Medicare Compliance & Reimbursement

Pressure from Congressional leaders turns up few hints about administration's plans

Will the Bush administration again seek to cap a big chunk of federal Medicaid expenditures? And how does Michael Leavitt, the president's nominee to succeed Tommy Thompson as Secretary of Health and Human Services, feel about such caps?

During lengthy appearances by Leavitt before the Senate Health, Education, Labor, and Pensions Committee on Jan. 18 and the Senate Finance Committee on Jan. 19, Democrats and some Republicans sought to get Leavitt to say he opposed Medicaid caps, as he did when he was governor of Utah. However, Leavitt, who currently leads the Environmental Protection Agency and is headed to easy confirmation, refused to commit himself, leaving his - and the administration's - options open.

In 2002, as Utah governor, Leavitt obtained a "Section 1115" Medicaid waiver from the federal government allowing Utah to extend very basic health care coverage to uninsured residents above normal Medicaid income limits. Section 1115 waivers must be budget neutral; previous waivers had met this requirement while expanding coverage in certain areas by assuming savings from increasing managed care for Medicaid recipients. Utah's waiver, in contrast, stayed budget neutral by increasing cost-sharing and cutting benefits for existing Medicaid beneficiaries.
 
 Expectations Of  2003 Redux Roil Congress
 
Given this background, Bush's nomination of Leavitt has been seen as signaling that changes to Medicaid, and efforts to control its cost, will be high on the president's second-term agenda. Democrats in Congress, and many moderate Republicans as well, worry that the administration will seek to reprise its 2003 Medicaid proposal, which included capping the majority of federal Medicaid expenditures.

Currently, Medicaid is a federal entitlement, meaning that the federal government contributes from 50 percent to 80 percent of each state's costs, with no maximum dollar amount. Federal law requires that all state programs cover certain "mandatory" services, such as inpatient and outpatient hospital treatment, and certain mandatory groups, such as pregnant women and children under six in families with incomes below 133 percent of federal poverty level. States may also cover additional "optional" benefits, such as prescription drugs, and optional populations, such as pregnant women and children in families at higher income levels.

The Bush 2003 proposal, had it been enacted, would have allowed but not required states to sign up for an alternative form of federal reimbursement. The government still would have provided unlimited matching contributions for the roughly one-third of state expenditures that provide mandatory services to mandatory beneficiaries. To cover optional populations and benefits, however, each state that signed up for the Bush alternative would have received a capped federal allotment that could not exceed a maximum dollar amount, no matter how much the state spent.

The administration hoped to bribe states into accepting [...]