WASHINGTON – Yesterday, the House Energy and Commerce Committee heard testimony from the National Governors Association (NGA) on a proposal to overhaul Medicaid and accommodate for an expected $14 billion cut to the program in Fiscal Year 2006. Congressman Bart Stupak (D-Menominee) spoke about Governor Jennifer Granhom’s success in coping with challenges but questioned some aspects of the NGA proposal.

“In Michigan, Medicaid accounts for 25 percent of the state's budget.  As Michigan’s economy struggles to cope with a wave of manufacturing jobs being shipped abroad, the state’s budget revenues suffer as well,” Stupak said. “Under Governor Jennifer Granholm, growth in Medicaid spending has been held to a mere 1.5 percent per year, even though the roles have grown by 30 percent.  That is evidence to me that Medicaid is flexible and that Governor Granholm has done a great job of meeting this challenge.”

The governors’ new proposal calls for more flexibility in setting premiums, co-payments and benefits offered.  Stupak warned of potential consequences, citing Oregon increasing premiums only to have its roles dropped by half. Stupak said that increased cost-sharing could deter the most vulnerable from receiving care.

“There is a misconception that Medicaid dollars go to free-loaders who waste state and federal dollars on unnecessary care.  In fact, Medicaid beneficiaries spend more out-of-pocket on health care than people with private insurance,” Stupak said. “Medicaid was designed to react to the ups and downs of the economy. At a time when Michigan needs a strong federal partner to meet the growing challenges to its Medicaid program, it's outrageous that the Congress is now going to cut Medicaid by up to $14 billion over the next five years.”

The governors also recommended changes to a provision of the new Medicare law that hurts the bottom line of many states.  In 2006 states will begin making "clawback" payments to the federal government in exchange for Medicare covering prescription drugs for those who are eligible for both Medicare and Medicaid.  Currently, Medicaid pays those drug costs.  The provision was supposed to save states money.  However, the governors said the provision is flawed and will result in higher costs to some states, including Michigan.

“The ‘clawback’ provision is just another example of the federal government not keeping its obligations to state governments,” said Stupak. “This provision most penalizes those states who have most reduced their prescription drug spending.  For instance, the state of Michigan will save no money from the provision, but instead see their costs rise by $50 million over the next two years.”     

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