Medicaid time bomb

February 28, 2003

PRESIDENT BUSH recently made the nation's cash-starved governors an offer he figured they couldn't refuse.

He promised extra Medicaid money for the next seven years to help with the costly burden of health care for the poor, elderly and disabled. Plus, he proposed to cut federal red tape so states could manage this spending more efficiently, perhaps trim benefits and tighten eligibility lists.

In return, the feds would get to walk away from the painful decisions that must be made to keep Medicaid from driving the states into bankruptcy a little further down the road.

But the governors are not about to let Mr. Bush off the hook, nor should they.

The president simply wants to borrow from the future to provide short-term relief - a tactic seen throughout his budget plans. Worse, he's encouraging the current governors to join him in a flight from responsibility, leaving the political dirty work to their successors - who would have no other choice.

The forces driving Medicaid spending through the roof can be effectively combated only at the federal level, where Medicaid was created. Mr. Bush should be leading the way.

What's needed is a far more sweeping reform proposal with several key elements. Chief among them would be fundamental redesign of both Medicare and Medicaid, the two national health care programs that serve overlapping populations.

Medicare, the health insurance program for the elderly, is financed entirely by the federal government but charges premiums and doesn't offer some crucial benefits, such as prescription coverage. Older Americans who can't afford Medicare or private insurance are covered by Medicaid, a health safety net for the poor partly financed by the states that includes drug and nursing home coverage among its benefits.

Simply adding a prescription drug benefit to Medicare would greatly relieve some of the burden on Medicaid. But both programs also need to be modernized.

Another vital part of the package would curb the outrageous pharmaceutical prices that fuel much of the growth in health care costs. Federal subsidies underwrite drug research while lengthy federal patent protections thwart competition. Inflated drug prices pay for advertising and lobbyists to further enrich the pharmaceutical industry.

Federal policy-makers also need to review whether government should continue picking up most of the tab for nursing home care in this country, particularly as baby-boomers advance to that stage. Medicare doesn't currently offer such coverage. Thus, middle-class Americans as well as the poor turn increasingly to Medicaid, which now spends about 43 percent of its $280 billion budget on long-term care.

Options might include tax breaks for the purchase of private long-term care insurance, and incentives to family members to provide home health care alternatives.

Nothing about this task is easy, which is why past presidents and Congresses have mostly ignored a problem that was visible on the horizon more than a decade ago. An opportunity is presented, however, by the staggering economy, which left the states with a combined $80 billion gap they must close. Medicaid's share of state budgets is 20 percent and growing fast.

Governors need immediate relief, which would better serve the economy than Mr. Bush's proposed tax cuts. Even more, they need a president who's willing to help them face an enormous future challenge rather than just pass the buck.

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