Congress Considers Cuts to Social Programs

As the House Weighs Budget Reductions, Services to Area's Disabled at Risk

Republican leaders in the House were pushing again late last night to find the votes for a $50 billion package of budget reductions that would slash spending on a wide variety of programs, among them food stamps, college loans, child support enforcement, farm aid and the enormous Medicaid program, which serves 53 million people -- about half of them children. Any cuts would need approval from House and Senate negotiators, Washington Post staff writer Mary Otto reports in Friday's article "Medicaid's Fragile Beneficiaries."

Leighton Ku, senior fellow at the Center on Budget and Policy Priorities was online Friday, Nov. 18, at 11 a.m. ET to examine the potential local impact of reductions to the nation's social programs being considered by the House of Representatives.

Photo Gallery: The Cost of Medicaid Cuts

Since Ku joined the Center as a Senior Fellow in health policy in 1999, he has specialized in Medicaid and SCHIP, among other health policy issues. He works on federal and state health policy issues, and helps to explain health research issues including trends in insurance coverage, health care for immigrants, and the way federal and state budget concerns impact health care. Ku is an adjunct professor in public policy at George Washington University.

The transcript follows.

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Leighton Ku: Hi, I'm Leighton Ku, of the Center on Budget and Policy Priorities. I'm an expert on Medicaid and health care programs. I've asked a couple of my colleagues, Sharon Parrott and Jim Horney, who are experts on other social programs and budget issues, to help out if I don't know the answer to your questions.

It is worth mentioning that late last night the U.S. House of Representatives passed legislation that includes billions of dollars in cuts in programs like Medicaid, child support enforcement, food stamps and other programs.

However, the Senate passed legislation that did not include cuts that are as damaging as those in the House bill. We won't know the final outcome of the legislation until both the House and Senate agree on final legislation a few weeks from now. We'll discuss the House bill, but please remember that the debate on Capitol Hill is not over yet.

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washingtonpost.com: House Approves Spending Reductions (Post, Nov. 18)

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Washington, D.C.: Could you please explain why these programs are being looked at for reduction? What would it mean for those with Medicaid if Medicaid is affected by cuts? Thank you.

Leighton Ku: Congress passed a budget earlier this year to cut spending in federal programs at the same time that it passed legislation to cut taxes further.

While Congressional leaders have said that cuts in Medicaid and other social programs are needed to reduce the deficit, in fact the deficit will be widened because the tax cuts are greater than the spending reductions.

Spending reductions tend to affect poor and middle-class people who benefit from the federal programs, but tax cuts primarily benefit those with higher incomes.

Ultimately, these are political (and value) choices made by Congressional and Administration leaders.

The Medicaid cuts being considered now could reduce benefits for children or people who are disabled or increase the amount they must pay for medical care. The Congressional Budget Office's analysis indicates that a large number of people may lose Medicaid coverage if legislation like that approved by the House is agreed to by the Senate. Let's hope that doesn't happen.

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Washington, D.C.: The budget cuts passed last night are very bad for social services. What about the HHS appropriations bill? I know that was defeated yesterday -- what's next for that bill? How will it also affect social services? Thank you.

Leighton Ku: As I understand it, the Labor HHS appropriations bill has gone back for reconsideration by the House, but it is not clear what changes they will make. I can't predict what the final outcome will be.

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Washington, D. C.: Each state offers its own Medicaid program. Would it make sense to "federalize" or "regionalize" Medicaid?

Leighton Ku: Medicaid is a combination federal and state program. The federal government puts up a little more than half the money and sets up the basic framework of how the program runs. States put up a little less than half the money and make more specific decisions about who to serve, which benefits to cover and how much to pay doctors and hospitals.

So the program already has a combination of federal and state management. Sometimes people talk about federalizing Medicaid, but the recent tendency has been to give options to states on how to administer the program. Since states contribute a large share of the funding and know the health needs of their populations, states have an important role.

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Silver Spring, Md.: How will the planned cuts specifically hit programs for child protection, such as foster care?

Leighton Ku: I asked my colleague Sharon Parrott to answer this question. Her reply follows:

The bill includes $577 million in cuts to the foster care program. A large share of these cuts would reduce the availability of federally-funded foster care assistance payments to grandparents and other relatives caring for foster children. In the short run, this provision will have its largest impact on California and several other states under the jurisdiction of the Ninth Circuit (of the federal court system). This is because the provision effectively "un-does" a court decision in the Ninth Circuit that made it easier for certain relatives to qualify for foster care assistance benefits in those states. However, many other states around the country were hoping that the Ninth Circuit decision that made it easier for some relatives to qualify for foster care assistance would be replicated in other courts around the country.

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Hamilton, Va.: Since when did attempts at reigning in the explosive growth of government entitlements, which in coming years threaten to bankrupt our country, become 'cuts'? Medicaid, Medicare and social security deficits are expected to increase dramatically in coming years. Your characterization of any attempt to control these out-of-control programs as 'cuts' is irresponsible and inaccurate.

Leighton Ku: When we use the term cuts, we use terminology that has been the standard in discussion of budgets for decades.

You are correct that spending for Medicaid (and other programs) will rise in future years, but there is a "cut" because some people who would get benefits under the current legislation will not get the same benefits in the future.

You might think of it this way: if a woman living on Social Security was supposed to get an inflation adjustment every year, but this inflation adjustment was eliminated, you might say that she is not being "cut." But she would be able to buy a little less each year because that adjustment disappeared. (I'm not saying Social Security is being cut, I'm just using this as an example.)

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Fairfax, Va.: Why shouldn't there be a law that limits spending increases to inflation plus population growth minus some productivity adjustment? Of course, there would have to be a toothy mechanism that allows, in exceptional circumstances, to bypass the limits.

Leighton Ku: Some states have tried formula-based budget limits like those you mention. Sometimes they have grievous consequences, however.

Health care is a particular problem since health care costs are rising faster (in the private and public sectors) than other inflation. Thus, a formula based on inflation inevitably shortchanges health care and means that continuous cuts must be made.

Colorado is the state that pioneered such a plan with its TABOR (Taxpayer Bill of Rights) legislation. But after more than a decade under the system, Colorado political leaders (including the Republican leader) and Colorado's electorate decided that the TABOR legislation was leading to serious cuts in the state's educational and health services, so they temporarily cancelled that law.

If you'd like to learn more about the problems in Colorado, let me suggest a paper written by colleagues of mine, which is at http://www.cbpp.org/10-19-05sfp.htm.

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Arlington, Va.: The article in The Post mentions that services to the area's disabled would be at risk with Medicaid cuts. Can you please expand on this point? Thank you.

Leighton Ku: The House legislation could cause problems for disabled people in at least a couple of ways. First, the legislation would let Medicaid benefits be trimmed to correspond to those in some private insurance plans. While this doesn't sound too scary at first, the problem is that private insurance plans are not designed to help meet the needs of those with serious disabilities and don't cover certain benefits (mental health, physical or speech therapy, home health benefits) that Medicaid offers. So, some disabled children or adults might lose special benefits they need.

Second, the House bill would increase the amount that people pay to get medical care. This can be a particular problem for those who are both poor and disabled because they have high health needs and tend to require more doctor visits, more medications, etc. Thus, higher cost-sharing can cause particular problems for those who are unfortunate enough to have severe disabilities.

Let's hope that the Senate doesn't agree to the cuts made by the House.

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Washington, D.C.: In 2004, the federal government spent $389 billion on education, training, social services, health, and veterans' benefits (total federal human resource outlays were $1.5 trillion). This subset excludes Medicare, Social Security, and state and local human resource outlays. In 1994, these same federal outlays were $188 billion. This represents a growth rate of 8 percent per year, well above the inflation rate. No reasonable person can conclude that federal spending has been draconian and that future spending, even after budget reductions, is draconian. Even if we spent 100% of the GDP on social services, would we still hear lamentations? What percentage of GDP should we spend on health care, education, infrastructure, shelter, food, etc.? There's only so much to go around, and we all have priorities.

Leighton Ku: There will always be some struggle and debate on the social and economic priorities of the nation. We agree that there is a need to move towards a more balanced budget.

But it is reasonable to question whether that balancing should be made by cutting programs that help poor and middle income people while also cutting taxes for those who are wealthy, or whether a more balanced approach is possible. Surveys indicate that a majority of the American public doesn't think we should have cuts in social programs while also reducing taxes for wealthy individuals.

People will grumble, lament, and disagree, but that is part of the political process in the U.S.

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Arlington, Va.: The Post story cites: "K.C. Patel, a Gaithersburg engineer, is also worried. For 20 years, Medicaid has been a lifeline for his son, Samir, 38, who is severely disabled by cerebral palsy."

Here's an example of someone living in one of the richest counties in America, with a working wife and the salary of an engineer who has been drawing against Medicaid benefits (apparently with a waiver, according the story) designed to go to poor people for 20 years. Why isn't this a clear abuse of the system, and a reason for supporting measured cuts being considered by Congress.?

Leighton Ku: It is hard to comment on this particular story without knowing more about the circumstances of Mr. Patel's family. Here are some possible explanations for this situation.

It is possible that Mr. Patel's family might qualify for help because they spend so much of their own income on their son's medical care that they can meet Medicaid's income criteria.

If Medicaid did not provide assistance, it is likely that Mr. Patel and/or his wife would need to stop working in order to provide more care for their severely disabled child. By providing help for their son, Medicaid can ensure that the Patels are able to continue working and contributing their skills to the local economy.

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Washington, D.C.: Isn't it likely that people are going to lose Medicaid anyway, whether these cuts are enacted or not? Also, aren't these "cuts" actually reductions in the rate of growth? My understanding is that the program needs to be fundamentally reformed.

Leighton Ku: It is not inevitable that people are going to lose Medicaid anyway. Some states, like Illinois and Maine, are expanding Medicaid coverage because they believe these programs are important. Some states that cut Medicaid a couple of years ago, like Colorado, have sought to restore coverage because they decided that they went too far.

Almost every state makes changes to improve its Medicaid program every year; this includes some things to save money and some ways to expand coverage.

Many would agree that Medicaid needs "reforms," but an important question is whether reform is synonymous with policies that cut the number of people who receive health coverage or the types of benefits they receive.

Much of the recent growth in Medicaid is not due to defects in the program, but broader changes in the economy that have increased poverty and reduced the number with private health insurance.

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Leighton Ku: I'm afraid we've run out of time. Thanks for your questions! I hope that you found this a lively discussion. Sometimes we won't agree, but it is always good to share views.

Bye!

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