The Pew Charitable Trusts

Welfare recipients and the nation's poor requiring health care are in for some jolting news from Washington, D.C.

 

The Republican-led Congress sent President Bush Wednesday (Feb. 1) a package of Medicaid and welfare reforms that will impose tougher work requirements on welfare recipients and will squeeze $6.9 billion in savings from the giant government health insurance program, in part, by getting poor patients to pay more for treatment.

 

The GOP muscled the measure through Congress without a single Democratic vote, clearing the House 216-214 Wednesday after squeaking through the Senate in December on a 51-50 tally with Vice President Dick Cheney casting the deciding vote.

 

The controversial measure meets many of the items on the wish list of the nation's governors for reining in the runaway costs of Medicaid, which covers 53 million poor Americans who are young, pregnant, disabled or elderly.

 

It also fulfills states' calls to officially extend the federally financed welfare program, called Temporary Assistance to Needy Families (TANF).

 

But the legislation has drawn fire from Democrats, including governors who helped push for Medicaid reform, because it jeopardizes social services for the poorest Americans.

 

Last year, the nation's governors mounted an aggressive campaign to convince lawmakers to rein in the costs of Medicaid, the $338 billion federal-state program that covers more Americans than any other health insurance carrier.

 

The bill awaiting Bush's signature, which is likely, contains many of the items they championed: It lets states make patients pay more for prescription drugs and hospital visits. It makes it harder for seniors to give away their money and then ask the government to pay their nursing home bills. And it squeezes drug companies to give states better deals on medicines.

 

The final package also includes changes in the rules governing TANF, the cash assistance program for poor families, to impose tougher work participation standards and greater federal scrutiny over state welfare-to-work programs. It also trims federal funds for child support enforcement, which Iowa Gov. Tom Vilsack (D) told Stateline.org was his biggest concern because parents who now depend on those checks would look to states for more social services if their child support no longer arrives.

 

The budget bill that cleared the House Wednesday would save the federal government $35 billion over the next five years, according to the Congressional Budget Office (CBO).

 

Of that, more than $6.9 billion would come from cost controls for Medicaid. States would likely save nearly that much for Medicaid, too, because states and the federal government share costs for the program. The savings amount to less than 1 percent of Medicaid spending.

 

But states still can expect their Medicaid bills to go up. States projected that their Medicaid costs would level out at 5.5 percent this year, after six years of growing more than 7 percent. The rapid increases have gobbled up state budgets, and states now shell out more money on Medicaid than they do for elementary and secondary education, when including federal money spent by the states.

 

Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured , said the philosophical shift in the congressional changes was more significant than the legislation's financial impact.

 

Traditionally, Medicaid was designed to offer broad-based protections for the low-income people it covers. But the latest retooling, which authorizes co-payments and premium increases, brings it more in line with recent moves by Bush and private insurers to give patients more control directing their health care, she said.

 

The rationale for using "cost consciousness" to drive down health costs may not work with people living in poverty, Rowland said. Families living on $16,000 likely would just forego medicine or a doctor's visit instead of paying a premium, she said.

 

"They already have a lot of cost consciousness," Rowland said. "This introduces fiscal responsibility on those who can least afford it."

 

The "cost-sharing" measures would affect about 13 million people - or about a fifth of those on Medicaid - by 2015, according to CBO estimates.

 

Further, states would be allowed to charge monthly premiums to families who are slightly better off ($24,900 for a family of three). The CBO projected it would lead to 45,000 enrollees leaving the program or never applying in the first place by 2015.

 

Another piece of the legislation would target seniors who shed assets in the five years before applying for Medicaid. Many seniors turn to Medicaid to cover nursing home care, and, indeed, roughly two-thirds of patients in nursing homes are on Medicaid.

Such treatment is extremely expensive. Obtained privately in New York, for example, it could cost more than $64,000 a year. States want seniors to pay for as much as their own care as possible and penalize those who donate their money and property before asking for government assistance.

 

The new law will clamp down on that practice.

 

First, it allows the states to look back five years, instead of three, when a senior applies to Medicaid to find out whether they've given away their assets.

 

Second, it requires those who gave away property to sit out for a certain penalty period, depending on the size of the gift, starting the day they applied for Medicaid. The penalty used to start on the date of the transfer, making it moot in many cases.

 

Advocates for the elderly worry that the changes will leave seniors without a way to pay for care when they need it most. A grandparent who gives money to a grandchild for college or donates money to a church may not anticipate that he would be in a nursing home within five years, they point out.

 

The provision is also troubling to the nursing homes themselves.

 

Many patients enter nursing homes paying for their care but then rapidly run out of money. Usually, they turn to Medicaid, and the program then picks up the tab. But if Medicaid won't pay their bills, the nursing homes may be forced to absorb the costs until the patient qualifies for aid. For many reasons, legal and ethical, nursing homes can't and won't kick out patients already under their care.

 

"Ultimately, what the problem is, is that you're shifting responsibility … back to the provider," said Jonathan Eames, executive director of the Washington Health Care Association , a group of 350 nursing homes and assisted-living facilities in Washington state.

 

Still, the costliest and most immediate impact of the legislation will be on drug companies. The states obtained more leverage with the pharmaceutical industry under the bill, including a new formula for the baseline price they pay for drugs for Medicaid patients and more information from the drug makers about the prices they charge.

 

The CBO estimates those changes would lead to nearly $3.6 billion in savings to the federal government, which pays about 57 percent of Medicaid expenses nationally. States would save nearly the same.