New political makeup of Congress raises different questions for states

With the political balance of power changing in the nation’s capital — Republicans will control the White House, the House of Representatives, and the Senate — an important question for state officials is the impact the change will have on Medicaid and efforts to reform what has become a very expensive program. 

While no one can say with any guarantee how things will play out, State Health Watch asked a number of observers for their opinions and predictions. Their responses varied from a sense that little would change to an expectation for significant changes in how Medicaid works.

Ray Hanley, Arkansas Medicaid director, who is president of the National Association of State Medicaid Directors, tells SHW he doesn’t foresee much change.

"The Bush administration has been very flexible on waivers over past years, seemingly trusting states to a much appreciated extent to make Medicaid work better. Hanging over this, however, has been a sense of concern on the federal level about the impact of waivers on the federal budget. It’s been an interesting balancing act. What may change in the new Congress is movement on a Medicare drug benefit. To the extent of the benefit it may well free up some financial obligations states now incur to provide drugs to low income seniors and the states very much need this relief."

Arizona Sen. Susan Gerard, who chairs the Health Committee in the Arizona Senate, says she expects to see more waivers and opportunities for states to come up with innovative ideas that can be approved. "Arizona already has some of the most innovative waivers, so there shouldn’t be much change for us," she says.

Sen. Gerard said that a National Conference of State Legislatures meeting at the end of 2002 included discussion of a prescription drug benefit for the elderly and concern that there would not be much federal financial aid for states. "The feds aren’t in that great shape, either," she explains.

Sen. Gerard says states will be most concerned about protecting programs they already have and dealing with their financial crises, rather than thinking about new opportunities. "The big fear is that there will be more federal mandates," she relates. "We’re not hearing there will be more money coming, but maybe more flexibility."

Bob Seiffert, Nebraska Medicaid director, foresees little change to Medicaid in the next few years. "Nebraska is projecting that revenue will fall short of traditional spending by more than 10%," he tells SHW.

"In my 30 years here, we’ve never faced anything like this. Except for a handful of states, all of us have the same serious problem."

Mr. Seiffert says he expects that the pattern of expansion and waivers "is likely to come to a screeching halt no matter who controls Congress." He says he suspects that those predicting federal expenditures will find they have overestimated what will be required because states won’t be able to meet their matching requirements.

"We hope that as devastating as state budgets have been, the feds may respond," Mr. Seiffert says. "We still don’t know how serious the problem really is. We’ll have a much better sense in the early months of 2003. That may be the time for discussions about the federal match rate and disproportionate share payments."

Michael Deily, Utah Health Department director of health care financing, was reluctant to predict what might happen in Congress. "I don’t know where the Republican majority is coming from," he adds. "States are looking for help with their budget troubles. We’re looking for federal relief to help us stay afloat. Congress looks at the deficits as a philosophical/fiscal problem with the states. About the best we can do is sit and wait and watch."

Nikki Highsmith, policy director at the Center for Health Care Strategies in Lawrenceville, NJ, says her organization tries to be of assistance to states without getting caught up in the changing political currents.

"The main cost drivers for Medicaid have been enrollment growth, long-term care, medical inflation, and the cost of prescription drugs," she says. "We’ve been working with states to develop short-term strategies to cope with these problems. States are struggling with what they can do in the short term and with how to prepare for some longer-term issues down the road. I think the tension between state flexibility and federal oversight will continue. I particularly expect to see additional flexibility through waivers or demonstration programs in long-term care and dual eligibles."

At the Washington, DC-based Center for Health Services Research and Policy, Colleen Sonosky, assistant director, hears a lot of talk about trying to move Medicaid to more of a block grant approach. "Congress has been looking at the National Governors Association reform proposal and ideas from the Medicaid Commission and various groups in Congress but nothing has happened. However, now that Republicans control both the Senate and the House, there will be discussion of true Medicaid reforms," she says.

Gearing up for a fight

"I think we’ll hear a lot about block grants, even if they call it something different. Republicans think that Democrats are gearing up for a fight over block grants, so that’s why they may want to call it something different. A lot of people who were involved in the 1995-96 block grant battles are pulling out their old files. The Republicans are trying to learn how the Democrats fought it back then so they can counter the fight now," Ms. Sonosky explains.

Judith Wooldridge, vice president for health research at Mathematica Policy Research in Princeton, NJ, contends the answer to what Congress will do lies in what happens with the nation’s economy. "I imagine there will be talk of cutbacks in optional Medicaid services," she says. "I honestly don’t know what can be done. The problem affects children even more than adults. I don’t expect we’ll see much change on the nursing home side; the changes will fall on children and families.

"Philosophically, there may be some interest in making Medicaid simpler. People are uncomfortable with Medicaid being an entitlement. Advocates for Medicaid are not as visible as those for Medicare. But despite the philosophical interest, Medicaid is so complex that not much will happen. And I don’t think there is enough of a Republi-can majority that they can try to do anything really sweeping."

Frank Shafroth, director of federal-state relations for the National Governors Association, says Medi-caid "is unsustainable in its current trajectory, but has always faced the competition of standing in line behind Social Security and Medi-care. Absent federal action, there are almost certain to be significant cuts in benefits and eligibility by the states. To the extent there is federal action in 2003, it might well be focused on reducing some of the burden on states of the so-called dual eligibles, those 7 million elderly and disabled Americans eligible for both Medicare and Medicaid."

Alwyn Cassil, Center for Studying Health System Change spokeswoman, tells SHW that a prescription drug benefit will be a priority for Congress.

"The Republicans campaigned on it and now they have to deliver," she says. "The margin [of political control] is still very narrow, and it’s going to take some consensus building just to get a bill. The biggest problem will be finding the money to pay for a plan."

Ms. Cassil says the issue of helping the uninsured also is gaining traction in Congress, with the consensus in the health policy community that the problem of the uninsured is only going to get worse. As far as Medicaid reform is concerned, Ms. Cassil says she wouldn’t be surprised at discussions to revisit the idea of block grants, and predicts that Republican governors might push for them. Governors also are likely to seek an enhanced federal match, she predicts, although "you need safeguards because states have shown that they will always try to maximize federal money, for instance through the upper payment level."

Despite a Republican report from a congressional committee in the last Congress making the case for Medicaid reform and outlining possible changes, early reports coming out of congressional offices after the election depict an agenda that doesn’t necessarily focus on Medicaid. 

There are indications that the GOP social agenda is likely to include efforts to limit abortions, provide greater support to religious groups, and increase funding for sexual abstinence and fatherhood programs.

Republican Conference chairman Sen. Rick Santorum (R-PA) says the GOP plans to take the country in a "more conservative direction" in the next two years, bringing up a lot of things that conservative groups are interested in seeing considered.

Outgoing Senate Majority Leader Tom Daschle (D-SD) announced at a news conference that Republicans will try to "placate" conservatives, giving Democrats "an opportunity to showcase the difference" between the two parties in preparation for the 2004 elections.

[Contact Mr. Hanley at (501) 682-8292; Sen. Gerard at (602) 542-4480; Mr. Seiffert at (402) 432-0491; Mr. Deily at (801) 538-6406; Ms. Highsmith at (609) 895-8101; Ms. Sonosky at (202) 296-6922; Ms. Wooldridge at (609) 275-2370; Mr. Shafroth at (202) 624-5300; and Ms. Cassil at (202) 264-348.]