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Leavitt outlines plan on health insurance, Medicaid

WASHINGTON—Health and Human Services Secretary Michael Leavitt Thursday said that President Bush will propose spending some $140 billion over the next decade to provide health insurance to 12 million to 14 million Americans who don't have it.

He said he would reduce some wasteful Medicaid spending, and that could help offset the cost of the additional coverage, which Leavitt said would be included in the administration's proposed 2006 fiscal year budget. The budget will be released Monday.

Leavitt said he intends to crack down on "creative" state-accounting practices that foist Medicaid costs onto the federal government, end Medicaid's overpayment for prescription drugs, and crack down on seniors who hide personal assets to get Medicaid to pay for their nursing-home care. Those moves, Leavitt estimated, could save $60 billion over 10 years.

The administration also aims to ease the burdens on states by permitting them to reduce or change benefits for Medicaid beneficiaries whose coverage isn't required by federal law.

Leavitt's proposals, while short on details, offer the clearest roadmap yet for the Bush administration's plans to change Medicaid and extend health insurance to more of the estimated 45 million Americans who don't have it. That number increased by 5 million during Bush's first term, according to government statistics.

Democrats and some Republicans have resisted Medicaid cuts in the past, and Thursday's proposals brought strong criticism from patient advocates and mixed reviews from state officials.

The White House plan to expand health insurance would include $10 billion in additional funding over 10 years to cover more children through Medicaid and the State Children's Health Insurance Program.

The plan also renews earlier Bush proposals, including tax incentives to help the poor purchase private coverage; association health plans, which allow small businesses to band together in groups to purchase cheaper employee coverage; and wider use of tax-favored health savings accounts.

Ron Pollack, the executive director of Families USA, a national patient-advocacy group, called the proposals "phantom improvements" because, he said, they're unlikely to pass Congress.

Previous legislation for association health plans passed the House of Representatives but failed in the Senate, Pollack said, mainly because the proposed rules would prohibit insurers from denying coverage based on an applicant's health.

Critics and lawmakers have agreed that tax incentives to reimburse the working poor for private health coverage are a cumbersome way to motivate people, and health savings accounts typically include high deductibles that scare off poor people.

The administration also proposes to allow states to alter coverage without federal approval for "optional" Medicaid beneficiaries—those who aren't entitled to coverage by federal law but are covered anyway by most states.

Such optional beneficiaries make up only 30 percent, or 15 billion, of Medicaid's 50 million enrollees. But an estimated two-thirds of Medicaid's projected $325 billion in expenditures in 2005 will pay for services for optional beneficiaries.

The optional beneficiaries include about 6 million low-income working adults, roughly 5 million children and nearly 3 million seniors, many of them in nursing homes, according to Families USA. Optional beneficiaries also include nearly 2 million people with severe chronic disabilities, many of whom receive home- or community-based care in rehabilitation facilities and in foster homes.

Another 3.5 million optional beneficiaries are adults and children with medical bills so high that they consume most or all of their income. States now must get a federal waiver before they can change or drop coverage for optional beneficiaries. Leavitt would drop the waiver requirement.

Pollack said that states facing budget problems would likely be tempted to cut services for these sick people. "Our concern is that if there is a significant cut in services to this population, it would cause enormous harm and even place lives at risk," Pollack said.

Medicaid, which is paid for by federal and state governments, is straining under the weight of higher health costs, rising enrollment and shaky funding.

Since 2000, the number of people living in poverty has increased by 8 million, causing Medicaid enrollment to grow faster than state revenues. States have responded by restricting payments, benefits and eligibility for the program, but state Medicaid spending is expected to increase by 11.7 percent, according to recent estimates.

Leavitt expects Medicaid's budget to grow by 7 percent or more each year for the next 10 years. Medicaid spending will reach $5 trillion over that time, with the federal government paying $2.8 trillion while states contribute $2.1 trillion, Leavitt said.

Joy Wilson, the health policy director for the National Conference of State Legislatures, said the administration's plan to eliminate federal waivers was "music to our ears," because it gives states more flexibility without a cumbersome federal approval process.

But Wilson expressed concern that the move might signal the Bush administration's intent to halt all federal funding for optional beneficiaries. "We want to make sure the federal government continues to help us with financing this program," she said.

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(c) 2005, Knight Ridder/Tribune Information Services.

ARCHIVE PHOTOS on KRT Direct (from KRT Photo Service, 202-383-6099): Michael Leavitt

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