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April 14, 2003

Congress Completes Action on FY 2004 Budget Resolution; Cuts to Federal Medicaid Spending Rejected

On April 11, Congress completed action on the FY 2004 budget resolution (H. Con. Res. 95) governing both mandatory and discretionary spending for the coming federal fiscal year. The budget resolution establishes the parameters for all discretionary and mandatory spending legislation that Congress will consider for the remainder of the year. While it does not encompass actual spending or authorization legislation, it does contain binding instructions to House and Senate Committees to produce legislation to meet specific spending and budget savings goals. These spending restrictions are binding on the congressional process even though the budget resolution is not signed by the President. As a result of sharp partisan divisions over proposed tax cuts, both the House and Senate passed the final budget resolutions by narrow margins (216-211 in the House and 51-50 in the Senate).

In final negotiations over this year's budget resolution Congress rejected $92 billion in proposed spending reductions for the federal share of the Medicaid program. In recent weeks, NAMI strongly opposed these proposed reductions for Medicaid – the most important source of funding for public sector mental illness treatment and support services. On March 21, the House passed a proposed budget resolution that called for reducing federal Medicaid spending by $92 billion over the next 10 years. This proposal drew enormous criticism, not just from NAMI and other national advocacy organizations, but also from the nation's governors and a bipartisan coalition of 79 senators. Finally, in a climatic vote on April 2, the House went on record by an overwhelming vote of 399-22 against these proposed reductions to future federal Medicaid spending. This vote was on a procedural "motion to instruct conferees" that repudiated the House's previous support for cuts to Medicaid.

The final result is that the FY 2004 budget resolution approved by both houses of Congress excludes future cuts to Medicaid. As a result, committees in the House and the Senate will not have to come forward later this year with "reconciliation" legislation that would have drastically reduced eligibility and available services for current beneficiaries (including children and adults on SSI). More importantly, the unified opposition to the House proposal – from governors, providers, consumers, families and (most prominently) large bipartisan majorities in Congress – demonstrates that support for the Medicaid program and opposition to cuts is strong and growing. NAMI advocates are to be congratulated for their efforts in defeating the cuts to Medicaid that were originally put forward by the House.

Fight For Medicaid Funding Far From Over

Despite this victory in turning back cuts to the federal share of Medicaid, states are continuing their efforts to target this critical safety net program for reductions. In state legislatures and governors' offices across the country, cuts to Medicaid are still under debate in this year's legislative sessions. Especially vulnerable in the current environment of unprecedented revenue shortfalls for the states are mental illness treatment and support services. This includes restrictions on eligibility for optional Medicaid populations and reductions for optional services such as prescription drugs and case management. In addition, many states are seeking to limit access to newer and more effective medications for severe mental illness illnesses through preferred drug lists, prior authorization and "fail first" policies.  NAMI advocates are strongly encouraged to continue working with their state affiliates in fighting these cuts and staying vigilant to ensure that reductions to Medicaid do not harm children and adults with severe mental illness.

In addition, the final budget resolution does set aside up to $3.3 billion in FY 2004 and $8.9 billion over the next 5 years to fund reforms under the Medicaid program. This mandatory funding authority would be made available to fund additional federal spending on Medicaid tied directly to efforts to create enhanced flexibility for the states. However, any changes to Medicaid made over the short-term would have to be "budget neutral" over the 10 years.  This means that overall federal spending associated with proposed reforms to Medicaid under any legislation passed by Congress could be no higher than if the current program remained in place over the next decade. This budget neutrality requirement is expected to severely restrict the ability of Congress to expand either services or eligibility, despite the availability of additional funds.

Future Funding Reserved for the Family Opportunity Act The final agreement on the budget resolution does include a "budget reserve" for additional mandatory spending authority under Medicaid for the Family Opportunity Act (S 622/HR 1811). Specifically, $43 million is reserved in FY 2004 and $7.5 billion over the next 10 years to cover future costs associated with implementing this important legislation. NAMI strongly supports the S 622/HR 1811, legislation allowing states to establish Medicaid buy-in programs for families of children with severe disabilities (including children and adolescents with severe mental illnesses). The legislation is designed to encourage states to make such Medicaid coverage available in order to prevent families from having to relinquish custody in order to get treatment for their children. NAMI is extremely grateful for the leadership of bill sponsors Senator Charles Grassley (R-IA) and Representative Pete Sessions (R-TX) in securing this protection of funding authority for passage of this important legislation.  Click here for more information on the Family Opportunity Act

Final Budget Resolution Holds Discretionary Federal Spending to 2% Increases

Also included in the final budget resolution are restrictions on overall federal discretionary spending levels for FY 2004. Discretionary spending is controlled by the annual appropriations process in Congress that funds the operations of federal agencies. This includes annual funding bills for priority NAMI agencies such as the National Institute of Mental Health (NIMH), the Substance Abuse and Mental Health Services Administration (SAMHSA), the Department of Veterans' Affairs and Department of Housing and Urban Development (HUD). This does not include spending for mandatory entitlement programs such as Medicaid, Medicare, SSI and SSDI.

For FY 2004, the budget resolution sets a $384 billion limit on non-defense discretionary spending, a 2.4% increase over FY 2003. This is very close to the limits recommended by President Bush in his FY 2004 budget proposal. By contrast, non-defense discretionary spending has climbed by as much as 9% per year over the past 3-4 years. The result is that leaders of the House and Senate Appropriations Committees are expected to be under the tightest fiscal constraints in years in developing budgets for the operations of most federal programs.