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Over a Thousand National and State Organizations Strongly Oppose Medicaid Cuts

January 14, 2005

In a letter sent to President Bush on January 12, 2005, over a thousand national and state organizations expressed their strong opposition to Medicaid cuts or funding caps that would likely shift billions of dollars in health care costs to state and local governments.

The organizations composed of labor, advocacy, health care, education, children, elderly and religious groups, said it is clear that reducing federal funding would move policy in the wrong direction. The organizations believe that states need reliable and consistent federal Medicaid funding to sustain their Medicaid programs.

The organizations oppose changes in the current structure of the Medicaid program that include converting the program into a block grant or otherwise imposing caps on federal funding.


Over the last year, several policymakers have discussed ways to modernize Medicaid in a period where health care costs and enrollment in the program are increasing significantly. Policymakers have been concerned that the old Medicaid rules have restrained creative approaches to preserving coverage, as well as expanding coverage to lower-income uninsured populations. State policymakers have also been asking for more flexibility to design health care programs that best meet the needs of their citizens and expand coverage to more people, including the mentally ill and the chronically ill.

Recent White House Proposals

In 2003, The Bush Administration tentatively proposed to offer states $12.7 billion of Medicaid funds from 2004 to 2010 that would restructure the Medicaid program. In exchange for these funds, states would receive all of their Medicaid and State’s Children’s Health Insurance Program (SCHIP) monies thereafter as a combined block grant. Federal funding for Medicaid and SCHIP would be provided in annual allotments, with one allotment for acute care and another for long-term care. States would be allowed to transfer a small amount of money (10 percent) between allotments. The amount of a state’s allotment will be based on its expenditures in fiscal year 2002. States would have been required to continue a financial commitment to Medicaid and SCHIP that will be based on their expenditures in fiscal year 2002.

Under the 2003 Administration’s block grant proposal, states would have had broad authority to change the scope of coverage for optional Medicaid and SCHIP beneficiaries without a waiver from the federal government, but there would have been some minimum requirement for coverage of mandatory beneficiaries. States that decided to not accept block grants would have continued to operate their traditional Medicaid and SCHIP programs, but would have not received any federal fiscal relief.

Although the proposal would have advanced $12.7 billion of Medicaid funds to states over a seven year period, it was designed to be budget-neutral over 10 years. States would have received smaller allotments in the last three years of the plan in order to "repay" the $12.7 billion they received earlier.

When the Bush proposal was floated in 2003, several policy analysts believed that states would be constrained in their ability to respond to increased demand for Medicaid in the case of a future economic downturn, increases in the number of people who are unemployed or have disabilities, health care price inflation or increased health care needs due to the aging of the baby boom generation.

NAMI will issue regular bulletins on Medicaid reform initiatives at the federal and state level. President Bush is expected to include Medicaid reform in his 2005-2006 budget.