A Little Trim

by Jonathan Cohn | February 21, 2005

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 sick. 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 same. 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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