Health News
Study: Cut subsidies, not Medicaid
By Todd Zwillich
Oct 12, 2005, 19:00 GMT

WASHINGTON, DC, United States (UPI) -- A watchdog group is urging Congress to cut billions of dollars in subsidies for the healthcare industry instead of Medicaid benefits, as lawmakers examine possible healthcare spending cuts to help ease the current strain on the federal budget.

Lawmakers next week are due to begin final -- and likely contentious -- negotiations involving competing plans to cut at least $10 billion from federal healthcare programs. Until recently, many observers on Capitol Hill assumed the cuts would come from Medicaid, the low-income health-insurance program, the costs of which are shared by the federal government with the states.

A recent deadlock occurred, however -- fueled by opposition from moderate Republicans -- over a stalled Hurricane Katrina emergency Medicaid bill, which has thrown the size and scope of the cuts into question.

A report issued Wednesday by the Center on Budget and Policy Priorities urged Congress to cut federal subsidies to insurance companies and drug makers, instead of going ahead with a plan to boost out-of-pocket payments by Medicaid patients for their healthcare.

\'Congress has an important choice as it seeks to secure savings,\' said Sharon Parrot, who wrote the group`s report.

Meanwhile, the Medicare Payment Advisory Commission, which advises Capitol Hill on Medicare policies, recommended last June that Congress end the billions in payments that go to insurance companies offering Medicare`s managed-care option, known as Medicare Advantage. Instead, the commission urged payments to the companies to be equalized with those going to doctors and hospitals under traditional fee-for-service plans.

Over the summer, the National Governors Association urged Congress to increase the rebates the drug companies pay to states for medications sold through Medicaid.

Parrot told reporters at a briefing Wednesday that acting on both sets of recommendations would save more than $10 billion without forcing low-income Medicaid patients to pay more. The latter move also was part of the governors` recommendation.

\'The coming weeks will tell us which path the policymakers choose,\' she said.

Judy Feder, dean of the Public Policy Institute at Georgetown University in Washington, told United Press International that analysts \'widely recognize\' Medicare is overpaying health insurers, who typically attract healthier and cheaper patients than do fee-for-service options.

\'Essentially, the deal is sweetened for them,\' she said.

Karen Ignani, president of America`s Health Insurance Plans, an industry lobbying group, said the higher payments were in place to help improve services for rural and inner-city beneficiaries, who have a harder time accessing healthcare.

Cutting the payments \'will affect what beneficiaries have access to -- there`s no question,\' Ignani told UPI. \'Members of Congress would have to go back to rural areas and explain to their beneficiaries why they were cutting the program.\'

Senate Finance Committee Chairman Charles Grassley, R-Iowa, who has been frustrated by White House opposition to his $9 billion package extending Medicaid benefits to Hurricane Katrina victims, has pledged to force the measure into negotiations over longer-term Medicaid cuts.

Todd Zwillich covers healthcare policy for UPI. E-mail: sciencemail@upi.com

Copyright 2005 by United Press International