Budget Snags on Medicaid as Cure or Curse for Society

It is here, in a dimly lit, poorly furnished health clinic in a poverty-ridden neighborhood about two miles from the Capitol, that the final casualties of the battle of the budget may be found.

In one unit of the Upper Cardozo Health Center, a woman six months’ pregnant with her second child and recently separated from her husband is applying for health insurance because she has no way to pay for prenatal care or the caesarean-section delivery doctors tell her she will need.

Across the hall, a teenager with Down’s syndrome waits with her foster mother to see a doctor about recent asthma attacks so severe her teachers thought she was having a heart attack. Downstairs, HIV-positive patients slump in plastic chairs in a dingy, chilly room where they await regular checkups or emergency examinations.

In each case, the cost is covered by Medicaid, the giant federal-state health care program that serves 38 million poor, blind and disabled Americans, many of them elderly.

And in each case, the certainty of future coverage has been called into question by the fiscal war of wills between President Clinton and the Republican-controlled Congress.

“I think it’s bad because it’s going to hurt a whole lot of people,” said Alice Barber, 57, who cares for her brother’s daughter, the 14-year-old with asthma. “If you’re poor and you get sick, what are you supposed to do? I sure wouldn’t be able to pay for it. I can’t afford even her glasses.”

Medicaid has emerged as one of the most contentious obstacles blocking a final budget agreement between the White House and Capitol Hill. For starters, the Republicans want to curtail future spending on the program by far more than the president says he can tolerate. The distance between the two sides adds up to $96 billion over seven years.

But there’s more than mere money involved.

The Republicans are determined to turn Medicaid into a giant laboratory for the “devolution” of federal authority to the states. They want to end the 30-year federal promise of guaranteed coverage for all who satisfy the eligibility requirements. They would transform the federal contribution to Medicaid into block grants that states could use for programs tailored to their own specifications.

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Clinton appears equally determined to preserve the federal coverage guarantee for children and pregnant women who are poor, the elderly who need long-term care, and the disabled, and he insists that the federal government must continue to determine basic eligibility and minimum service requirements.

For some, the Medicaid fight raises difficult philosophical questions. Conservatives tend to advocate reductions in such programs as Aid to Families With Dependent Children because they believe that welfare assistance perpetuates the problems it is designed to ameliorate. In their view, the able-bodied poor are less likely to go to work if the government pays them to stay home with their children. But Medicaid is different because it involves something over which recipients exercise little discretionary control. People don’t decide to get sick because the government helps pay their medical bills, and they are unlikely to become healthy if the assistance is taken away.

“People may begrudge poor people cash welfare: ‘If they wanted to earn a living, they could do so if they got off their lazy duff,’ ” said Paul Offner, director of the District of Columbia’s Medicaid program and a former Senate staffer. “But even if they get off ‘their lazy duff,’ they might not be able to afford health care.”

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Finding common ground on Medicaid is even more difficult because the issue pits one of the president’s policy priorities, expanding access to health care, against one of the principles of the GOP revolution, reducing the reach of the federal government.

The potential consequences of this battle have not gone unnoticed by the people who are involved with the program. No one is certain who would lose coverage or what benefits would be restricted if congressional Republicans get their way, because governors and state legislatures would ultimately make those decisions. But health care providers and many analysts agree that the magnitude of the reductions in future spending would leave most states with no choice but to curtail medical services to the poor and disabled.

Mike Everette-El, 43, one of Upper Cardozo’s HIV-positive patients, said he expects he would still receive basic coverage because there is a strong local lobby for AIDS patients and other disabled people. But he worries that Medicaid might stop paying for some of his expensive medication and is concerned about others who are more likely to lose coverage.

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“It makes me think that America is really showing its colors,” he said. “The budget is tight because of government waste, and the poor man has to pay for it. It’s like it’s our fault.”

Several patients interviewed at Upper Cardoza stressed that Medicaid is not like cash welfare or food stamps. Many of the people who rely on it do not have the option of working to pay for their medical expenses because they are either disabled or elderly or underage. Half of the children on Medicaid have parents who work but have no employer-provided health insurance and do not earn enough money to buy their own.

“If I could work I would work,” Everette-El said, sitting in the cheerless waiting room, paint chipping off the walls. “I really need Medicaid. Without Medicaid, I don’t know if I would have lasted so long. It’s not like we’re at the cream-of-the-cream doctor’s office. We come to these clinics and local hospitals for treatment.”

Policy analysts say many Americans appear to agree with Everette-El. They are generally more willing to pay for health care for the needy than to give them cash or food stamps.

That distinction appears to be one of the main reasons that Clinton has held firm on preserving the federal guarantee of Medicaid when he has not done so for AFDC. The president appears to be betting that in proposing to leave eligibility and service standards up to the states, the Republican revolution has gone too far.

“Americans have not supported broad redistribution of income, but they have been far more willing to see that poor people have enough to eat, are adequately housed, and cared for when they’re sick,” said Henry Aaron, a senior economist at the centrist Brookings Institution think tank.

Clinton’s willingness to go to the mat for Medicaid reflects the fact that one of his central campaign promises, and the primary domestic policy initiative during the first two years of his term, was health care reform.

“You have to remember that when President Clinton took office, one of his commitments was to provide universal coverage,” said Diane Rowland, a policy analyst specializing in Medicaid at the Kaiser Family Foundation, a Menlo Park, Calif.-based health care philanthropy. “The GOP plan would effectively say that none of the individuals who have been able to count on Medicaid as their safety net will be able to do so in the future. It would signify a retreat away from universal coverage rather than progress toward it.”

Bob Greenstein, executive director of the Center on Budget and Policy Priorities, a liberal-leaning research institute, noted: “For an administration that took office indicating it wanted to make sure all Americans had access to health insurance, to allow passage of a measure that would swell the ranks of uninsured by millions would be a pretty bitter pill to swallow.”

Analysts disagree on the probable outcome of the dispute. Some conservative analysts predict that congressional leaders will prevail and that the program will be turned over to the states in the form of block grants. To give the president political cover, Congress might insert more language specifying eligibility standards and minimum service requirements.

A few liberal analysts suggest that in the end, Republicans will realize Clinton is so determined to retain the federal coverage guarantee that they will abandon the Medicaid fight for now to preserve the rest of the policy changes reflected in the GOP budget. The president, in turn, might accept somewhat larger reductions in future Medicaid spending than he originally proposed.

On one point there is agreement: Something must be done to limit the growth of this behemoth program, which the Congressional Budget Office projects will cost the federal government $924 billion over the next seven years if no changes are made in current law. Federal costs for the program have ballooned from $22 billion in 1985 to $89 billion last year.

Clinton envisions slicing $37 billion from the projected spending over seven years through such cost-cutting strategies as paring regulations and giving states more flexibility. Republicans believe that they can trim $133 billion over the same time by turning the program into block grants. Both plans would increase funding for the program each year but not at a rate rapid enough to keep up with estimated growth of medical costs and recipients.

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Many health care providers, Medicaid administrators and policy analysts say the scope of the changes proposed by Republicans would require states to reduce services or limit eligibility. The problems would become deeper over time, they contend.

Some conservative health care analysts see things differently. Accusing Democrats of demagoguing the issue, they argue that state officials who administer their Medicaid programs creatively can continue to cover needy people while spending less money.

“The public will be better off under the balanced-budget GOP proposal because governors are going to be held more responsible,” said John Liu, senior health care analyst at the conservative Heritage Foundation, a Washington research institute that has considerable influence with congressional Republicans. “We have to face a new reality. Just because you’re spending less money does not mean you’re getting a poor or lower quality of care. Instead of throwing money down the drain, it’s time to find a way to provide the same level or better care for less money.”

Liu acknowledged that Medicaid reform could contribute to the forces that are causing hospitals to close or merge with other institutions. But he stressed that many hospitals are operating under capacity and are already candidates for consolidation.

Additional savings will accrue if poor mothers and children on Medicaid are steered into health maintenance organizations and other managed-care networks, Liu said. Many employers cut costs by offering incentives to employees who enroll in managed-care programs, he noted.

“If they don’t like it, let’s find a way for them to go and join the work force so they can pay for their own insurance,” Liu said.

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Some states already serve women and children on Medicaid through managed care. Others, including the District of Columbia, plan to make the switch. But Medicaid defenders note that the recipients most suited to managed care are not the source of its biggest expenditures, because most of them are relatively healthy.

Although fewer than one-third of Medicaid recipients are elderly or disabled, more than two-thirds of the program’s funds are spent on those populations, largely for long-term care in nursing homes and other long-term care facilities.

Because the reductions in future spending under the GOP plan would deepen over time, the full effect would not be felt for years, health care analysts and administrators say.

“It will have a lesser effect early on and a very big effect over the seven years as different states make different choices,” said Rowland of the Kaiser Family Foundation. “Some states may keep the programs they have now. Some states may dramatically revamp.”

Some analysts express concern that the disabled and nursing home residents, and the businesses that serve them, have strong lobbies in Washington and state capitals. For that reason, services for poor women and children are expected to take the biggest hits initially, according to state and local officials who run Medicaid programs.

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“Politically, it’s women and children first,” said Offner, the D.C. Medicaid director. “It doesn’t seem like they have any clout at all. The first thing states would do is put all women and children into managed care.”

In later years, when federal funding would be 30% to 40% less than under current law, states would be forced to cut back on benefits for the elderly and disabled as well, some analysts and administrators predict.

One way some states could cut these costs under the GOP plan would be to require adult children to contribute to the cost of nursing home care for their parents. Current law protects adult children from such cost-sharing, and the controversy over this provision hits home for middle-class Americans whose parents’ nursing home costs may be covered by Medicaid.

The GOP plan would also eliminate federal standards concerning the level of care in nursing homes, providing another place for states to cut costs.

Public health officials say the pinch would be felt throughout affected communities, not just by Medicaid recipients.

The money the government pays to clinics and hospitals helps offset costs incurred for other needy patients who are not eligible for Medicaid. Many hospitals and clinics routinely pick up all or part of the tab for treating poor, uninsured patients. If the GOP plan is enacted, clinics and hospitals might be forced to eliminate some services or close entirely.

This is a big worry at the Upper Cardozo Health Center, where many patients are uninsured working poor who are not eligible for Medicaid, often because they are not disabled or are undocumented immigrants. They pay according to a sliding scale based on income. For example, Medi-Cal, as the program is called in California, sets eligibility for coverage for the poor at $750 a month or less for a family of two.

“Potentially, if there is a decrease in Medicaid revenues, it will require the center to reduce services,” said Nathan Stinson, a senior official of the U.S. Health Resources and Services Administration and interim executive director of Upper Cardozo. “Then it hurts everyone who walks through the door. The impact of this is not just on poor people. The impact is on the entire community.”

Shogren is currently on assignment in Bosnia-Herzegovina.