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Medicaid to be Cut $10 Billion Over 5 years

To: National Association for the Advancement of Orthotics and Prosthetics

From: Peter W. Thomas, Emily Niederman

Re: Budget Update – Medicaid to be Cut $10 Billion Over 5 Years

Last week Congress approved a fiscal year (FY) 2006 budget resolution and, for the first time since 1997, included reconciliation instructions to several Committees with jurisdiction over mandatory programs.

The House narrowly approved the “conference report” by a vote of 214-211. The Senate approved the same measure by a vote of 52-47, with Senators DeWine (R-OH), Chaffee (R-RI) and Voinovich (R-OH) voting against it.

The $2.56 trillion budget puts a virtual freeze on discretionary spending and estimates mandatory spending to reach $1.669 trillion in the coming fiscal year. The reconciliation instructions direct authorizing Committees, such as the Senate Finance and the House Energy and Commerce Committees, to find savings of $35 billion from mandatory program spending over the next five years.

The Senate Finance Committee, which has jurisdiction over both Medicaid and Medicare, must find $10 billion in savings over the next five years while the Senate Health, Education, Labor and Pensions (HELP) Committee must cut $13.7 billion from other health-related programs as well as education, labor and training programs. The House Energy and Commerce Committee has been charged with finding almost $15 billion in savings from programs such as Medicaid, possibly Medicare, and telecom-related programs. The House Ways and Means Committee must find $1 billion in savings from programs such as Supplemental Security Income (SSI), TANF, Social Services Block Grants, the Earned Income Tax Credit and possibly Medicare. Finally, the House Education and Workforce Committee has been instructed to find $12.7 billion in savings from programs under its jurisdiction including vocational rehabilitation and education programs. The Committees targeted in reconciliation will spend the next several months developing policies to achieve these mandated savings with a Reconciliation Bill expected in September, 2005.

Throughout this budget process, heavy debate focused on cuts to the Medicaid program. While numbers between $14 and $20 billion were originally considered by the Budget Committees, the final reconciliation number directed at the Finance Committee only allows up to $10 billion in cuts.

Additionally, it appears a Medicaid commission or advisory committee will soon be formed, although details have not been announced. The Commission will be charged with recommending changes to the program in order to achieve the required savings. The Medicaid Commission is expected to deliver its final report in December 2006 with an interim report due to Congress in September, 2005. Therefore, major Medicaid cuts are not expected to be implemented until FY 2007.

The reduction in cuts from the original proposals as well as the formation of the Medicaid Commission can be greatly attributed to Senator Smith (R-OR), who successfully opposed Medicaid cuts in the Senate budget resolution, as well as the national organizations, such as NAAOP, that worked to educate Members on the importance of Medicaid services. Nevertheless, $10 billion in cuts will likely prove harmful to Medicaid recipients, particularly those with disabilities who depend on so-called “optional” benefits such as rehabilitation services, home and community based supports and services, assistive devices, and prescription drugs to maintain their health and independence.

We will continue to keep you updated as policy proposals emerge that are likely to become law later this year, particularly those that impact NAAOP members and the clients they serve. Additionally, we will keep you informed as details of the Medicaid commission develop and, specifically, of opportunities to influence its recommendations to Congress.

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