Fight Bush’s Assault on Medicaid

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May 5, 2003 — Millions could lose access to needed services under a White House proposal currently being considered by the nation’s governors. The proposal would radically remold the Medicaid program, which currently funds half of all community mental health services in the nation. Bush’s plan would replace Medicaid entitlements with a block grant, an approach that would undermine state coverage of mental health services. The Bazelon Center needs your help to stop the Administration’s assault on Medicaid.

Plan Nixes Protections, Caps Federal Spending

Medicaid currently operates on principles similar to private employer-based insurance. States are required to cover a defined set of benefits for a defined group of people. Medicaid programs must then pay for any medically necessary service covered in the state’s Medicaid plan for any eligible individual.
Although all states must meet federal minimums, the people who are eligible to receive Medicaid benefits and the services covered by state Medicaid programs vary widely because states have considerable flexibility to decide which populations and services will be covered. All eligible people generally have the same benefit package (except for the few who qualify as medically needy or who are covered through special programs operated under waivers of Medicaid rules).

The Administration’s proposal would eliminate these protections. No longer would the program act as an insurer of the nation’s poor and people with disabilities. Instead, Medicaid would become a block grant—a finite source of funding for healthcare with states deciding how to spend the money.

The new Medicaid block grant would fund two programs:

• Preventive and Acute Care: The benefit package would vary with different populations. States would provide a “basic” benefit (i.e., minimal), a “comprehensive” benefit (similar to State Child Health Insurance Program and commercial insurance benefits) and a supplemental benefit with rehabilitation and other services relevant to people with disabilities or those who are elderly.
• Community and Long-Term Care: Benefits include institutional care and home- and community-based services. For mental health, this could include case management, psychiatric rehabilitation, supported employment and other community services. However, states have full flexibility to define this package and are not required to cover specific services.

States that opt for the Administration’s proposal would initially receive a modest amount of increased funding, but their federal share of Medicaid spending would be reduced starting in 2011. These states would then be locked into a capped program, limiting their ability to supplement state health spending with federal dollars in the future.

Reduced Benefits for Mandatory Populations

Federal law requires state Medicaid programs to cover certain populations, referred to as mandatory populations. This group includes people on Supplemental Security Income (SSI) disability, children in very low-income families and others. Mandatory populations would remain eligible under the Administration’s plan, but their benefits would be reduced and their cost-shares would increase.
The White House proposal would require states to cover all mandatory populations under the Preventive and Acute Care Program. States would also be required to cover some mandatory populations under the Community and Long-Term Care program, but only if the state determines that, at the time the block grant option is implemented, they require a level of care typically provided in a nursing home. If individuals do not meet this standard, the state may, or may not, choose to cover them under the Community and Long-Term Care program.

Under the Preventive and Acute Care Program, mandatory populations would receive the comprehensive benefit, a package similar to private insurance and far less comprehensive than Medicaid’s current benefit. Individuals who are elderly or have a disability would also have the supplemental benefit. However, states determine this package and could opt to exclude mental health services. Children in the mandatory population would continue to have access to a broad benefit through Medicaid’s Early and Periodic Screening, Diagnosis and Treatment (EPSDT) mandate.

Optional Populations Targeted for Cuts

Those whose Medicaid eligibility results from a state’s choosing to cover them under current law, called optional eligible populations, would have even fewer protections. This group includes some adults who receive Supplemental Security Disability Insurance (SSDI) benefits, children with incomes a little over the poverty level, people with disabilities who are working, those with high healthcare costs who are considered “medically needy” and others.

Optional populations have no guarantee of services. States could limit their eligibility by geographic area and determine income and resource limits without federal input. Medicaid would be a capped grant program, so optional populations could also be denied care if their state ran short of money —even if they have coverage.

States could cover new populations of low-income people who are not now eligible for Medicaid, but (over a 10-year period) would receive no new money to do so. Using waivers of federal Medicaid law, the Administration has already encouraged states to cut services for current Medicaid beneficiaries in order to finance limited packages—with no mental health benefit—for the uninsured.

A Better Way to Help States

A congressional proposal with strong bipartisan support would give states more resources than the Bush plan in the short term without compromising Medicaid’s long-term capacity to provide access to needed health services. The legislation—S. 138 and H.R. 816—would increase the federal share of dollars to pay for Medicaid services for an 18-month period, helping states respond to the temporary fiscal pressures placed on Medicaid by the recession and state budget crises.

Act Now to Save Medicaid

The future of Medicaid now lies in the hands of state governors. Congress is not likely to pass the Bush proposal without the support of the nation’s governors.

Contact both your governor’s office and your state Medicaid director today to urge that the governor oppose the Administration’s Medicaid block grant proposal, and instead support S. 138 and H.R. 816, a temporary increase in federal matching funds.

Half of all revenue for state mental health systems comes from Medicaid, and many other individuals also rely on the program’s mental health services. The safety net for people with mental disabilities is already weak, and many now experience long waits to access too few programs. We cannot afford to weaken it further by reducing the federal government’s support of mental health services for low-income individuals and those with disabilities.

• Contact state governors
• Contact state Medicaid directors