Medical Device Daily Washington Editor

WASHINGTON – Late last week, the U.S. Department of Health and Human Services (HHS) unveiled plans for taking another stab at reining in the rapidly rising costs for Medicaid.

In response to requests from senators on both sides of the aisle looking for some justification to cap 2006 budget cuts to the program, HHS Secretary Mike Leavitt said that the department will establish an advisory commission which will have the goal of identifying reforms to “stabilize and strengthen Medicaid.”

The commission will submit two reports to HHS.

The first is due Sept. 1 and will outline recommendations for Medicaid to achieve $10 billion in savings during the next five years. It also will examine long-term enhancements and potential performance goals for Medicaid.

The second, longer-range report will be due on Dec. 31, 2006. It will make recommendations to maintain “the long-term sustainability of Medicaid,” Leavitt said.

Up to now, both the House and the Senate have worked out their own federal budget resolutions, with the financing of the Medicare and Medicaid programs both the subject of much political wrangling concerning President George Bush’s financial road map. The White House’s budget for fiscal year 2006 includes revisions to Medicaid that are estimated to save $60 billion in 10 years and $14 billion in five years.

In April, the House approved a budget resolution with Medicaid savings of $15 billion to $20 billion. The Senate’s version of the budget included no cuts to Medicaid, after senators approved an amendment to eliminate $14 billion in proposed cuts.

Budget resolutions are non-binding, but they set guidelines for Congressional consideration as the budget process moves forward.

Opponents of cuts to Medicaid maintain that federal and state policy experts should be given time to work out changes to the Medicaid system before Congress sets arbitrary spending limits on the program.

“In good times and bad, the people you don’t abandon or put at risk are the people in most need,” Sen. Gordon Smith (R-Oregon), recently told Congressional Quarterly.

Smith is one of the senators who had advocated the creation of an advisory committee.

Leavitt said the program, administered by the Centers for Medicare & Medicaid Services (Baltimore), and funded by state and federal tax dollars, was no longer meeting its potential.

“It is rigidly inflexible and inefficient, and worst of all, it is not financially sustainable,” he said. “The time to reform Medicaid is now, and this commission will help the administration, Congress and the states create a plan to ensure Medicaid can meet its goal of providing quality healthcare in a financially sustainable way.”

In announcing the group to look at alternatives for Medicaid funding, Leavitt pledged that it commission has been directed to work in an “open and bipartisan manner” to reform the ailing program.

The proposals will address issues such as:

• Expanding coverage while reducing costs;
• Providing long-term care to those who need it;
• Reviewing eligibility, benefits design, and delivery;
• Improving quality of care, choice and beneficiary satisfaction.

The second report also will consider how to address the major issues affecting Medicaid under three different scenarios: an assumption that federal and state spending continues at current pace; an assumption that Congress chooses to lower the rate of growth in the program; and an assumption that Congress may increase spending for coverage.

The report will assume that the basic federal-state match for Medicaid funding will continue.

Up to 15 voting members will be appointed by Leavitt to the commission, including at least three representatives of public policy organizations involved in healthcare policy for families, individuals with disabilities, individuals with limited incomes, and the elderly.

The commission also may include former or current governors and state Medicaid directors, in addition to experts in health, finance or administration. The commission will have up to 23 non-voting members including advisors with specific healthcare expertise or interest in Medicaid, and as many as eight policy experts designated by members of Congress.

On average, the federal government pays for about 57% of total Medicaid expenditures, as part of a matching program with states. The program has roughly 45 million beneficiaries this year, and more than 46 million are expected for FY06.