Mr. Chairman, and members of the Committee: I want to thank you for giving
me the opportunity to testify today to speak about the National Governors' Association
(NGA) resoluti Medicaid. That is
the standard by which we must judge any reform, including the resolution
recently adopted by the National Governors' Association.
We greatly appreciate the efforts of the NGA in fashioning a bipartisan
consensus on the foundations of a plan and their ongoing work to add further
detail to their resolutions. We believe that they have made a positive
contribution to the debate and have increased the likelihood that Republicans
and Democrats will produce bipartisan solutions to reforming our Medicaid
program. While we applaud their tenacity and their contributions, we do have
serious questions about some of the proposals they have put forward: questions
about maintaining national objectives and the federal-state partnership
necessary to achieve them.
It is now up to this Administration and this Congress to build on the spirit
of the Governors, efforts. It is time for all of us to work together to reach
our mutual goals: the preservation of health insurance coverage for those who
need it most; flexibility for the states; and a shared financial partnership
with accountability for federal tax dollars and quality of care.
Medicaid provides vitally important health and long-term care coverage for
36 million Americans and their families, including the following:
- It provides primary and preventive care for 18 million low- income
children;
- It covers 6 million individuals with disabilities -providing the health,
rehabilitation, and long-term care Medicaid. That is
the standard by which we must judge any reform, including the resolution
recently adopted by the National Governors' Association.
We greatly appreciate the efforts of the NGA in fashioning a bipartisan
consensus on the foundations of a plan and their ongoing work to add further
detail to their resolutions. We believe that they have made a positive
contribution to the debate and have increased the likelihood that Republicans
and Democrats will produce bipartisan solutions to reforming our Medicaid
program. While we applaud their tenacity and their contributions, we do have
serious questions about some of the proposals they have put forward: questions
about maintaining national objectives and the federal-state partnership
necessary to achieve them.
It is now up to this Administration and this Congress to build on the spirit
of the Governors, efforts. It is time for all of us to work together to reach
our mutual goals: the preservation of health insurance coverage for those who
need it most; flexibility for the states; and a shared financial partnership
with accountability for federal tax dollars and quality of care.
Medicaid provides vitally important health and long-term care coverage for
36 million Americans and their families, including the following:
- It provides primary and preventive care for 18 million low- income
children;
- It covers 6 million individuals with disabilities -providing the health,
rehabilitation, and long-term care services that would otherwise be unaffordable
for these individuals and their families;
- It covers 4 million senior citizens -- including long-term care benefits
that provide financial protection for beneficiaries, spouses, and the adult
children of those requiring nursing home care.
- Finally, it pays the Medicare premium and cost sharing for low income
seniors, which is the only way to make the use of Medicare benefits affordable
for these individuals.
As part of his balanced budget plan, the President has proposed a carefully
designed and balanced approach to Medicaid reform. His plan preserves Medicaid
(title XIX of the Social Security Act) but makes important changes that will
give states unprecedented flexibility to enhance the program's ability to meet
the needs of the people it serves. The President's plan:
- preserves the federal guarantee of a congressionally defined benefit
package for Medicaid beneficiaries;
- preserves Medicaid protection for all currently eligible groups;
- maintains our shared financial partnership with the states as they provide
health coverage to needy individuals;
- provides unprecedented new flexibility so that states can better manage
their programs and pay providers of care and operate managed care and other
arrangements without unnecessary federal requirements, while maintaining
programmatic and fiscal accountability; and
- contributes federal savings to the balanced budget plan through reductions
in disproportionate share hospital payments and the use of a per capita cap on
federal matching that adjusts automatically to changes in state Medicaid
enrollment and changes in the economy.
As you know, the President strongly opposed -- and ultimately vetoed -- the
congressional approach to Medicaid reform because it did not meet these
standards. The Congress voted to repeal the Medicaid program and replace it
with a new "Medigrant" program that did not include meaningful guarantees of
eligibility or benefits. The Congress also proposed a "blockgrant" funding
mechanism that breached the 30 year federal partnership with the states to share
in changes in state Medicaid spending.
As I mentioned earlier, NGA recently approved the outlines of its own
Medicaid reform plan, which has been helpful to the debate. In particular, we
have been pleased that the Governors appear to agree with one of the key
elements of our plan -- namely that federal financing must be responsive to
actual, and often unanticipated, changes in Medicaid enrollment in the states
and changes in the economy.
However, while the details of the NGA plan are still not completely fleshed
out, we are concerned that the elements of the NGA resolution do not reflect the
priorities set out in the President's Medicaid plan in certain areas. These
are: (1) the need for a real, enforceable federal Guarantee of coverage to a
congressionally-defined benefit package; (2) appropriate federal and state
financing; and (3) quality standards, beneficiary Protections, and
accountability.
The Federal Guarantee of Coverage and Benefits
The federal "guarantee" of coverage and benefits is at the core of the
federal Medicaid program. Unfortunately, the term "guarantee" has been assigned
very different meanings in the context of the current Medicaid debate. When we
use the term guarantee in the context of a federal statute like Medicaid, we
mean a real guarantee, composed of three interrelated components: definitions of
1) eligibility; 2) benefits, and 3) enforcement.
Eligibility
Let's begin with eligibility. The NGA plan sets out a number of current law
groups that states must cover in their plan. However, problems remain in the
NGA definition. First, it repeals the current law phase-in of Medicaid
coverage for children ages 13-18 in families with income below the federal
poverty level -- a bipartisan coverage expansion signed into law by President
Bush.
In addition, the NGA resolution repeals the federal standard for defining
disability and replaces it with 50 separate state definitions. This has the
effect of making Medicaid coverage and benefits for those with disabilities
uncertain and variable around the nation. For example, it would be possible for
states to use restricted definitions of disability resulting in very limited
coverage for populations whose service needs are pronounced and among the most
costly. In such situations, we are concerned that narrow state definitions of
disability could preclude individuals with HIV, certain physical disabilities,
or mental illness, from receiving critically needed services under Medicaid. We
should not turn back the clock on those with disabilities by permitting 50
different state definitions for purposes of Medicaid coverage.
It appears that the Governors have retained the linkage between cash
assistance and eligibility for Medicaid: However, there are still some
outstanding questions that require clarification, including how currently
covered populations, like the welfare-to-work eligibles, will be covered after
the enactment of welfare reform.
Benefits
Eligibility is only one component of the guarantee -because the question is
eligibility for what -- bringing us to benefits. The NGA resolution lists
benefits that are characterized as "guaranteed for the guaranteed populations
only." The resolution also says that all other benefits defined as optional
under the current program would remain optional, and that there would be an
additional set of long- term care options.
This new framework raises several unresolved questions. The first relates
to the adequacy of the benefits. Current Medicaid law and regulations already
give states substantial flexibility in defining the amount, duration, and scope
of benefits, and states have used this flexibility to respond to their unique
circumstances. This latitude is tempered by a very reasonable constraint --
benefits must be "sufficient to reasonably achieve their purpose". We have
concerns that by specifying "complete" flexibility on amount, duration, and
scope, the NGA proposal provides no standard against which to assess the
reasonableness of a state's benefit plan. Without a standard, any federal
"guarantee" is illusory. We believe the Governors understood this as they
acknowledged in their testimony last week that the provision in their resolution
on this issue has shortcomings that need to be addressed.
The NGA resolution also is silent on the current law standards of
comparability and "statewideness" of services -- among and within eligible
groups -- for mandatory as well as optional services. In the absence of further
information about such provisions, there is no standard against which the
"guaranteed" benefits and potential discrimination against certain groups or
diseases can be assessed, and therefore, we are concerned about the potential
for discrimination against certain groups or diseases.
The NGA proposal also would limit the treatment portion of the Early and
Periodic, Screening, Diagnosis, and Treatment (EPSDT) program, so that states
need not cover all Medicaid optional services for children. The NGA does not
yet specify exactly how this would be done, so it is difficult to assess the
impact of the provision -- other than the certainty that some children would not
receive treatments despite the clinical recommendations for those services
arising from the EPSDT screening and diagnosis process.
Enforcement
The third essential component of the federal guarantee is enforcement.
Implicit in the concept of defined populations and defined benefits is the
notion of a meaningful enforcement mechanism. A federal cause of action for
beneficiaries assures that those seeking a remedy for the deprivation of medical
care receive the same due process rights everywhere in the United States. The
NGA resolution requires states to provide a state right of action, but
eliminates any federal right of action for individuals and providers who assert
that a state is violating federal Medicaid laws. The only access to federal
court for such claims would be the opportunity to petition the U.S. Supreme
Court for review of a decision of a state's highest court.
The NGA provisions pose a number of serious questions and concerns. Under
the proposal, we believe Medicaid would be the sole federal statute conferring
benefits on individuals with no possibility of federal enforcement by its
intended beneficiaries.
Review by federal courts also promotes efficiency. As a practical matter,
common sense tells us that those aspects of the Medicaid program that are common
to all states should be subject to consistent interpretation and administration.
When the same question arises across multiple jurisdictions, decision-making in
the federal court system maximizes efficiency and predictability. This is
particularly true when Medicaid interacts, as is often the case, with other
federal statutes (such as Medicare, Social Security, SSI and AFDC). Federal
courts are more experienced in analyzing these federal programs and are better
able to understand and decide cases involving relationships among them.
When courts are being asked to interpret statutory provisions that apply to
all participating jurisdictions, we should not construct a system that will
encourage different outcomes in different states.
Suits against states filed by providers over payment rates have caused the
greatest problem to the states. Under the Administration's plan, the Boren
Amendment and related provider payment provisions would be repealed, thereby
eliminating these causes of action by providers. Thus, under the
Administration's plan, state concerns about limiting their exposure to suit in
federal court would be resolved largely.
On balance, when we assess the three components required to make any
guarantee real -- the definitions of eligibility, benefits, and enforcement in
the NGA resolution -- we continue to have concerns because the federal guarantee
of Medicaid coverage and benefits does not appear to be real and enforceable for
recipients.
Financing
The second key issue is the financing contained in the NGA resolution. The
NGA resolution would replace the current financing system with a combination of
a fixed federal payment and a payment adjustment for unexpected increased
enrollment. The Governors, financing mechanism has the potential to be creative
and a workable formula that constrains growth without providing incentives to
drop coverage. Their funding approach, which ensures Medicaid dollars increase
with enrollment, represents a constructive addition to the debate. As the
Governors have noted, however, these provisions must be fleshed out in much
greater detail before anyone can assess whether the financing actually flows
based on changes in enrollment and the economy.
The NGA proposal also includes two changes in the state share of financing
Medicaid. The minimum federal contribution to the financing of Medicaid would
increase from 50 percent to 60 percent, and states, use of provider tax and
donation financing mechanisms would once again be unconstrained.
While these proposals are appealing to many states, they raise significant
concerns. Depending on the overall structure of the program and on state
decisions about program spending, raising the minimum federal match rate from 50
percent to 60 percent either could result in significant increases in federal
spending, or reductions in state contributions to Medicaid -- and in total
Medicaid funding for health care.
For example, an analysis of this provision by the Center on Budget and
Policy Priorities indicated that if the seven-year federal funding reduction
were $59 billion and state matching requirements were reduced only for states
with current matching rates above 40%, states could cut their own Medicaid
funding $182 billion over seven years. Under this scenario, the total federal
and state seven-year cut would be $241 billion. The cut would grow with each
year, reaching 19 percent in 2002. If the cut were $85 billion -- the amount in
the latest Republican offer and the matching rates were adjusted as in the
Conference Agreement (where maximum state matching rates were reduced to 40
percent, as in the NGA proposal, and some of the factors used to calculate the
matching rate were changed causing some states' matching rate to fall below 40
percent), states could reduce their funding by $214 billion over 7 years. In
this case, the total 7 year cut -- both federal and state -- would equal $299
billion, reaching 26 percent by 2002.
Defining and revising the appropriate federal and state contributions and
spending levels will always be one of the most difficult issues to settle in any
Medicaid reform plan. There is no question that these matters merit careful
attention in the long-term. However, given the enormous fiscal implications,
the President's plan proposes to gain advice from an intergovernmental advisory
commission on the appropriate federal and state funding before the Congress
proceeds to change the current distribution.
The NGA plan would also permit unconstrained use of provider tax and
donation financing approaches for the "state" share of Medicaid. These are the
exact mechanisms that the Congress recently limited -- in the case of taxes --
or outlawed completely -- in the case of donations. During the late 1980s and
early 1990s, many states took advantage of these funding approaches, costing the
federal government billions of dollars and helping drive annual Medicaid
spending growth rates up to well over 20 percent. The Congress wisely enacted
limits on these mechanisms that remain appropriate today.
In addition, the NGA proposal treats American Indians and Alaska Natives
(AI/ANs) in its category of "special grants" that includes "grants to certain
states to cover illegal aliens and to assist Indian Health Service and related
facilities in the provision of health care to Native Americans." AI/ANs have a
unique status in that they have a government to government relationship with the
United States that distinguishes them from other special populations. Based
upon this legal status, they are entitled to benefits promised under federal
treaties and trust responsibilities and to any benefits for which they are
otherwise eligible as U.S. citizens.
Finally, the NGA resolution does not clearly address beneficiary and family
financial protections such as spousal impoverishment and family responsibility
protections that have been central to the Medicaid program for some time. The
NGA resolution also does not address the imposition of co-payments and other
cost sharing for Medicaid beneficiaries. Further clarification in all of these
areas is needed, because these are central elements of the financial security
that Medicaid provides today for beneficiaries and their families.
Conclusion
When we are all long gone and the history books of this period have been
written, what will they say about our role in this great debate?
Did we give the American people a government that honors their values and
spends their money wisely?
Did we balance the budget and shift responsibility away from Washington
without breaking our historic promises of health care to seniors, children, and
people with disabilities?
Did we move forward on common ground with a common vision?
Quite simply, did we do the right thing?
That is the challenge facing this Administration, this Committee, and this
Congress. And, that is the challenge we must meet together.
Again, I want to thank this Committee for giving me the opportunity to
testify today and I look forward to answering your questions.
