrator MarkMcClellan on Friday and described in greater detail today. The budget proposal includesMedicaid cuts of $60 billion over 10 years.

“I am deeply concerned about these new cuts to the Medicaid program,” Baucus said.“This program is a lifeline to more than 50 million low-income elderly and disabled adults,parents, pregnant women and children. We need to tread very carefully here.”

Baucus noted that recent increases in Medicaid spending are largely due to the countercyclicalnature of the program and the role Medicaid plays in filling in Medicare’s gaps incoverage for low-income elderly and disabled Americans. From 2001 to 2003, Medicaidenrollment increased dramatically during the economic downturn, covering an additional 7.5million people, many of whom were dropped from employer coverage due to job loss orincreased health care costs.

“Medicaid has been growing because it is doing its job – providing a safety net ofcoverage that is there when times are tough,” said Baucus. “Medicaid’s costs are also risingbecause of the increasing costs of services for the low-income elderly and disabled Medicarebeneficiaries it serves. As the largest payer of long term care services, Medicaid is doing morethan its share to ensure that coverage for our nation’s seniors is secure. What will happen to ourinfrastructure of care for seniors and the disabled if Medicaid can no longer serve them?”Instead of addressing the real reasons that Medicaid costs have increased, however, theadministration has focused on cutting federal Medicaid payments to states and referring to thecuts as initiatives to improve “program integrity.”

“While I appreciate the president’s interest in minimizing fraud and abuse in Medicaid, itis unclear whether Congress will be able to find the savings he is proposing through the budgetprocess,” said Baucus. “The proposed cap on state administrative spending also concerns megreatly – it sets a dangerous precedent of limiting Medicaid’s promise and would hamper states’efforts to improve information technology and efficiency for Medicaid and further burden themas they take on new administrative responsibilities to implement the new Medicare law. Cuts ofthis magnitude would have a dramatic impact on Medicaid wherever they are made, and I remainunconvinced that such cuts should be our top priority.”

Baucus continued, “I have strong reservations about the administration’s proposal to‘improve flexibility’ to provide less comprehensive Medicaid benefits to higher incomepopulations – given the fiscal pressure Medicaid is facing, I am concerned that this approachtries to do too much with too little.”

Baucus also expressed concern over the president’s proposal to eliminate the RuralHospital Flexibility (Flex) Grant Program. Established as part of the 1997 Balanced Budget Act,Flex Grants assist hospitals in making the transition to Critical Access Hospital status, and helprural, under-served areas establish health networks. Congress funded this initiative at a level of$39.5 million in FY 2005.

In addition to cutting Medicaid and rural health funding, the President has proposed$142 billion in new spending on a variety of health coverage initiatives, including individual taxcredits, new incentives for health savings accounts (HSAs), community health center funding,SCHIP outreach, and other initiatives. Baucus applauded the President’s focus on the uninsured,but questioned a number of the proposals.

“I am encouraged by the President’s willingness to commit up to $142 billion onapproaches to help uninsured Americans get access to needed health coverage and services,”Baucus said. “However, I remain concerned about the proposals he is advancing to achieve thisgoal. Individual health insurance tax credits and health savings accounts will provide little helpto the two-thirds of uninsured individuals with chronic conditions and will simply not beaffordable for many uninsured individuals. I will be interested to see the details of thePresident’s proposal to expand coverage under the SCHIP program, but this is another areawhere the funds should be targeted carefully to expand coverage not merely target enrollment.On all of these proposals, I look forward to working with Congress to develop a responsiblebudget proposal that prioritizes improving the health security of all Americans.”