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The Wrong Prescription for Medicaid

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By Bill Richardson
Saturday, January 22, 2005; Page A17

As someone privileged to have held public service positions both in and outside Washington, I've learned that policy ideas produced and promoted from our nation's capital are all too rarely new, thoughtful or workable. The latest example of this truth may be the recycled proposals President Bush is reportedly considering that would impose deep cuts and arbitrary caps on federal Medicaid expenditures through some form of block grant.

Even as the costs of prescription drugs and long-term care continue to be shifted to the states, and in the face of bipartisan opposition from governors, the administration is looking at ways to put strict limits on the federal government's financing commitment to Medicaid, the nation's health care safety net. This would be a radical change from the current federal-state partnership that provides health care coverage to 52 million low-income children, parents, people with disabilities and seniors.

I have a better idea: Why not block-grant state rather than federal spending on Medicaid? This would be the mirror image of past congressional proposals.

Under my plan, states would be prohibited by law from spending more than a fixed amount on health care. The federal government would pay for the rest. It would be obliged to insure populations that the state had covered. It would retain flexibility to change eligibility and benefits for groups covered by federal law, such as poor children and seniors. Rather than shifting all risk of unexpected costs to states, this plan would shift such risk and cost to the federal government.

This plan makes more sense than a federal Medicaid block grant for several reasons. Unlike the federal government, all state governments balance their budgets. Thus it is more difficult for states (and governors) to account for unexpected and rapidly rising health care costs. Moreover, states with the greatest health care need typically have the least ability to raise revenue to address it.

States are willing to pay a fair share of health care financing costs. But the federal government, which has a broader tax base and no balanced-budget requirement, should be responsible for the unpredictability of Medicaid costs.

Most important, since the federal government has abdicated its responsibility for paying for a significant amount of health care costs for seniors, it should act now to take greater responsibility for them. Its failure to provide adequate health benefits to its Medicare beneficiaries has shunted the pharmaceutical and long-term care costs of low-income seniors to states. Fully 40 percent of all Medicaid benefit spending is for low-income Medicare beneficiaries. This will only grow with the retirement of the baby boomers. This required spending to fill in the gaps of Medicare forces governors to limit coverage for low-income children and others.

Finally, Washington's reckless fiscal policy has reduced state tax revenue and weakened our businesses' global competitiveness. This will only worsen if congressional supporters of the tax cuts make them permanent -- an item high on their agenda. Their record and their policies contrast dramatically with governors' fiscally prudent management of the Medicaid program, which has limited its growth rate to less than half the rate of premium hikes by traditional private insurance.

Clearly, if one is going to advance absurd, unrealistic policy, it makes far more sense to block-grant state rather than federal Medicaid spending. Yet, in truth and in the real world, no type of block grant will solve Medicaid's problems. Medicaid exists to address the serious health care needs of the nation's most vulnerable citizens.

That need will not go away if federal and state funding is cut. The rise of prescription drug costs will continue unabated. And until Congress and the administration heed the call of the National Governors Association to take financing and coverage responsibility for its Medicaid-Medicare beneficiaries, states will be saddled with the cost of caring for low-income seniors. These problems would only be exacerbated by a federal block grant and deep cuts in Medicaid. I urge the president and Congress to take these things off the table as the federal budget is drafted and debated.

The writer is governor of New Mexico and chairman of the Democratic Governors Association.

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