Thompson Unveils Bush Administration’s Medicaid Reform Proposal

In response to recent appeals by states for federal relief from "soaring" Medicaid costs, HHS Secretary Tommy Thompson on Friday unveiled the Bush administration's proposal to "revamp" Medicaid by giving states more freedom to decide what medical services are provided to the one-third of Medicaid beneficiaries to whom states are not required by law to give benefits but who are covered at the states' discretion, the Washington Post reports (Goldstein, Washington Post, 2/1). Under the proposed changes, which would need to be approved by Congress, states would no longer need to apply for federal waivers to deviate from federal standards for Medicaid eligibility and benefits, according to the New York Times (Pear, New York Times, 2/1). For "non-mandatory" beneficiaries, states would be permitted to change Medicaid rules and regulations, simplify and alter eligibility requirements and "tailor" or cut benefits at their own discretion, the Philadelphia Inquirer reports (Pugh, Philadelphia Inquirer, 2/1). In addition, the proposal would give states a fixed amount of federal money for the beneficiaries that states voluntarily choose to cover -- a shift away from the current system, under which the federal government matches every dollar that states spend based on each state's wealth, the Los Angeles Times reports (Kemper, Los Angeles Times, 2/1). Under the proposal, states would be required to preserve comprehensive Medicaid coverage for the roughly two-thirds of Medicaid beneficiaries whose income levels are low enough that the federal government mandates that they be covered (Washington Post, 2/1).

States that decide to join the new optional Medicaid program would receive a total of $3.25 billion in federal subsidies in 2004 to fund new programs and $12.7 billion over seven years, but for the three years after that, federal funding would decrease, resulting in a net of no cost to the federal government over 10 years, Thompson said (New York Times, 2/1). Federal Medicaid and CHIP funding would be provided in annual allotments, with one allotment for acute care and another for long-term care (HHS release, 1/31). According to the Post, the formula to determine those allotments would be fixed and would be based both on how much states spent in the previous year and on a formula that determines how much spending will increase in the future (Washington Post, 2/1). "The time to modernize Medicaid is here. The states' budget crises are threatening the progress we've made in expanding health insurance," Thompson said, adding, "The old Medicaid rules are a straitjacket, restraining creative new approaches that could preserve coverage and expand it to more Americans in need" (New York Times, 2/1).

Utah Gov. Mike Leavitt (R) was "enthusiastic" about the Medicaid reform proposal, saying, "It's better for everyone to have basic health care than for a few to have everything." CMS Administrator Tom Scully added that the proposal was a "deal" for the states. However, Sen. Edward Kennedy (D-Mass.) "lashed out" at the proposal, saying, "Earlier this week, the Bush administration proposed to break the promise of Medicare to our senior citizens. Now, they are proposing to break the promise of Medicaid as well." He added, "Low-income senior citizens, the disabled and children will all be victims of this misguided policy" (Los Angeles Times, 2/1). The National Governors Association and several Republicans in Congress were "noncommittal," the New York Times reports. The NGA issued a statement thanking Thompson for "recognizing the need to reform the Medicaid program" but did not endorse any details of the proposal (New York Times, 2/1).