CWLA's Medicaid Principles

* Preserve the federal guarantee of Medicaid for all low-income children, including children in the child welfare system.

* Improve Medicaid benefits and broaden health insurance coverage for uninsured children under SCHIP.

* Oppose any efforts to block grant or reform Medicaid and SCHIP that does not result in maintaining and improving benefits, eligibility, and access to services.

Overview of the Medicaid Program

Medicaid is the nation's major program for providing health and long-term care coverage to low-income people. It is a critical health care safety net for millions of low-income children. Medicaid provides health care to 40.4 million low-income people in 1998 - 20.7 million children, 8.6 million adults in families, 4.1 million elderly, and 7 million individuals who are blind or disabled. Although children represent half of all Medicaid enrollees, they account for only 15% of program spending.

Medicaid is a joint federal-state program; each state has extensive flexibility to set its own eligibility standards, benefits packages, payment rates, and program administration, under broad federal guidelines. The result is 56 unique Medicaid programs (one for each state, territory, and the District of Columbia).

Under current Medicaid law, to qualify for federal matching funds, states are only required to cover the very poorest people who fit into several mandatory categories:

* Parents and children who meet income and asset limits for each state's welfare program as of July 16, 1996;

* Pregnant women, and children younger than 6, with family incomes up to 133% of the federal poverty level;

* All children younger than 19 with family incomes up to 100% of poverty;

* All current and some former beneficiaries of Supplemental Security Income;

* All beneficiaries of foster care and adoption assistance under Title IV-E of the Social Security Act; and

* Certain low-income Medicare beneficiaries.
States have the option to cover people with higher incomes who fit these categories.

States are only required to provide a package of core health services - mandatory services - but they must provide this package for all Medicaid beneficiaries. States have flexibility to cover an additional one or more of a list of 33 "optional services" with federal matching dollars. These optional services are usually medically necessary, and most states already provide this coverage.

Although states have great freedom to design their own Medicaid programs, the federal government funds a significant portion of total Medicaid spending in every state - between 50% and 83%. The Federal Medical Assistance Percentage (FMAP) matching rate for each state is calculated by comparing the state average per capita income to the national average. In 1998, 24 states and the District of Columbia had federal matching rates higher than 60%; of these 50% had matching rates of 70% or higher.

Administration Proposal to Reform Medicaid

* The President's FY 2004 budget announces a new legislative proposal to give states the option of continuing their current Medicaid program or converting their Medicaid and SCHIP into a capped, consolidated block grant.

* States that choose to keep their current Medicaid program would not receive any additional funding. At a time when states are experiencing severe budget deficits, this may leave states little choice in the short-term but to significantly scale back coverage for vulnerable low-income populations.

* States choosing the block grant approach would receive a loan totaling, for all states, $3.25 billion in federal funding for FY 2004 and $12.7 billion over seven years. These states would repay these funds to the federal government in lower reimbursement in years 8-10, but would also have to accept an overall cap on federal Medicaid spending over a fixed 10-year period starting next year. The Administration describes the proposal as budget neutral.

* At state option, most if not all federal rules related to at least two-thirds of all Medicaid spending would disappear.

* All Medicaid and SCHIP beneficiaries would be affected. Currently, half of all Medicaid beneficiaries are children.

* Although mandatory groups, including children in foster care, are to be protected, both mandatory and optional populations would fall under the capped funding structure. States would have to serve mandatory groups, but within the fixed pot of funds available to meet the needs of all groups-children and families, people with disabilities, and seniors.

NGA's Medicaid Reform Task Force

With pressure from the Administration to support their proposal, the National Governors Association (NGA) formed a Medicaid Reform Task Force that is directed to work with the Administration and Congress to strengthen and modernize the state-federal health care program for low-income and disabled individuals. Their reform proposal is expected to be voted on by the Task Force this week with the full NGA membership voting on it by June 10, 2003. A two-thirds vote is needed for passage.

The Task Force is co-chaired by Kentucky Governor Paul Patton, NGA's chairman, and Idaho Governor Dirk Kempthorne, NGA's vice-chairman. Members include Florida Governor Jeb Bush; Indiana Governor Frank O'Bannon; Connecticut Governor John Rowland; Iowa Governor Tom Vilsack; Maryland Governor Robert Ehrlich; Missouri Governor Bob Holden; North Dakota Governor John Hoeven; and New Mexico Governor Bill Richardson.

Believing that the Medicaid program "is crushing state budgets," governors are looking at ways to restructure Medicaid and help bring state budgets under control. Most will agree that the prescription drug benefit and the long-term care benefit under Medicaid are providing the most problems in controlling costs.

The Medicaid Task Force's reform proposal is disturbing for a number of reasons. The proposal includes a recommendation for a capped block grant, or as the Task Force refers to it, a "budget allocation" for all optional services and all optional beneficiaries. This would affect nearly two-thirds of all Medicaid spending. Mandatory services to mandatory populations, such as foster care children, would still receive a federal match in funds. However, states would be encouraged to provide a "State Children's Health Insurance Program or SCHIP-like program" instead of Medicaid to mandatory beneficiaries. The presumption is that that a state could make the Medicaid program so distasteful everyone would gravitate to the lighter benefit package with higher cost sharing.