Medicare and Medicaid “Reform” Proposals

OCTOBER 2, 1995 VOLUME 3, NUMBER 14

The debate in Congress over changes to federally-subsidized health care has shifted focus in the last few weeks. Rather than making proposals to “save” Medicare and Medicaid, Republican strategists have begun to discuss “reform” of those programs.

At the center of the legislative discussion is the need to deal with Medicare’s anticipated $270 billion shortfall over the next seven years. At the same time, Medicaid spending has come under scrutiny as one of the few areas where cuts can be made, given the realities of federal debt, defense and entitlement payments.

The U.S. House of Representatives has already adopted several proposed changes in the funding mechanism for Medicare and Medicaid, and the Senate is now discussing its own version of change. Late last week the Senate Finance Committee adopted “reform” proposals which would:

  • Permit states to adopt unlimited “transfer penalty” rules, potentially making any person who had made a gift to family or others permanently ineligible for Medicaid benefits.
  • Repeal all spousal impoverishment protections. Under current law the spouse of a nursing home resident is permitted to retain the family home, automobile, household furnishings and as much as $74,000 in cash or investments. Under proposed changes, states would be free to establish their own rules.
  • Repeal the Nursing Home Reform Act of 1987, leaving nursing home standards to state governments.
  • Save about $30 billion by increased use of managed care plans. The remaining $240 billion savings in Medicare would come from lower payments to providers and higher premiums for beneficiaries.

Meanwhile, President Clinton indicated Saturday morning that the Medicaid proposals were “outrageous.” Political insiders speculate that Clinton will veto the Medicaid “reform” legislation if it passes in its current form, and that the real work of balancing the Medicaid budget will begin after the veto.

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