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  1. Miller, Michael MPP


Abstract: Medicaid is often accused of devouring state budgets. In reality, it is a sharp decline in revenue that has precipatated the current state fiscal crisis, not the growth of health care spending. Nonetheless, in a climate of scarce resources, proponents of maintaining health coverage for low-income people through the Medicaid program face a complex challenge that requires them to think simultaneously about policy and building a political constituency for health care for the poor. At the same time, they must challenge the conventional wisdom that argues against raising taxes in times of economic weakness.


STATE FISCAL DOWNTURNS, accompanied by retrenchment in state spending, are cyclical, but the trough of this current cycle seems particularly deep, with potentially devastating consequences, both short and long term, for the Medicaid program and the people who depend on it.


If the first step toward solving a problem is defining and understanding it, then the Medicaid problem will be a particularly difficult one, as a common definition of the problem continues to elude advocates for the program and its beneficiaries and state and federal officials. Some describe the state fiscal crisis as being caused by state overspending in general and Medicaid spending growth in particular. Furthermore, Medicaid spending growth is sometimes attributed to unwise and unsustainable program expansions.


An alternative explanation of the state fiscal crisis is that it is caused primarily by a combination of tax cuts in the 1990s (based largely on the implicit assumption that the revenues generated by the capital gains tax on the overheated stock market would continue indefinitely), a growing weakness in state tax structure, and an imbalance in the relationship between Medicare and Medicaid relationship.


The stakes in this debate are extraordinarily high. In the short term, health coverage is at risk for more than 1.7 million people, and millions more risk loss of benefits and will face higher financial barriers when seeking to access care (Nathanson & Ku, 2003). In addition, billions of dollars in reduced revenue for providers could dramatically undermine the health care delivery system, particularly those providers and classes of providers (e.g., community health centers, nursing homes, public hospitals) that are heavily dependent on Medicaid.


If anything, the long-term stakes are even higher. Structural program changes are on the table that could make it difficult if not impossible for people to regain lost ground even when the economy improves. Such changes could strip away the critical beneficiary protections that today are associated with Medicaid.


Consumer organizations, providers, and others seeking to protect the Medicaid program face a complex, multipart challenge. They must persuade a critical mass of public policy makers of the inadvisability of cutting Medicaid as a (partial) solution to resolving state fiscal problems and instead refocus attention on the difficult task of securing new revenues from both the state tax base and the federal government; in tandem, they must make longer term changes in the delivery of services to Medicaid recipients that will save money without undermining the program and advocating for an increased federal role in meeting the health care needs of low-income Medicare beneficiaries.


To make matters even more difficult, the debate in Washington includes not only the prospect of additional support for state Medicaid programs, but also the possibility of the elimination of guaranteed federal matching payments for state expenditures and the loosening or elimination of many of the current federal program requirements. This means that advocates must work collaboratively across state lines while at the same time addressing their own state budget issues.


This article briefly reviews the causes of both the state fiscal crisis and increased Medicaid spending. It then reviews the substantive and political tasks that confront Medicaid's defenders, using the Massachusetts experience as a guide.