March 3, 2005


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A new Center report finds that the Medicaid proposals in the President’s fiscal year 2006 budget would likely lead to increases in the number of uninsured and underinsured Americans by weakening states’ ability to fund health and long-term care coverage for low-income populations.  The budget would reduce federal funding for Medicaid by $45 billion over ten years.  The budget also suggests that the Administration supports placing a cap on at least part of federal Medicaid funding, a profound change that would shift costs and risk to states and likely erode health coverage over time.

To cap all or a significant part of federal Medicaid funding would change the program profoundly.  The federal government’s share of Medicaid costs could fall substantially over time as federal funding failed to keep pace with rising health care costs.  That would force states to choose between shouldering a larger share of Medicaid costs or steadily scaling back their programs.  Moreover, many eligible low-income children, parents, seniors, and people with disabilities would no longer have an entitlement to Medicaid coverage and could be turned away or put on a waiting list, despite being in need and lacking health insurance.  If the Administration is proposing to cap part or all of federal Medicaid funding, that proposal should be spelled out clearly for Congress, the states, and the public to consider.

Along with the State Children’s Health Insurance Program (SCHIP), Medicaid demonstrated its effectiveness during the recent economic downturn, by helping to offset the loss of employer-based coverage.  While the number of uninsured Americans has gone up over the past few years, millions more would have become uninsured if Medicaid and SCHIP had not responded quickly and effectively to the downturn by enabling substantial numbers of low-income children and parents who lost employer-based coverage to enroll.  Reducing or capping the federal government’s financial commitment to Medicaid would almost certainly make the program less effective over time and increase the number of Americans with inadequate or no health care coverage.