Number 219 August 22, 2003

This Week:

Quote of the Week
Bush Attacks Medicaid
More Medicaid Information and Organizing


Back in Nygaard Notes #189 I wrote an article called “The Two Types of Government.” One type is the Business Government, which serves the interests of the wealthy corporate interests in the U.S. The other type is the Popular Government, which serves the interests of the rest of us. One of the best examples of the Popular Government at work is the health care program for low-income people known as Medicaid. The relatively “quiet” attack (see last week’s Notes for more on “quiet.”) by the Bush administration on this program is the subject of this week’s edition of Nygaard Notes.

The lead article this week was originally published, pretty much as you find it here, in the August 10th issue of Access Press, Minnesota’s Disability Community Newspaper. Pretty quick now you’ll be able to find the electronic version on the Access Press website at I was going to write a whole new article for the Notes, but when I read the original, I realized that I couldn’t do a whole lot better than that. Plus, I’m going to be out of commission for part of this week, so this is better than taking the week off. Right?

As I mentioned last week, the exact timing of the next issue of the Notes is a bit up in the air, as I am going to be enmeshed in the medical system for a few days now, at minimum. I expect to be back in the groove in time for the next issue, but you never know with these things. Thank you to all of you who wished me well last week!



"Quote" of the Week:

“The system cannot continue much longer the way it is. It is clearly imploding. It isn’t that single-payer is the best choice. It’s the only choice.”

-- Marcia Angell, former editor of the New England Journal of Medicine, speaking at a news conference on behalf of nearly 8,000 physicians who are calling for a national system of single-payer health care in the U.S. The physicians all signed an article that appears in the current issue of the Journal of the American Medical Association.

Bush Attacks Medicaid

Health care news in recent months has been dominated by coverage of the debate on the federal Medicare prescription drug bill. But, unknown to many Americans, the past six months has also seen a major debate on a plan put forth last January by the Bush administration to radically restructure and shrink the federal Medicaid program. Typically, it’s consistent with the overall Bush strategy of “shrinking” the capacity of the Popular Government to serve the majority of the citizens of this country. It’s another piece of the 3-decade-old “New Federalism” inaugurated by Nixon and kicked into high gear by the Reagan braintrust. (For more on this concept, see Nygaard Notes #157, in an article that I oddly titled “The Immense Capacity of States.”)

What Is Medicaid?

Medicaid is a jointly funded, Federal-State health insurance program for 47 million low-income and needy people. It covers children, seniors, people with disabilities, and other people who are eligible to receive federally assisted income maintenance payments. It is funded jointly by the states and the federal government, but administered at the state level. For every dollar a state spends on providing these services, the federal government will provide from one to three dollars (that is, the federal government’s matching funds currently provide between 50 percent and 77 percent of each state’s Medicaid budget). The amount of reimbursement is calculated based on how much a state actually spends to provide services to all eligible participants.

Services provided under Medicaid vary from state to state. All states that participate in the program are required to provide certain services, such as inpatient and outpatient hospital services, physician services, home health care for persons eligible for nursing facility services, as well as a few others. Other services are considered “optional,” with states given the freedom to choose whether to provide services beyond those mandated by federal law.

Minnesota has historically chosen to cover a long list of so-called “optional” services, including: preventive health services, prescription drugs (including birth control), dental services, chiropractic services, physical, occupational, speech and respiratory therapy, WIC (nutrition advice/food vouchers for pregnant Women, Infants and Children), eye exams and glasses, hearing aids, transportation services, mental health treatment, alcohol and drug treatment, hospice care, home health care for those under 21, private-duty nursing, personal care services, group homes for people with mental retardation, prosthetics, and podiatry. [This list is current as of this writing; Minnesota has already cut back on some of these “optional” services.]

The Bush Proposal

The Bush administration’s Medicaid proposal, put forth this past January, was presented as a way to “modernize” and “expand” the program. Many advocates for low-income people and people with disabilities see it as an attempt to weaken or roll back the program. The advocacy group Families USA says that the President’s plan “protects federal and state Medicaid budgets at the expense of the seniors, people with disabilities, and children who rely on Medicaid for health coverage.” (Elements of the plan would also affect the SCHIP—State Children's Health Insurance Program.)

The key features of the Bush administration’s plan are:

1. Increased flexibility for states to change the coverage they currently provide under Medicaid;
2. A drastic reduction in federal funding for Medicaid services;
3. A change in the funding process from the current “federal match” system to a block grant, or “allocation,” system.

“Increased flexibility” could, in theory, mean that states would increase the levels of services provided to low-income recipients. However, in the current budget climate this is highly unlikely. The proposal comes at a time when many states are struggling with serious budget shortfalls. Medicaid expenditures have increased in recent years as a percent of total state expenditures, rising from 10.8 percent in 1988 to close to 20 percent in 2001. A recent study by the Kaiser Commission on Medicaid and the Uninsured found that 49 states were taking action or planning on taking action to reduce the growth in Medicaid spending, with nearly half of the states either reducing benefits or placing limits on program eligibility.

People with disabilities now represent 15% of all Medicaid recipients and account for 37% of all costs because they utilize disproportionate amounts of long-term care. This makes people with disabilities particularly at risk in the current budget environment, where the pain of Medicaid cost-containment measures is already being felt. In this environment, the “increased flexibility” proposed for the states by the Bush administration takes on a different meaning than it might in times of budget surpluses.

In a press conference announcing the Bush plan, Health and Human Services (HHS) Secretary Tommy G. Thompson stated that the plan would provide states with “$12.7 billion in extra funding over seven years.” While this is true, the Secretary did not mention that this is a ten-year plan. After the seven years is up, the plan calls for federal payments to be cut so that there would be no net increase in federal spending over the ten-year period. If this plan were implemented, at the end of the 10-year funding period, in 2013, the Medicaid and SCHIP programs would have to be cut by 16 percent. For perspective, consider that a 16 percent funding cut, if applied today, would mean that nearly 3.9 million children, over 1.2 million people with disabilities, almost 690,00 seniors, and approximately 1.7 million other adults would lose health coverage (if the cuts were applied across-the-board).

The third major element of the Bush proposal is the change in the funding process. Under the current “federal match” system, states are guaranteed additional federal funds if their Medicaid costs increase. The Bush administration proposes to change the funding into a block grant, or “allocation,” system, in which the federal government would estimate in advance how much states need, and then provide that amount of funds, and no more, in a “block.” As the economic think tank The Center on Budget and Policy Priorities points out:

The difficulty of forecasting Medicaid costs stems from the large number of hard-to-predict factors that affect them, including the state of the economy, trends in employer-based health coverage, the price of health care services, the outbreak of an epidemic or the onset of new diseases, advances in medical technology, demographic changes, and changes in poverty rates. A block grant would absolve the federal government of any risk or responsibility related to greater-than-expected increases in Medicaid costs resulting from these or other factors, with states having to bear such cost increases without any federal contribution.

In addition, the formulas used to set the allocation amounts would be based on current spending, already at low levels due to recent cutbacks.

Exactly what is at stake in the Medicaid debate for people with disabilities? If the President succeeds in passing into law his proposal to cap funding at reduced levels and grant the states increased flexibility to set standards and eligibility, people with disabilities will be among the first to feel the impact. In the current budget environment, three specific scenarios are likely to be seen:

1. Many states would likely impose tighter Medicaid eligibility requirements, forcing untold numbers of people with disabilities out of the program;
2. Pressure will mount to cut back or eliminate many “optional” services that specifically serve people with disabilities, such as physical, occupational, speech and respiratory therapy, hearing aids, transportation services, mental health treatment, home health care for those under 21, private-duty nursing, personal care services, and group homes for people with mental retardation;
3. States will be under pressure to increase co-pays and fees for program participants, reducing access to needed services for people with fixed incomes.

What Happens Next?

Soon after the Bush administration announced their plan, the National Association of Governors met and gave “a cool reception” to the proposal, according to press accounts of the meeting, but agreed to set up a task force to negotiate with Bush administration officials on a modified version. After several months of contentious debate, the 10-Governor task force (five Democrats and five Republicans) announced on June 12th that their attempt to reach bipartisan agreement on a modified version of the President’s plan had failed, in part due to “aggressive lobbying by Democratic senators who oppose the changes,” as reported in the June 13th Washington Post.

In reporting on the Governors’ failure, the Washington Post reported that “Now it appears that any Medicaid bill is destined for sharp partisan debate—or indefinite postponement.”

Speculation as to which it will be is far from unanimous. A spokesman for Minnesota Senator Mark Dayton told this reporter that the President’s Medicaid proposal is “sort of slipping from the to-do list” of the Senate leadership, and they don’t expect to see further action in 2003. Likewise with Representative Betty McCollum’s office, where a spokesman added that action on the President’s proposal in the House of Representatives “probably gets less likely every day.”

Outside of Minnesota, the signals are mixed. The Post quoted Thomas A. Scully, who oversees the Medicaid and Medicare programs for the Bush administration, as saying that bipartisan support from the governors was critical. “If they don't want to do it,” Scully said recently, “it's not going to happen.” At the same time, the Post reported that HHS spokesman Bill Pierce says that Secretary Thompson (a former governor of Wisconsin) is not ready to give up. “With the actions many states are taking, include cutting spending on Medicaid, this is just more evidence of why we need to continue try to come to agreement,” Pierce said.

It seems likely that politics will play a large role in determining the fate of the Medicaid program. If the Republican leadership and the White House come to believe that their work on the Medicare prescription drug bill is a vote-getter, perhaps they will be inclined to bring up Medicaid reform as the 2004 presidential campaign gets into gear. If the Medicare campaign is perceived as a “loser,” then it is unlikely that we will see action until after the election. Much of this perception, and the political momentum that comes with it, will depend on the actions and advocacy of the people—including many people with disabilities—who depend on the Medicaid program to live healthy and independent lives.


More Medicaid Information and Organizing

Those wishing to learn more about the President’s proposal to “reform” the Medicaid program—or do something to stop it!— may want to contact the following groups:

The official U.S. government website for the Medicaid program is the Centers for Medicare & Medicaid Services site, found at

The non-partisan advocacy group Families USA has a special division that researches issues concerning Medicaid and Children’s health. Visit their website at, or call (202) 628-3030.

The Kaiser Family Foundation has a special “Commission on Medicaid and the Uninsured.” Find it on the web at or call (650) 854-9400.

With any health care issue, some of the best information is to be found in the hands of those pushing for the only real solution: a universal system of national health care. For Medicaid, one of the best groups, in my opinion, is the“Defend Medicaid” site of the Universal Health Care Action Network at:

The other excellent group—not quite so much specifically about Medicaid, but I want to promote it again!—is Physicians for a National Health Program at