CMS Restates Projected Medicaid Spending, 10-Year Estimate Lowered $73 Billion
CMS on Friday lowered Medicaid's projected spending growth rate over the next 10 years and said that without any policy changes, federal spending in the program would be $73 billion lower than previously estimated, although administration officials "emphasized" that reforms to the program are still necessary to cut federal and state costs, CQ HealthBeat reports.
CMS announced the projected change after the agency's actuary found that the spending growth rate for 2004 was 9% rather than the projected 11%. The revised growth rate lowered the expected 10-year rate -- between 2006 and 2015 -- from 7.8% to 7.6%. The Congressional Budget Office still maintains its growth rate projection at 7.8%, "though that could change," CQ HealthBeat reports (CQ HealthBeat, 2/4).
According to CQ Today, CMS on Friday "downplayed the significance" of the lower estimate and said the revision would not affect administration plans to reform Medicaid in the fiscal year 2006 budget proposal that President Bush is set to release on Monday (Reichard, CQ Today, 2/4). HHS Secretary Mike Leavitt on Tuesday said that the federal government could save $60 billion in Medicaid spending over the next 10 years by closing "loopholes" that allow middle-class seniors to receive benefits, prohibiting what he called "accounting gimmicks" used by states to receive more federal matching funds and eliminating excessive spending on items such as prescription drugs.
Leavitt said that the Bush administration will not limit federal spending on mandatory beneficiaries. However, he did not directly address the possibility of spending caps on optional patients and services, which account for about two-thirds of Medicaid costs (California Healthline, 2/3).
The administration has said the policy changes in the FY 2006 budget would lower Medicaid's spending growth rate to 7.3% over the next decade. The proposed policy changes, combined with the readjusted spending estimates, mean federal Medicaid spending will be $133 billion lower over the next decade than the administration had previously projected. Taking into account $15 billion in estimated savings that the administration plans to use to expand coverage, the net reduction in spending would be $118 billion. According to CQ HealthBeat, administration officials on Friday "stressed" that only half of that figure would be attributable to policy changes, and a CMS official noted that "it would be incorrect to describe the administration proposal as one seeking $118 billion in cuts" (CQ HealthBeat, 2/4).
Officials noted that while the lower spending estimate was encouraging, the projected spending figure is frequently revised. "This is better news about costs," CMS administrator Mark McClellan said, but he added that the new rate "is not very sustainable for states" (Reichard, CQ Today, 2/4).
According to CQ HealthBeat, the impact of the rate change "is unclear," although Medicaid analysts suggested that "Congress might be tempted not to go as hard at Medicaid because of the lower estimate" in spending growth. Alec Vachon of the consulting firm Hamilton PPB said, "They've already found savings, and nobody's hurt. I've got my party hat on," adding that the new figure "is even more than the president proposed to save in the first place."
However, CQ HealthBeat reports, the revised rate may "mean little" to House and Senate Budget Committee chairs "who view Medicaid in its current form as a serious long-term threat to state and federal budgets" (CQ Healthbeat, 2/4).
According to CQ Weekly, the budget announcement Monday "is not likely to be a day of rejoicing in many state capitals," as governors and lawmakers prepare to "face a new fight over Medicaid." The National Governors Association will begin a lobbying effort in late February, when the group is set to meet in Washington, D.C., but "the complicated nature of Medicaid almost ensures that efforts to balance the budget ... will weigh heavily on the states," CQ Weekly reports.
NGA is expected to offer a proposal in late March that will focus on controlling long-term care costs, lowering enrollment by tightening eligibility requirements and encouraging individuals to buy long-term care insurance prior to qualifying for Medicaid. The governors are planning to resist the Bush administration's plans to change accounting transfers that provide states with what they say are necessary additional funds.
Virginia Gov. Mark Warner (D), chair of NGA, said, "The cuts cause grave concern because the states are still reeling from the budget woes of the last five to six years. To have a major cost shift that simply passes costs from the federal government to the states will really slow the recovery that most states have started to experience" (Adams, CQ Weekly, 2/7).
Sen. George Voinovich (R-Ohio), a former mayor of Cleveland, is leading a coalition of Republican former governors and local officials in Congress who are prepared to contest Bush's Medicaid proposals. "We're going to look at what he proposes. But we are not going to just slash funding for states. We're not going to rip up the safety net," Voinovich said.
While social conservatives note that Bush between 2000 and 2003 raised federal grants for states from $285 billion to more than $409 billion, Voinovich and others say that the trend began to reverse last year, when spending on such grants fell 3% to an estimated $397 billion.
Sen. Thomas Carper (D-Del.), a former Delaware governor, said, "We can't just cut spending for states and local government. We need to look at everything" (Ota, CQ Today, 2/4).
Minneapolis Star Tribune: The Star Tribune on Monday examined the upcoming Medicaid debate, which is expected to be "[o]ne of the toughest battles" in the budget (Hotakainen/Diaz, Minneapolis Star Tribune, 2/7).
- Wall Street Journal: The Journal on Monday examined the expected "state-versus-federal battle" over Medicaid changes and looked at some states' recent efforts to address rising costs in the program (Lueck, Wall Street Journal, 2/7).