PI Perspective #17

December 1995     View PDF     En español

Medicaid Cuts Threaten Care for People with AIDS

The 104th Congress has called for cuts in Medicaid, one of the most critical lifelines for people with HIV/AIDS. Both the U.S. Senate and the House of Representatives have proposed a $170 billion cut to Medicaid over the next seven years as part of the Congressional budget resolution. This is a 30% reduction from projected spending under current law.

These spending reductions are, in part, being used to fund a $245 billion tax cut, also included in the Budget Reconciliation bill, which will disproportionately benefit corporations and wealthy Americans. In addition, Congress has proposed eliminating the present guarantee that all people who meet state and federal eligibility guidelines will receive health care coverage. President Clinton, who has promised to veto this bill, has also proposed cuts to the program, totaling $54 billion over ten years.

One of the arguments used to support this “reform” of both Medicare and Medicaid is that the proposed cuts are the only way to ensure that the programs will not go bankrupt in the future. However, to reduce funding for this program without addressing the underlying causes of increasing health care costs will result in weaker health services for people with AIDS, other people with disabilities, and low income people. It will also lead to more use of inadequate and costly emergency care services.

To achieve the goal of the Republican budget reconciliation proposal, 53% of the proposed $894 billion in federal reductions comes from health and human services programs.

What is Medicaid?
Medicaid is government health insurance for low income persons. Currently, 36 million people, or one in eight Americans, receive Medicaid. Over half of Medicaid recipients are children, 15% are people with disabilities, and 12% are elderly. It is an entitlement program financed by federal and state governments and administrated by the states. The federal government finances 50–80% of the program, depending on the state’s per capita income. In some states, Medicaid is given a different name, such as MediCal in California. Many states augment the federal program; for example, in California, Medi-Cal offers prescription drugs as a benefit.

People with HIV/AIDS depend heavily on this program, which provides $3 billion annually to HIV-positive individuals. Medicaid provides basic health care services to 90% of all children with HIV and for at least 40% of adults with AIDS. Medicaid has become the only form of health care coverage available to many people living with HIV/AIDS because of discrimination, preexisting conditions, decreased income, lifetime coverage limits, and other practices by private insurance companies.

Medicaid and Block Grants
The Senate and the House have proposed shifting Medicaid funds into block grants to give states more flexibility and responsibility for their Medicaid programs. Block grants convert program funding into a set pot of money which is given to each state to cover program expenses. Historically, when programs are block granted, less federal money is allocated towards the programs. This is in part because of the incorrect assumption that state administrative expenses will be less than federal administrative expenses. In light of both the proposed cuts and the initiation of a block grant mechanism, state Medicaid programs would receive less overall funding, undermining the only “safety net” for health care coverage.

This mechanism would also remove the “entitlement” status of the program, meaning that all those eligible may not receive coverage. For example, if a state used up the allotted block grant funding and still had people in need of coverage, there would be no additional funding. Consumers Union estimates that 12 million Americans will lose their health insurance coverage under the current proposal. In addition, because the federal government typically attaches few requirements to block grants, the comprehensiveness, accessibility, quality, affordability, or cultural competency of services is not ensured.

Supporters of the block grant approach say that Medicaid is more wasteful than other health care programs and that it has been a major cause of health care inflation. In reality, the major increases in Medicaid spending are largely attributable to two factors: 1) an increase in the number of persons eligible to receive Medicaid due to losing other insurance coverage, and 2) disproportionate share payments. These payments support health care facilities serving large numbers of uninsured persons. For example, San Francisco General Hospital receives 77% of its funding to provide services to the poor and indigent through Medicaid and Medicare, reflecting in part disproportionate share payments. When the two factors outlined above are excluded, the rate of growth for Medicaid is comparable to increases in other forms of medical spending.

Effects of Medicaid Cuts
People with HIV/AIDS will be severely hurt by current Medicaid “reform” proposals. Cuts in Medicaid would worsen the health of people with HIV/AIDS by taking away their guarantee to essential services, such as preventive care, prenatal care and prescription medications that treat and prevent a whole variety of secondary infections. Studies have shown that, when looking at a cross-section of people living with HIV, access to quality health care appears to be the primary factor in the delay of disease progression. People with HIV/AIDS who lose their Medicaid health coverage will ultimately be forced to delay accessing health care services until a crisis occurs. They would be forced to seek care in hospital emergency rooms. Hospitals and state taxpayers would ultimately bear the burden of this high-cost care.

Action is Needed
Now is the time to demand that the President veto the Budget Reconciliation Bill. The President has repeatedly promised to veto this bill, but we need to flood the White House with calls and letters asking him to insist on a compromise with Congress that provides adequate federal funding for Medicaid and maintains the entitlements status of the program. You can call the White House at 202-456-1414 or write to the President at The White House, 1600 Pennsylvania Avenue NW, Washington, DC 20500. Please call Project Inform’s Public Policy Department at 415-558-8669 for a sample letter or if you need more information about Medicaid reform.

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