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Health Program Cuts in Tight Federal Budget

$45 billion proposed Medicaid cut in White House Budget Plan

WebMD Health News

Feb. 9, 2005 - Many federal health agencies and programs face cuts in a White House budget plan that officials say is needed to pare large deficits.

The budget proposes a 1% decrease in overall fiscal 2006 spending at the U.S. Department of Health and Human Services, which controls the Food and Drug Administration and the National Institutes of Health, as well as several aid programs for the poor.

President Bush also proposes reducing Medicaid spending by $45 billion over the next ten years, a plan that is likely to prove the most controversial cut to health programs. Spending on the $338 billion program is projected to expand 7% each year, potentially ballooning costs for covering the approximately 48 million Americans who rely on it for medical care.

"This is a lean budget," Bush said in a briefing following a meeting of his cabinet Monday morning.

Administration health officials say that they do not expect the cuts to result in lowered health services for beneficiaries. Instead, the cuts reflect expected savings due to new efforts to save on Medicaid's prescription-drug costs and to change financing laws that now may let states overcharge the federal government for health costs, they say.

At the same time, Bush officials say they plan to work with state health authorities to give states more flexibility in deciding who will receive coverage and what medical services will be covered under the program.

The federal government pays approximately 60% of all Medicaid costs, with states picking up the rest according to a complex set of formulas that vary sharing arrangements from state to state.

"We can get more coverage and more assistance for the dollars that we're spending," says Mark B. McClellan, MD, chief of the Centers for Medicare and Medicaid Services. "This is not about saving money. It's about getting more people covered."

HHS Secretary Michael O. Leavitt echoes that view. "I remain increasingly optimistic about our ability to meet the needs of the truly needy in this country," Leavitt says.

Medicaid advocates immediately attacked the proposal, warning that it would result in deprivation of vital health services for millions of poor and low-income Americans. They also warn that giving states more authority over Medicaid's optional benefits could allow cash-strapped legislatures to scale back vital services, including prescription-drug coverage and health insurance for up to 5 million children.

"The net result is going to be that millions of seniors and children who depend on Medicaid as their safety net will lose coverage," Ron Pollack, executive director of the consumers' health group Families USA, tells WebMD.

The proposed cuts are also likely to spark controversy on Capitol Hill, where several lawmakers warn against enacting strict limits on Medicaid spending.

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