A Little Trim


Republicans complain that they are unfairly caricatured as heartless
corporate lobbyists who get their jollies yanking health insurance
away from little old ladies in wheelchairs. Fine, I say. So how do
they explain Haley Barbour?Most of Washington remembers Barbour as the former Republican Party
chairman and a consummate K Street insider. But lately, Barbour has
been gaining a different sort of notoriety in Mississippi, where he
became governor in 2004. Mississippi is struggling to afford
Medicaid, the joint federal-state program that provides health
insurance for the poor, because rising medical costs and swelling
enrollments have made it so expensive. Last year, Barbour came up
with a crude, if effective, solution: Cut from the rolls 50,000
people who live at or near the poverty line.

When critics protested that the cuts would expose these people to
substantial new medical bills, Barbour insisted the new Medicare
drug benefit would take care of them--even though Medicare's
benefit, which is less comprehensive, won't even start until 2006.
Then Barbour began ranting about Medicaid fraud. "I'm not going to
make people who work two and three and four jobs to support their
families and pay their taxes have to pay for people to get free
health care who could work but choose not to." But the people
Barbour was ousting from Medicaid weren't lazy; they were part of
Mississippi's plad program, as in "Poverty Level Aged and
Disabled," meaning age or disability keeps them from working. Soon
Barbour got a lesson in the difference between Washington, where
budget cuts look like numbers on a spreadsheet, and state capitals,
where budget cuts look like your neighbor's elderly aunt. After
legislators passed Barbour's proposal, they came home to crowds of
irate constituents.

Now those lawmakers are scrambling to undo the cuts, and Barbour has
agreed to consider alternatives. But he has already ruled out
raising taxes to close the program's funding gap; the former
tobacco lobbyist is particularly unhappy about a proposed 50-cent
levy on cigarette packs. That means significant Medicaid cuts loom
no matter what the legislature concocts. One measure under
discussion would reduce the yearly limits on Medicaid coverage from
seven prescriptions to five and from 30 days of hospitalization to
15. It's still more than adequate--unless you happen to get really

Barbour is hardly the first governor to try to reduce the flow of
money into Medicaid. In fact, it's a gubernatorial tradition that
reaches across party lines and renews itself every time a recession
tightens state budgets. When the Democrats controlled Congress or
the White House, however, they usually blocked such efforts because
they believed in preserving Medicaid as an entitlement that would
grow with the population's needs. Even as the program got more
expensive, they did their best to have the federal government
contribute its share of dollars. Then they pushed states to do the

Today, Washington is under different management. In 2003, President
Bush showed some of his famous compassionate conservatism by
ripping a page from Newt Gingrich's "Contract With America" and
proposing to turn Medicaid into a block grant, thereby putting a
lid on the federal government's contribution. The initiative
failed, as even Republican governors had qualms about it. But, this
week, Bush revealed in his new budget proposal that he still expects
to extract tens of billions of dollars from the program over the
next few years. Most of these savings will allegedly come from
eliminating waste, which sounds easy enough, until you realize that
Medicaid already pays doctors and hospitals less than either
Medicare or private insurance. Most likely, states will be
hard-pressed to comply with Bush's budget goals without cutting
people or benefits.

And that seems to be the whole point. Bush's new secretary of health
and human services is Mike Leavitt, the former governor of Utah,
whose claim to fame was a rather creative restructuring of that
state's Medicaid program in 2002. Leavitt reduced benefits for one
group of beneficiaries, then used the savings to offer uninsured
residents deeply discounted "insurance" that covers doctor visits
but not hospitalization. (Coming soon: car insurance that doesn't
cover collisions.) The entirely predictable result of this so-called
expansion was to contract the basic Medicaid benefit package. Last
week, Leavitt announced that the federal government should allow
more states similar "flexibility"; as secretary, he's in a position
to grant it unilaterally. Translation: If governors want to dilute
their Medicaid programs on his watch, he won't stop them.

This isn't to say the pressure Medicaid places on government
finances isn't severe. Today, Medicaid costs the federal and state
governments more than three times what it did in 1990, thanks in
part to expansions in the program that were made while the booming
economy of the '90s boosted tax revenue. That money is gone now,
warranting such belt-tightening measures as higher co-payments for
the non-destitute. But such reforms can yield only modest savings;
the real reason Medicaid keeps getting more expensive is that more
and more people need it. Employer-provided health insurance is ever
more difficult to find; affordable long-term care for the elderly
virtually impossible. Medicaid is nobody's ideal solution to these
problems. (Ideal solutions are a discussion for another day.) But,
for all of its flaws, it's the most cost-effective option on the
mainstream political agenda, according to research by Massachusetts
Institute of Technology economist Jonathan Gruber.

Think of it this way: If Medicaid hadn't grown to fill the yawning
gaps in private coverage over the last decade, today we would
probably have 50 million uninsured Americans instead of 45 million.
Conservative Republicans can't abide expanding Medicaid in part
because bigger government eventually means more taxes and, heavens,
we can't have that. But rolling back Medicaid means the poor and
disabled will have to confront medical bills alone. The
bankruptcies will pile up, emergency rooms will get even more
crowded, and, yes, some people will die. Bush, Leavitt, and Barbour
may find those consequences acceptable. But then they really can't
complain when people call them heartless.

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