DECEMBER 28, 1995
One of the sharpest confrontations in the current budget battle between President Clinton and the Republican Congress is over the future of Medicaid. Margaret Warner presides over a debate between Senators Bob Graham, (D-Fla) and Don Nickles, (R-Ok).
MARGARET WARNER: As part of their seven-year plan to balance the budget, the Republican-controlled House and Senate have passed a bill that would end Medicaid's entitlement status, block-grant it to the states, and slow the growth of spending in the program from the current 10 percent a year to about 4 percent annually. That would save $162 billion over seven years. President Clinton has proposed far more modest savings and says he cannot sign the Republican bill. Here to debate the issue now are Republican Senator Don Nickles of Oklahoma, a member of the Senate Budget Committee. He joins us from Capitol Hill; Democratic Senator Bob Graham of Florida, a member of the Senate Finance Committee; Ron Pollack, executive director of Families USA, a national health care consumers group; and Gail Wilensky, a senior fellow at Project Hope, a health care education foundation. Under President Bush, she headed the Health Care Financing Administration, which administers Medicaid. Welcome, all of you. Sen. Graham, why has the future of the Medicaid program emerged as such a major sticking point between the President and the Republican Congress in this budget fight?
SEN. BOB GRAHAM, (D) Florida: Medicaid is the ultimately safety net under the entire health care system of America, because Medicaid has been a great success, it has helped dramatically reduce infant mortality, it has provided health care financing for millions of poor children who would otherwise have been without it, particularly those whose parents have lost their privately- financed health care coverage, and it is dealing with the needs of an increasingly aging society. And so rather superficial proposals to change it dramatically primarily in order to ravage its cost and its capacity to render important services have made it a centerpiece for this budget debate.
MARGARET WARNER: Sen. Nickles, why do you think this has emerged as such a sticking point? Because you both want to find some savings, the President and the Republican Congress, and yet, it's--to listen to the President speak, it really is a major bone of contention.
SEN. DON NICKLES, (R) Oklahoma: (Capitol Hill) Well, it's one of the real challenges we have. You can never balance a budget if you have a program that is just growing totally out of control. The cost of the federal government in the last several years has just exploded. Growth rates of 28, 29 percent, 13 percent, 8 percent, it's just exploded, and for lots and lots of different reasons, some of which are maybe good reasons, some which are not. You have exploding populations, people that are receiving benefits that maybe shouldn't be receiving benefits and so on. So it needs to be curtailed. You can never balance the budget if you're going to say, well, we're going to allow all these entitlement programs to continue to grow in cost without any limitation, any growth whatsoever. Now, both the Democrats and the Republicans have some ideas trying to rein in the growth, but--and there's significant difference, and I guess we'll talk about those. But, you know, 2/3 of the federal budget, Margaret, are entitlements, and if you don't control the entitlements, you'll never ever end up balancing the budget.
MARGARET WARNER: Okay. Let's take the first of the major differences, which has to do with how much money the Republican plan would save versus the administration's plan, which Sen. Graham has also been very involved with, and it's a difference between a savings of $54 billion under the Democratic alternative and $163 billion under your alternative, Sen. Nickles.
SEN. NICKLES: Well, Margaret, let me--
MARGARET WARNER: Let me just ask you, because I want to narrow this down, can you at a time of expanding population need, which as we just saw on the tape piece and you just mentioned, there is kind of an explosion of demand, how can you actually continue to cover all these people and the new people if you reduce the rate of growth from 10 to 4 or 5 percent?
SEN. NICKLES: Well, let me just, one, bring you up to date on some of the figures. You know, one of the things that we've tried to do is to get President Clinton to use Congressional Budget Office figures, which so far he hasn't agreed to do, or at least hasn't agreed to put down a budget that's balanced using CBO figures. So we're using sometimes different numbers, but the Congressional Budget Office has scored our proposal now, and it's not $160 billion; it's $116 billion in savings from, from the present growth assumptions. Some of the Democrats in Congress--and I compliment them because they do have a budget, calls for $62 billion, so a difference of about $50 billion. Now, that's--there's still significant policy differences. There's differences as far as who determines eligibility, who's entitled to receive Medicaid and who defines disabled, for example. We say the states should. They say the federal government through the SSI program should. But those are differences I think that we need to negotiate, but they're not quite as big as, as maybe your opening comment indicated.
MARGARET WARNER: All right. Sen. Graham, do you think the population that needs to be served can be served under their proposal, under that amount of money?
SEN. GRAHAM: No. And some of the reasons why a partnership between the states and the federal government is important for the future of Medicaid is exactly because of the expanding population and the fact that that population is not expanding at the same rate everywhere. For instance, my state happens to be a fast growth state. So we have many people coming to Florida who are going to require Medicaid services. Then you have economic circumstances. We had a major depression in New England at the end of the '80s and in California in the early 90's. That resulted in their Medicaid rolls ballooning in order to meet the economic distress. In my state of Florida, after Hurricane Andrew, our Medicaid role grew in South Florida by about 10 percent as a result of people whose jobs were blown away, as well as their homes. The current partnership is able to respond to those and other unforeseeable specific circumstances, and, therefore, assure that people in need will have access to health care.
MARGARET WARNER: Now, let me let Gail Wilensky and Ron Pollack in now. Gail Wilensky, explain to us, though, both of these proposals seek savings, how actually in the program can savings be made?
GAIL WILENSKY, Health Economist: Well, there are lots of ways, fortunately, and there is and should be a debate about how much we really can save. Under the program as it existed, there are a lot of rules and regulations that have been put in place by the federal government, usually for perfectly good, well-intended reasons, that cause the states to spend more money, or to spend it in ways they wouldn't want to if they could. Managed care, a very common option, is something that states have to come to the federal government and ask permission. If they want to do things different ways in different parts of the states, they have to get permission to do that. There are many, many thousands of things that require states to do something one way when they think they could do it better. Now, it's very important to understand this because many governors, mostly Republicans, I'll grant, but many governors have said we can stand a slower rate of growth in spending if we don't have to follow all these rules and regulations put in place. We can do things better. We need to grow it. And personally, I think that the new numbers we're hearing talked about, 110, 116 billion dollars over seven years, are now within the doable range. I was uneasy at the numbers level, not about the concept but the numbers level, at $170 billion. That was less than inflation and population growth. I think there are savings to be had. That was pushing it a little far.
MARGARET WARNER: Ron Pollack, is Gail Wilensky right, that you could, if you give the states this flexibility, you could realize all these savings without hurting the populations you're trying to cover?
RON POLLACK, Families USA: Well, I think you can achieve some savings. There are some savings, I think, that we can all agree on. I think there's a broad consensus among Democrats and Republicans, and I think--I think you can achieve some savings, but not the kind of savings we're talking about here. Now, one of the things that were I think missing in the numbers debate is that not only is there going to be a cutback on the federal government side, but there's also going to be a major cutback on the state side. The Kaiser Commission on the future of Medicaid, a non-partisan group, estimated that if you include the federal dollar savings and the state dollar savings, we're talking about double the dollars that we're just talking about in the federal debate. Now, one thing I found interesting, I just received a letter that's being circulated throughout the state of Virginia from the Medicaid director in Virginia who is--has asked people who are involved in the Medicaid program to figure out how they're going to triage the system. And these are the kinds of decisions that governors are being forced to make. The kinds of questions they ask are: Should we limit the number of days that a person is in the hospital? They suggest perhaps 15 days. Should we limit the number of doctors visits? They suggest perhaps three days. Should we cut prescription drug coverage? Who should we provide coverage for, seniors, children?
MARGARET WARNER: You're talking about rationing health care.
MS. WILENSKY: All of which states can do right now, by the way.
MR. POLLACK: There is no question that we are going to see with these kinds of dollars, we're going to see a very substantial reduction in the number of people who heretofore had this guarantee of coverage.
MARGARET WARNER: Let me let Sen. Nickles in here. Speak to that point, if you would. Is that really what you're heading toward? Is that where the states are heading, rationing health care for Medicaid recipients?
SEN. NICKLES: Margaret, what a lot of the governors and legislators have told us, have said Medicaid has just exploded. It used to be about 10 percent of the budget a few years ago. Now it's about 20 percent. In many cases, it's the largest item in their budget, and exploding because of federal mandates, and they're saying we can live with less money, just cut off some of the strings, and we can do a better job in providing health services for people who are falling through the cracks, who need some help, but give them the latitude. Right now, you have the federal government mandating coverage for a lot of people that maybe shouldn't be receiving coverage.
MARGARET WARNER: But, Senator, do you anticipate these governors, once they're free from the federal regulations, having to make the kinds of choices that Ron Pollack just outlined?
SEN. NICKLES: No. I think they can do a better job with, with dollars growing, but dollars don't have to grow at such a high percentage rate. And what they're saying is give them flexibility so they don't have to spend so many of their resources making applications for HCFA, for Health Care Financing Administration, to get waivers so they can have permission from the federal government as if only the federal government is concerned about the less fortunate. The governors and the states are just as concerned, if not more concerned, about low-income people or people that need health assistance than the federal government. They're closer to the people so they can make better determinations on who should be eligible. We have a lot of people--for example, the number of--
MARGARET WARNER: Senator, I'm sorry--that's an interesting point. I want to get Sen. Graham, himself a former governor, to speak to that, which is, of course, under the Republicans' proposal, this would go block-granted to the states, they would have total freedom to spend it as they wanted. Under your proposal, the federal government would retain a lot of control. Why is that necessary?
SEN. GRAHAM: The key issues in this debate are the ones that you have raised. They are the issue of the partnership between the federal government and the states, the issue of flexibility at the state level to use those dollars, and how many dollars will be available to be used. I can appreciate the fact that there can be savings by giving states greater flexibility. While I was governor, we initiated a community-based program for the elderly, which allowed many people who otherwise would have been in nursing homes, to be served better and less expensively in their homes. In this debate, President Clinton is proposing to give the governors virtually every degree of flexibility which they have asked for, including no longer having to get waivers to use managed care, no longer having to get waivers for community-based services for the elderly, and a whole array of other new authorities that will be given to the states, but we don't have to give up, however, what is a very important part of the state flexibility, and that is that if we get in trouble because of a depression or a hurricane or some other event outside of a state's control at that very moment when you're crippled, you don't then have to suffer the additional indignity and loss to your citizens of losing health care for thousands of your people.
MARGARET WARNER: Let me let Gail Wilensky weigh in on this point, how the states are going to respond, because you just heard Ron Pollack say that the states themselves, now they'll be free to cut back on their own spending are going to. How do you think the states are going to respond?
MS. WILENSKY: States that have ideas in hand that have been applying to the federal government for permission will go out quickly and try to make changes. Some of the states that haven't been as aggressive will probably take a little longer to decide what they want to do. We have made it very difficult for states to try to make the best use of the money that they're putting up and they're getting from the federal government. It makes no sense. Everywhere we look-- Arizona, a place that has not just for acute care for moms and kids managed care, very innovative programs for long-term care in the disabled populations with much greater savings than they've even seen in their acute care population, still is on a research and development waiver. That's the only way that we can do it. It makes no sense. Their question is: Who should make these decisions, the federal government or the states? If you think the states are just looking for ways to hurt the poor, then block grants will make you very nervous.
MARGARET WARNER: All right. Let me raise one other point, because we're going to run out of time and get you to answer, Ron Pollack. The other major difference between the two is the Republicans would end the entitlement status of Medicaid. Your proposal would not. Why is it bad to end the entitlement status, which, of course, is a guarantee of coverage for anyone who meets certain criteria?
MR. POLLACK: Well, first of all, it provides real flexibility to the states. It provides flexibility to the states because the money goes with the people. And it's like insurance. If you're insured, you want to know personally if you're going to be insured. If you only have a block grant, rather than a guarantee of coverage, then it could--the circumstances could change, then your eligibility could change. If there's a recession, you might not get coverage. If there's high unemployment--
MARGARET WARNER: Because there just wouldn't be enough money in the pot.
MR. POLLACK: There wouldn't be enough money or if there is a natural disaster, like Sen. Graham was talking about, you might not get the coverage. I don't think the issue is ultimately whether we should provide more flexibility to the states on things like managed care. What Gail said is absolutely right. I think the states should get some more discretionary authority about the system, how they deliver health care. But what's really key here is that people who have come to depend on the Medicaid program, senior citizens in nursing homes, children who may be in a working family but that working family does not have private health insurance--and we're increasingly seeing that--the Medicaid program guarantees to them that they will get coverage no matter what. And that's the crux of the issue.
MARGARET WARNER: Let me ask Gail Wilensky, very briefly, on entitlement status, why did the Republicans want to eliminate that?
MS. WILENSKY: This is a decision they want to let states closer to the people make as to how to best provide care to those in need. I don't think you're hearing governors saying we don't want to do this. You ought to listen to what the governors are saying when they come to Washington. We can do it better. Don't tell us we don't care. We can do it at slower rates of growth. That's what's being talked about. It is the guts of the issue, who ought to make this decision, the federal government as an entitlement, the states providing care to the people as makes sense to them and closer to the situation.
MR. POLLACK: And, Margaret, if the states are going to protect these people, there'd be nothing better than to tell those people right now that they'll be guaranteed that coverage. That's the key.
MARGARET WARNER: Before we go, I want to get the two Senators--Sen. Nickles, I'll start with you. Can the two of you see outlines of a deal here? And what would it be?
SEN. NICKLES: Well, we need to make a deal, I think make a deal. We need to pass a budget, and we need to rein in entitlements, and this included, and to touch on the entitlement issue, because of federal entitlements under SSI, you see the number of, of drug addicts and alcoholics has grown from 23,000 to 136,000 in the last five years. Federal eligibility has greatly expanded these programs well beyond our capacity to pay, so we need some reform, some restraint, and I think turning it over to the states will make some common sense decisions because they really are closer to the people.
MARGARET WARNER: All right. Before we go, I have to get Sen. Graham. What do you think of the outlines of a deal here?
SEN. GRAHAM: The outlines of a deal are going to be a continuation of the federal-state partnership, the conservative Democratic budget and the bipartisan budget of Republican and Democratic Senators, both favor the maintenance of a federal-state guarantee.
MARGARET WARNER: You mean an entitlement?
SEN. GRAHAM: An entitlement. I think that the dollar sum will be in the range of 60 to 70 billion dollars reduction in this program, which I think will not be easy but can be secured, and I believe the greater flexibility to the states as to how to use their money but still have access to the federal government in a time of need, and those are going to be the ingredients of the Medicaid settlement, and it will be an important part of achieving the goal of a balanced budget.
MARGARET WARNER: Well, thanks. We're going to have to leave it there. Thank you all four very much.