Medicaid's $10 billion quandary: How and where to make the cuts

The federal government and states agree there are savings to be had; the debate is over just how much.

By Joel B. Finkelstein, AMNews staff. June 27, 2005.

Washington -- After tough negotiations, Congress in April passed a budget resolution provision calling for $10 billion in federal Medicaid savings over five years. Turns out that might have been the easy part.

Now lawmakers, governors and others are positioning themselves for the fight over how and where to make those cuts. Members of Congress are drafting plans, the National Governors Assn. recently weighed in with an interim policy and a Dept. of Health and Human Services commission is expected to provide further recommendations later this year.

Both the NGA proposal and the HHS panel are meant to move the discussion away from simply financial considerations and toward broader reforms that help contain costs over the long run while improving the quality of care delivered to Medicaid recipients. Driven by rising health care costs and burgeoning case loads, total spending on the program has grown to more than $300 billion a year.

Physicians are encouraged by the discussion but are worried about some of the possible outcomes, said John Lewy, MD, chair of the American Academy of Pediatrics' committee on federal government affairs.

"We're for Medicaid reform, as long as it is done in ways that don't hurt children, and people in general," he said.

That concern highlights the need to raise the debate above artificial financial goals, said Michael Chernew, PhD, an economics professor in the department of health management and policy at the University of Michigan.