Obama Budget Increases Federal Contribution To Medicaid By $25 Billion

MedicaidBudgetWith health care reform legislation on life support, President Obama’s new budget offers a short-term patch for cash-strapped public health care programs. The administration’s FY 2011 budget invests $25.5 billion into a 6-month extension of “the help that states got in last year’s economic stimulus bill with their Medicaid programs,” increasing the federal contribution by 6.2%. States with higher unemployment rates would qualify for more aid.

The extra federal dollars will help states meet the demands of increasing enrollment and reduce the need for tax increases or cuts to other essential state services. States could plug existing budget holes, transfer funds earmarked for Medicaid into other spending priorities or increase their program’s reimbursement rates, which fell in 2008 as states tried to compensate for budget shortfalls.

Congressional conservatives will characterize the funding boost as irrelevant to ‘stimulating’ the economy or, worse yet, a ploy to reward ‘bad behavior.’ During the stimulus bill debate, for instance, MSNBC’s Joe Scarborough argued, “what this [Medicaid] spending does is it bails out states that haven’t made tough decisions.” Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee, explained that he “opposes the nearly $90 billion in aid to states for Medicaid because some governors would use the money to mask poor decisions in other portions of their budgets.”

In fact, rather than strengthening Medicaid, Republicans are openly looking for ways to privatize the program, which they call a “medical ghetto.” Last week, Rep. Paul Ryan (R-WI) — the ranking member on Budget Committee — outlined a plan that would allow Medicaid to to “provide supplemental payments to low income recipients so they too can obtain the health coverage of their choice and no longer be consigned to the stigmatized, sclerotic care that Medicaid has come to represent.”

For all its problems, Medicaid currently covers around 60 million Americans, including people who are often rejected by private plans. Medicaid protects low-income Americans from uncontrollable out-of-pocket costs charged by private insurers and also “covers services not usually covered in private health insurance.” Increasing the federal government’s contribution to Medicaid would provide immediate relief to cash-strapped states and protect other essential services from painful budget cuts.

The House has already attached a Medicaid funding increase to a jobs bill it passed in 2009 and Sen. Jay Rockefeller (D-WV) is considering “using the jobs bill under discussion in the Senate” as a vehicle to extend the federal government’s contribution. Some senators are already expressing skepticism about “his proposal, arguing the funds would not be used directly to create jobs.”