Medicare Compliance & Reimbursement

States not likely to take cuts lying down

At a Feb. 16 Senate Finance Committee hearing, senior panel Democrat Max Baucus (MT) pressed Health and Human Services Secretary Mike Leavitt for details on how the administration's proposed cuts would affect specific states.

The administration has proposed cutting $60 billion over 10 years from the Medicaid program; $15 billion would go back into the program in other forms, so the net cuts would be $45 billion. Of the $60 billion, two-thirds, or $40 billion, would come from ending what Leavitt characterized as accounting loopholes that allow states to unfairly shift costs to the federal government.

"The only fair way to get to the bottom of this is to put all the cards out on the table, and one of the cards is: 'What's the dollar effect going to be on each state?'" Baucus said. When Leavitt promised Baucus this information "to the extent we have it available," Baucus was unmollified. "If you don't have it, that says something right off the top," he said, "And if you don't want to do it because it makes your life more difficult, that says a lot, too."

Baucus' concern about the effect on states of possible Medicaid cuts was echoed by colleagues from both sides of the aisle. For instance, Sen. Gordon Smith (R-OR) said the administration's cuts would cost his state's Medicaid program $500 million over 10 years. And Sen. Jeff Bingaman (D-NM) complained about the administration's proposal to cut the federal match rate to 50 percent for state Medicaid expenditures on targeted case management, which he said would cost New Mexico $8 million in fiscal year 2006.

Bingaman and Smith are co-sponsoring legislation that would create a bipartisan Medicaid commission, and Bingaman touted the idea to Leavitt as a way to break the blame game between the federal government and the states. But Leavitt said a commission would only create delays and ultimately "would end up with the same dance that you just characterized." The Secretary declared, "There is a need for swift and early action" to introduce flexibility into Medicaid, so that cash-strapped states would not be forced to cut off "optional" beneficiaries completely.

Leavitt said he was working with the nation's governors to develop a bipartisan proposal that would give states the needed flexibility. But panel members remained skeptical, with Sen. Olympia Snowe (R-ME) expressing the worry that the administration's proposals "could be a euphemism for reducing the program and support to the neediest populations."