Debt-ceiling issue threatens payments to children's health providers

August 11, 2011

Although Medicaid and CHIP were considered off limits during the original debt-ceiling deal, the landscape has since tilted precipitously with more bad economic news: S&P?s recent downgrade of US debt adds fear and strain to the uncertainty about the future of these programs. A bipartisan congressional ?super committee? is saddled with recommending as much as $1.5 trillion in federal budget cuts over the next 10 years. Medicaid and CHIP were intended to be off the table during the negotiations, but now providers? payments may be at risk.

Although Medicaid and the Children’s Health Insurance Program (CHIP) were considered off limits during the original debt-ceiling deal, the landscape has since tilted precipitously with more bad economic news, and providers’ payments may now be at risk.

S&P’s recent downgrade of US debt adds fear and strain to the uncertainty about the future of these programs. A bipartisan super committee, composed of 12 Congress members, is saddled with recommending by Thanksgiving as much as $1.5 trillion in federal budget cuts over the next 10 years.

That is likely to put Medicaid and CHIP, which were intended to be off the table during the negotiations, into play, according to some political observers.

“They’re talking about trillions-with a ‘t’-in cuts,” according to Matt Salo, executive director of the National Association of Medicaid Directors. “And when you’re talking about trillions in cuts, almost everything has to be on the table.”

In some ways, a nondecision by the committee could be the best scenario for the 2 programs. If the committee can’t agree, a trigger in the current law automatically guarantees the savings through cuts in defense and other federal spending, including a 2% reduction in Medicare payments beginning in 2013. That trigger would not affect Medicaid funding.

The federal struggle is only half the picture. States also have shrinking tax revenues with which to contend. That means many states are looking for ways to alter their Medicaid programs to make them more manageable: If revenues don’t grow, then Medicaid programs could be slashed by the states.

An effort to shift more of the financial burden from the federal government to the states has been opposed in many quarters, including in California, which was seeking to implement a 10% cut in reimbursements to Medicaid providers.

The American Academy of Pediatrics, meanwhile, is concerned that some of the aspects of the Republican debt-ceiling proposal will make it into the final cuts, and here’s why: “Children make up half of all Medicaid enrollees. It is a lifeline for kids in low-income families and children with special health care needs, such as those with congenital heart diseases, spina bifida or cerebral palsy,” said O Marion Burton, MD, the academy’s president.

One positive is that Medicaid, in addition Medicare and Social Security, remain popular programs with the public, according to a recent Pew Research Center survey.

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