Bush Skirts Congress with Medicaid Cuts

Isabel Perez, a certified nurse assistant living in Los Angeles, could barely understand her 7-year-old daughter, Kelly, when she spoke. Kelly's grades suffered and her classmates rarely talked to her.

But every time Perez took her daughter to the doctor to treat Kelly's ear infections, the doctor told her the infections were normal.

It was only when Perez took Kelly to the school-based health clinic two years ago that she could get a referral to a specialist, who told her Kelly needed surgery immediately. After the surgery and speech therapy at the clinic, Kelly's speech and grades improved. Perez gives all the credit to the Columbus School-Based Clinic in the San Fernando Valley.

But officials with the Los Angeles Unified School District worry that looming federal budget cuts will jeopardize school-based clinics such as Columbus.

While the Bush administration presses Congress to curb spending on entitlement programs such as Medicare, Social Security and Medicaid, it is also aggressively pursuing regulation changes without input from Congress that would further cut funding to these programs.

In many cases, the cost of covering these funding cuts would be passed along to someplace else - like schools, hospitals or states - or services to the poor and disabled may be cut.

That's especially true for Medicaid, the state-federal program that provides health insurance for 59 million poor Americans. The administration is pushing more than half a dozen new sets of rules to limit Medicaid spending.

One of the most controversial is an informal policy announced in August by the Centers for Medicare and Medicaid Services (CMS), which administers the Medicaid program. The new policy limits states' ability to make more families eligible for the State Children's Health Insurance Program (SCHIP), which provides health insurance to families whose higher income disqualifies them from Medicaid.

Dennis Smith, director of the federal Center for Medicaid and State Operations, told state officials in a letter that they will now have to prove they are covering 95 percent of kids living below 250 percent of the federal poverty level before states can offer coverage to families earning modest, but higher incomes.

The administration followed that letter with a September denial of a New York plan to let families making up to four times the federal poverty level ($82,600 for a family of four) participate in SCHIP.

New York Gov. Eliot Spitzer (D) responded by suing the administration, backed by the states of Arizona, California, Illinois, Maryland, New Hampshire, New Mexico, New Jersey and Washington.

Tensions between states and the federal government increased in December, when CMS rejected an Ohio plan to expand eligibility to its Medicaid program. Federal officials said Ohio should have asked for an SCHIP expansion instead, even though that expansion would have cost the federal government more money.

CMS' Acting Administrator Kerry Weems said Monday (Feb. 4) that the agency wants to ensure that states focus on insuring the poorest families under Medicaid before asking for Medicaid expansions, mirroring its policy on SCHIP. But, Weems said, the rejection of Ohio's plan was not related to the new policy.

Ohio Medicaid Director John Corlett told Stateline.org the 95 percent coverage is "almost impossible to achieve." He said one of the best ways to enroll poorer people is to increase the income eligibility levels, because more people would become aware that they qualify for help.

Other Bush administration changes, many of which have been temporarily blocked by Congress, deal with seemingly arcane accounting rules within Medicaid, the nation's largest health insurer. But in a program that's so big, even small changes can impact programs and set off alarm bells among health providers.

For example, U.S. Health and Human Services Secretary Mike Leavitt, a former Utah governor, decided that Medicaid should no longer pay schools to transport special education students with intense medical needs to school.

His agency concluded that because school districts are required to bring all students to school anyway, Medicaid shouldn't pick up the expense for these students.

But school administrators point out that busing kids who need constant medical attention is far more expensive than bringing healthy children to school. Because federal law requires schools to bring those students to their facilities and to offer them medical care there, they argue that Medicaid also should cover their transportation expenses.

For example, Medicaid now pays the L.A. schools $2 million a year to help cover transportation costs of 7,000 Los Angeles public school students - or about 1 of every 100 pupils. These students arrive in customized vans or buses, which are often outfitted with wheelchair lifts and strap-in seats. Many times, aides watch over the students during their ride.

For many of those students, school days are spent receiving medical treatments. Students get occupational and physical therapy. They may learn to drive a wheelchair, feed themselves or simply communicate using facial expressions. Many require constant medical supervision, including students who are on oxygen, who are epileptic or who are diabetic but can't monitor their own insulin levels.

John DiCecco, director of the Los Angeles school district's Medicaid programs, argues that the new restrictions proposed by the Bush administration make little sense.

Medicaid would still pick up the tab, for example, for taking the students from their home directly to the doctor's office - as long as the office isn't on school grounds. One of the options L.A. schools is considering in response to the rules is moving health providers off school property, he said.

In Colorado, the new policy would directly affect other programs. Schools there are required by state law to use the transportation money on other health-related services as well, including paying for eyeglasses and dental care, school nurses and supplies and mental health services, said Kim Erickson, who heads the Medicaid department for Denver Public Schools.

"I think people don't really understand that schools are a primary health care provider for our children," Erickson said. "Without these resources, it really is going to affect children and parents in being able to get the services they need."

Schools could also bear the brunt of a change in rules that would slash significantly what they could recoup from Medicaid for administrative expenses for health-related programs.

The Los Angeles schools, for example, would lose between $6 million and $8 million a year they now get for such activities, which include arranging for mobile asthma clinics to visit schools, signing up students and their families for Medi-Cal (California's Medicaid program) and running school-based health clinics, such as the one Isabel Perez visited with her daughter.

The Bush administration estimates that the belt-tightening for schools' transportation and administration expenses would save the federal government $635 million next year and $3.6 billion over five years.

Despite the large sums, the potential savings are less than two-tenths of 1 percent of Medicaid's annual $330 billion price tag for states and the federal government.

Congress blocked those rules until at least June 30.

Still, there are several other changes either in effect or pending, including:

  • Cuts, which took effect Jan. 1, in how much states can tax hospitals to recoup federal matching funds. The change is expected to save the federal government $85 million this year.
  • Strict new rules lowering how much public hospitals can bill Medicaid for services, a change that could save the federal government $120 million this year and $3.87 billion over five years. Congress blocked those rules from taking effect until at least May 25.
  • Limits, also delayed until June 30, on what types of rehabilitative services Medicaid will pay for. They would save the federal government $180 million this year and $2.2 billion over five years.
  • Elimination of funding, starting March 3, for many targeted case management services (coordinating the different types of care a patient receives), a change that would save the federal government $1.28 billion over the next four years.

Erickson, from Colorado, questioned the wisdom and timing of the Bush administration proposals.

"We're not saving any resources," she said. "All we're doing is pushing responsibility onto other agencies and other programs and onto families and onto communities. It seems like it's all coming all at once."