Bush plan slows Medicaid, research funding

The budget could reduce coverage for Medicaid recipients and hurt the country's reputation as a research leader, groups say. Others applaud efforts for the uninsured.

By Joel B. Finkelstein — Posted Feb. 28, 2005

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Washington -- President Bush's proposed budget for fiscal year 2006 delivers tough economic discipline for several health programs and departments, including Medicaid and the National Institutes of Health. But the president would give a financial boost to some of his priorities, such as health centers and health savings accounts.

The proposed budget is nonbinding but helps guide Congress in developing a budget that the president would be willing to sign. It also provides the public with an outline of the administration's legislative goals.

Bush has proposed Medicaid reforms designed to shave at least $60 billion from expected funding over the next 10 years. Medicaid is projected to cost the federal government $193 billion in 2006.

As part of this effort, the president has asked Congress to take another look at how Medicaid funds are shuttled between state and local governments. The administration and some lawmakers have complained that the current rules governing the movement of these dollars have allowed some states to increase the amount of federal matching funds they receive.

"State officials have resorted to a variety of loopholes and accounting gimmicks that shift the costs they claim to pay to the taxpayers of other states," Health and Human Services Secretary Mike Leavitt said during a recent speech. "If we don't close these loopholes, we project that over the next 10 years they will shift $40 billion through various means."

But the states would like Congress to take a renewed look at the funding partnership between themselves and the federal government from a different point of view.

"The Medicaid program needs to be rethought and reformed," according to a statement from the National Governors Assn. "It needs to redefine the federal-state role in a way that makes the states' financial commitment sustainable over the long run."

The problem isn't that states game the system, but that health care cost increases and rising enrollment are overwhelming their budgets, experts said.

Restricting the federal share will force states to cut the program further. In the past, states have contained costs by cutting reimbursement to doctors, limiting enrollment and scaling back services and benefits.

Ron Pollack, executive director of the consumer group Families USA, called the cuts "an ill-conceived move that will add to the financial burden states are already experiencing. As a result, many seniors, children and the sickest people in Medicaid will be devastated by a loss of health coverage."

The Bush administration also proposed giving states the ability to use Medicaid funds more wisely and efficiently.

"The president is committed to resolving the growing challenges facing Medicaid," Leavitt said. "His approach will build upon the success of the SCHIP and waiver programs to allow states the flexibility to construct targeted benefit packages, coordinate with private insurance and extend coverage to higher income and nontraditional Medicaid populations."

Bush is seeking other savings in the program.

Medicaid currently overpays for prescription drugs to the tune of more than $500 million a year, so Bush is seeking changes to the rebate formula so that the program is charged closer to market prices.

The president also has asked Congress to change eligibility criteria that allow nursing home patients to claim Medicaid benefits despite having significant personal assets. This would save an estimated $4.5 billion over 10 years.

Other cuts

In addition to the Medicaid cuts, the administration has asked Congress to drop funding for nine programs and reduce funding for another 10 that are part of the Health Resources and Services Administration. For example, money for health professionals' training activities and universal newborn screening tests for hearing, trauma and sickle cell disease would be eliminated.

The cuts would add up to more than $800 million in fiscal 2006.

The Centers for Disease Control and Prevention also would sustain more than $500 million in cuts, a large part of which would come from a moratorium on new building. There also would be a slowdown in stockpiling of shots for the Vaccines for Children program, which HHS officials said already has built up adequate reserves.

The budget's proposed funding level for the NIH was denounced by some research advocates. Even though, at $28.8 billion, the agency would receive a small increase in fiscal 2006, the growth does not keep up with inflation, experts said.

This is third consecutive year that Bush has proposed such small increases in research dollars, said Jordan J. Cohen, MD, president of the Assn. of American Medical Colleges.

"If this funding trend continues, America's position as the world leader in research will be threatened," he said.

Several other groups involved in medical research reiterated that message. "We urge the administration and Congress to acknowledge the need for a sufficient investment to protect Americans against infectious diseases," said Walter E. Stamm, MD, president of the Infectious Disease Society of America.

Helping the uninsured

The budget isn't bad news for everyone. It reflects the president's continued support for federally funded community health centers. It would add $304 million to the program in fiscal 2006, including $26 million slated to build 40 new centers in poor counties.

Bush also calls for new financial support for promoting health savings accounts, broadening the availability of health insurance tax credits and expanding access to state high-risk insurance pools.

"The expansion of health savings accounts can empower patients to have greater control over their health care decisions," said John C. Nelson, MD, MPH, president of the American Medical Association.

The AMA plan for reducing the ranks of the uninsured calls for "expanding coverage and choice through refundable tax credits inversely related to income, individually selected and owned health insurance, and other reforms," he said.

The Bush administration also would like to increase outreach efforts that encourage families to enroll eligible children in public programs, such as Medicaid and the State Children's Health Insurance Program.

Together, efforts to expand coverage will cost an estimated $140 billion in federal funds over the next 10 years, Leavitt said. The efforts are expected to extend health insurance to between 12 million and 14 million Americans.

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NIH funding slows

President Bush's proposed fiscal year 2006 budget asks Congress to allocate $28.8 billion for the National Institutes of Health, a $200 million rise over 2005 and the third year in a row that research funding growth has slowed.

1999 14.6%
2000 14.0%
2001 14.5%
2002 15.0%
2003 15.0%
2004 3.0%
2005 2.1%
2006 0.7%

Note: 2006 is president's request.

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External links

Dept. of Health and Human Services fiscal year 2006 budget documents (link)

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