As an example of the potential impact of the original Senate-passed version of the Gramm-Rudman-Hollings budget amendment, a new study says the proposal could soon force cuts in the federal Medicaid program of as much as 22 percent, reducing grants to the states to help pay medical bills for poor people by $2.3 billion to $9.7 billion below current projections for fiscal 1987 and 1988.
These would be much deeper cuts than Congress has ever entertained, let alone voted, in the Medicaid program, and could easily force sweeping reductions in benefits to the poor.
The new study, released by the National Conference of State Legislatures and the National Governors' Association, said the cuts would fall most heavily on low-income states that get a large share of their Medicaid funds from the federal grants -- 81 percent in the case of Mississippi, for example
If the nationwide two-year cut did reach $9.7 billion in the federal share of the program, the study said, Mississippi would have to increase its expected contribution of $85 million in fiscal 1988 by 78 percent to make up for the lost federal money. Arkansas, South Carolina, Alabama and Utah would have to increase their 1988 contributions by 55 percent to 60 percent in order to maintain Medicaid at projected levels of expenditure.
The Medicaid study is one of several focusing on individual programs as lobbyists, special interest groups, state and local governments and others struggle to assess the impact of the budget balancing legislation on individual programs.
For all of them, the legislation is a moving target -- the House version is slightly different than the first and the latest Senate versions. Under any version, programs such as Medicaid are expected to be cut.
The Medicaid study, performed by Federal Funds Information for the States (FFIS), a statistical service sponsored by the two state groups, said the size of the cut would depend on the size of the federal budget deficit. The higher the deficit, the higher the Medicaid cut.
FFIS computed the Medicaid cuts under two different economic scenarios. One was based on the Congressional Budget Office's August economic projections, the other on a more recent and less optimistic set of projections obtained from a group of private economic forecasters.
The study said that under the CBO assumptions, the deficit would be $163 billion in fiscal 1987, or $19 billion over the Senate's $144 billion target. The first step in the Senate bill -- eliminating cost-of-living increases in various federal programs -- would save the government $6 billion of the $19 billion, leaving $13 billion to be saved by cutting other programs an average of about 3 percent each.
This would require reducing 1987 Medicaid grants to the states by $810.7 million below the $27 billion projected for them.
The study calculated that in fiscal 1988, projected federal grants to the states for Medicaid would have to be cut about 5.5 percent ($1.53 billion) to meet the deficit limit -- for a total Medicaid cut of $2.34 billion over the two years.
However, the study said, many economists believe the August CBO projections are too optimistic. Using another set of projections from private forecasting firms, the FFIS study said the deficit could be as high as $200 billion in fiscal 1987, requiring cuts of about $56 billion to meet the Senate bill target.
Again assuming $6 billion of this will come from reduced cost-of-living allowance, the study said that would leave $50 billion to be taken from other programs.
FFIS said this would require that outlays for Medicaid and other "controllable" programs be cut by 12 percent in fiscal 1987 and 22 percent in fiscal 1988.
This would mean reducing federal Medicaid outlays by $3.2 billion in fiscal 1987 and $6.45 billion in fiscal 1988 -- a total of $9.7 billion over the two years.