President Bush’s 2009 Medicaid Budget: Congress is not Convinced

By Meredith Taylor, Esq., CIS Compliance Specialist & PCX Product Manager (www.cis-pcx.com/register)
meredithtaylor@cis-partners.com

In February, President Bush announced the FY2009 budget proposal for Medicaid spending. His proposal, if implemented, would result in a reduction of $17 billion over the course of five years for the Medicaid Program. This reduction will result from changing the federal matching rate as well as changing: managed care, long term care, reimbursement for prescription drugs, and other Medicaid functions.

It is anticipated that Medicaid spending will reach $1.2 trillion over the course of the next five years. President Bush’s proposed budget has forecasted a GDP deficit of $407 billion in 2009, but with his plan, a surplus of $29 billion in 2013. His plan will result in a reduction in Medicaid spending of $17.4 billion over the next five years.

His plan includes legislative proposals and three specific regulatory proposals which will save billions of dollars over the next five years. For the Kaiser Network report outlining a potential rule change and resulting impact, see yesterday’s blog post. Proposed Medicaid Rule Changes Would Cost States $50B in Federal Aid Over Five Years From kaisernetwork.org.

The proposed legislative changes that will impact spending over the next five years include:
1. Decrease federal match rates, which will save $10.1 billion.
2. Repeal current law exemptions to allow states to enroll certain beneficiary groups in mandatory managed care plans, which will save $2.2 billion.
3. Extend the DRA flexible benefit package option to allow states to offer a limited, private sector type coverage to certain beneficiary groups who qualify for long term care services ,which will save $1.1 billion.
4. Limit Medicaid pharmacy reimbursement for certain drugs by reducing the Federal Upper Limit to 150% (last year 250%), which will save $1.1 billion.
5. Change the ways in which states allocate administrative costs across programs with shared responsibility for determining program eligibility (TANF and food stamps); create an electronic asset verification demonstration program used by the Social Security Administration to use asset verification to ensure eligibility for Supplemental Security Income (SSI), Abstinence Education, and Medicare Qualified Individual (QI)programs; enhance third party liability for medical child support and prenatal care, require states to report performance measures, require state participate in Public Assistance Reporting Information System (PARIS), mandate a national correct coding to prevent inappropriate Medicaid billing, require publication of annual actuarial report (similar to Medicaid reporting requirements), which will save $4 billion. 6. Program extensions including TMA and QI for one year, which would save $1.2 billion.

The regulatory changes that will impact spending over the next five years include:
1. Specify which services states can provide using savings derived from managed care, which will save $800 million.
2. Prohibit certain long-term care insurance policies from qualifying for LTC partnership programs which will not ultimately save any money.
3. Clarify the “free care” policy and specify that providers cannot bill Medicaid for services provided to other payers at no cost which will not ultimately save any money either.

For a full Report of the President’s FY2009 Medicaid Budget, see the fact sheet provided by the Kaiser Network http://www.kff.org/medicaid/7759.cfm

This county is heading towards a recession, so it makes sense that the President is trying to pinch pennies wherever he can. If these proposals are enacted, they will effectively limit federal spending (and pinch many much needed pennies; however, the costs will shift to the states. Ultimately, this may cause more economic problems in the long run as the Medicaid coverage will suffer which will cause a toll on the already shaky economy.

Historically, Congress has supported similar regulatory changes to reduce spending in Federal Programs. In fact, in 2008, Congress passed 4/6 similar regulations. The effect of these enacted regulations will save $12 billion through 2012. So, will Congress side with President Bush in this downward economy? Probably not….

Last week, both the Senate and the House approved similar $3 trillion fiscal year 2009 budget resolutions that would increase spending for health care and other domestic programs and "would torpedo hundreds of billions of dollars in tax cuts won by President Bush," the AP/Houston Chronicle reports (Taylor, AP/Houston Chronicle, 3/14).

The Senate’s 2009 federal budget plan will effectively curtail President Bush’s tax cuts by providing increases to domestic programs immediately. The House’s 2009 budget, although allowing the tax cuts to continue until 2010, still exceeds the amount that Bush requested for discretionary domestic spending by $25.4 billion (Clarke/Higa, CQ Today, 3/13). In addition, both budget resolutions do not include $196 billion in spending reductions for Medicare and Medicaid that Bush has requested (Taylor, AP/Houston Chronicle, 3/13).

Neither of these budget plans are binding, but it is obvious that they stand in stark contrast to Bush’s 2009 proposed Medicaid budget proposal. There are clearly diametric goals set by the Republicans and the Democrats. That’s what makes this year’s presidential election so exciting. The future President of the United States will have a lot to consider when he or she walks into the White House next year!