Medicare Compliance & Reimbursement

What CMS plans to do once Medicaid savings come rolling in

President Bush's fiscal year 2006 budget includes $142 billion over 10 years in new coverage initiatives, Centers for Medicare and Medicaid Services Administrator Mark McClellan told reporters Feb. 4. McClellan said the package would increase the number of insured Americans by 12 to 14 million over the decade.

Of the $142 billion total, $60 billion will be offset by Medicaid savings from new policies, leaving a net total of $82 billion in new money, according to CMS documents. However, McClellan said that revisions in the Medicaid "baseline" will knock another $73 billion over ten years off Medicaid costs. He emphasized that these savings came from a routine, semi-annual re-estimate of trends by Department of Health and Human Services actuaries. He said the savings likely came from factors such as slowed health care inflation and an improving economy, not from policy changes.

The administration allocates the biggest chunk of coverage money, $74 billion, for a health insurance tax credit to help low income families and individuals purchase insurance. The credit could be used to pay for up to 90 percent of the premium for standard coverage, up to $1,000 for an individual and $3,000 for a family of four. It would start to phase out at incomes of $15,000 for an individual and $30,000 for a family, disappearing completely at twice those amounts.

Another element in the package is additional steps to encourage use of health savings accounts. HSAs, created in the Medicare Modernization Act of 2003, are savings vehicles that are already tax-advantaged.

The administration wants to spend $28.5 billion over 10 years to render tax-deductible the cost of purchasing a high-deductible insurance policy, to be used in conjunction with an HSA, on the individual market. The deduction would be "above-the-line," meaning it would be available to taxpayers who do not otherwise itemize deductions. The administration also wants to provide $19.2 billion in rebates to small employers who contribute to their workers' HSAs.

The administration is proposing $16.5 billion in coverage initiatives within Medicaid and the State Children's Health Insurance Program. The biggest item is $11.3 billion over 10 years for a "Cover the Kids" outreach program, designed to sign up the millions of children eligible for, but not enrolled in, Medicaid and SCHIP.

Separately from these totals, McClellan said, the FY 2006 budget will include $2.038 billion for community health centers, an increase of $304 million over the 2005 amount.