Treating a Symptom, Not a Disease

By Karen Davenport | February 6, 2008

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President Bush has once again offered dangerous policy prescriptions in his 2009 federal budget proposal that would further damage our broken health care system. This budget, if enacted, would undermine critical public health insurance programs and state budgets by cutting Medicare by $178 billion over the next five years—largely by reducing support to hospitals that serve needy communities—and cutting Medicaid by $17.4 billion over five years.

These deep cuts mask another story: By cutting Medicare and Medicaid by nearly $200 billion over five years, the president is trying to treat a symptom, not the disease. The real problem is that health care costs in the United States are out of control—between 2000 and 2005, overall health spending grew nearly twice as quickly as the GDP—and the federal health programs operate within this environment.

However, the president hasn’t offered any meaningful solutions for controlling health care costs. He continues to promote the same changes to the tax treatment of employer-provided health insurance, in concert with a new individual deduction for health coverage, which would merely escalate the erosion of our current employer-based health care system. Other perennial proposals, like Health Savings Accounts, would make families pay more and get less care. Taken together, the administration estimates these two ideas would cost nearly $100 billion over the next five years in foregone revenue, yet they would do nothing to address the problems of cost, quality, and access in the nation’s health care system.

Instead of offering proposals that would fix these urgent problems, the Bush administration’s budget would inflict further damage on our nation’s health care system. The administration’s Medicare proposals would hit public hospitals, teaching hospitals, nursing homes, home health agencies, and other Medicare providers, well in excess of expert recommendations. They would also require some beneficiaries to pay higher Medicare and prescription drug premiums.

Yet insurance companies unsurprisingly dodged the bullet. The administration did not target the insurance industry for any of these cuts—indeed, Medicare-contracting health plans will continue to receive overpayments equal to 13 percent more per enrollee than the traditional program would pay for these individuals’ health care needs. The Congressional Budget Office estimates that these overpayments will cost taxpayers about $150 billion over 10 years.

The administration is also proposing an arbitrary cap in federal support for the Medicare program that would result in across-the-board payment cuts to all providers for all services, whenever general revenue support for Medicare services exceeds 45 percent of total program spending.

In a similar vein, the administration’s Medicaid proposals would reduce federal Medicaid payments to states—which would unravel the federal-state partnership that is a hallmark of the Medicaid program—and make other changes to Medicaid that would hurt certain enrollees.

The budget particularly targets federal matching rates for various eligibility groups, state activities, and health care services—including payments for family planning services—and limits state flexibility to determine eligibility criteria for long-term care. The proposal would also strip managed care enrollment protections for adults with disabilities and children with special health care needs from Medicaid law.

The budget also ignores the true financial needs of the State Children’s Health Insurance Program. Because the administration’s SCHIP request does not fully fund current program levels after health inflation, states would need to scale back their programs or contribute more of their own money to run the program under this request. This would likely prevent states from offering coverage to additional children. The administration also proposes changes that would limit states’ ability to define their target population.

In sum, this final Bush budget offers heavy-handed program cuts and recycled ideas that will cause further damage to our fragile health care system. We need smarter solutions, and real reform.