Congressional Medicaid reform plans curtail the number of Americans who are entitled to coverage regardless of where they live, while providing the states with much greater choice in determining who is eligible. Under the proposed changes, states would receive an annual Medicaid block grant based on current expenditure levels and a predetermined growth rate. Given those changes, Medicaid spending is projected to decline by approximately $163 billion by the year 2002 relative to the spending anticipated under current law. The Clinton administration has proposed reducing Medicaid spending growth by $55 billion over a seven-year period (approximately one-third the amount proposed by Congress).

Although reducing the growth in the Medicaid program would help to shrink future budget deficits, the proposed changes pose a number of risks.

With federal Medicaid funding increasing more slowly than the rate of health care inflation and states and localities ill-equipped to provide additional funds for indigent residents, millions of poor people are likely to lose Medicaid benefits. A study by the Urban Institute estimates that as many as 8 million people will lose benefits under the current congressional reform proposals.^[67]

Assuming that states reduce coverage equally across the various beneficiary groups, it is estimated that between 318,000 and 429,000 elderly people will lose Medicaid benefits; between 448,000 and 634,000 Americans with disabilities will be cut off; and between 2.1 and 2.9 million nonelderly adults and children will lose health care through Medicaid.^[68]

Because the poor, including children, have little political clout relative to the families of elderly Americans in nursing homes and the elderly generally, reductions in Medicaid are likely to fall disproportionately on low-income families. According to a recent report in the Journal of the American Medical Association, between 1980 and 1982, the last major retrenchment in domestic spending, real per capita public social welfare spending for children dropped 8 percent while funding for other groups increased.^[69]

Repeal of the Boren amendment, which requires Medicaid to pay "reasonable" rates to nursing homes, could reduce the resources available to those institutions and impair the quality of their services. Curtailing or eliminating federal regulation of nursing homes, another proposal under serious consideration, may result in a return to the poor conditions that prompted federal intervention.

Congress has been debating whether or not to continue to require states to use Medicaid funds to pay Medicare premiums for low-income senior citizens. The outcome of this dispute could adversely affect nearly one million poor older Americans.^[70]

Historically, block grants for social programs have not fared well in the federal budget process. For instance, block grants established during the Reagan administration in 1981 amounted to 25 percent less than the combined appropriations of the particular programs they replaced. Over the following thirteen years, their funding then fell by the equivalent of between one-quarter and one-half of the original appropriations for the block grants. ^[71]

Funding for the majority of social welfare block grants did not keep pace with inflation between 1983 and 1993.^[72] During that period, block grant money for job training, community development, social services, community services, education, and low-income energy assistance fell in excess of 15 percent in inflation-adjusted dollars. That history suggests that converting Medicaid into a block grant program could lead to deeper reductions than those specified in the current proposal.

Under the proposed reforms, states would bear the entire burden of health care spending beyond the federal block grants, called "Medigrants." Forty-nine of the fifty states are required to balance their state budgets, and eighteen states have tax and spending limitations; this makes it difficult for these states to raise health care spending. Moreover, twenty-five states have enacted tax cuts recently.^[73] And escalating costs for programs ranging from corrections to education to welfare are further squeezing state budgets.

The American College of Physicians argues that cutting Medicare and Medicaid funding will create enormous pressures on health care providers who still must care for those same patients, ultimately pushing costs from the government to the private sector. A recent study estimates that the private sector will face higher charges amounting to about $90 billion for the seven-year period.^[74] Higher premiums to workers, lost wages, and more uninsured individuals are likely.

States will be tempted to pass health care costs to local governments just as the federal government is passing current obligations to states. During the early 1990s, many states required local governments to shoulder greater public policy responsibilities.^[75] As the National Association of Public Hospitals explains, "block grants and elimination of Medicaid entitlements would effectively act as an unfunded mandate on local governments."^[76] The main danger of transferring Medicaid responsibilities to local governments is that the counties and cities whose residents are most dependent on Medicaid are likely to have the fewest financial resources to pay for indigent health care.^[77]

Congressional changes might well hasten a "race to the bottom" in health care for the poor. Many experts suspect that the proposed Medicaid reforms will cause state policymakers to fear the in-migration of poor people seeking more generous health care benefits. To discourage this shift, states will consistently compete with neighboring states to offer less generous health care services. Between 1976 and 1989, state Aid to Families With Dependent Children (AFDC) and Medicaid benefit levels fluctuated in ways that suggest neighboring states attempt to avoid luring impoverished people seeking more generous programs. To do so, states surrounded by neighbors with lower benefits tended to reduce their payouts. And states with growing poverty rates reacted by cutting benefits. According to one study, the forty-eight contiguous states have already started the race to the bottom with welfare -- in 1995 no state provides as high a level of real AFDC benefits as it did in 1970.^[78]

Congressional reforms would perpetuate current funding inequities in the program. The various proposed new funding formulas do not account for future economic and social changes in the states. If a state experienced an economic downturn or demographic change, it would not receive offsetting funding from the federal government. Well-off states, which already receive more federal aid per capita than poor states on average, would lock in that advantage under the proposed funding formula.^[79]

Estimates of the effects of the current proposals indicate that by 2002, states would lose an average of 30 percent of the Medicaid payments they would have received under the existing setup. Under the congressional reform plan, reductions range from a low of 7 percent in Missouri to a high of 53 percent in Louisiana.^[80]

Many hospitals and clinics that serve large numbers of poor patients are financially strapped already and heavily dependent on Medicare and Medicaid funding. Cuts in these programs are likely to force many of those institutions out of business, while forcing others to reduce the level of services they provide.^[81]

Many doctors already refuse to treat Medicaid patients. Further reductions in Medicaid payments to physicians are likely to discourage more doctors from serving those who remain covered. This will further impact clinics and hospital emergency rooms, especially those in public hospitals, which in many cities are already facing enormous financial problems.^[82]

Polls show that citizens consistently support government-financed medical care, particularly for vulnerable Americans. In numerous surveys, the vast majority of those questioned actually supported expenditure increases for medical programs.^[83] For decades, Americans have favored government financing of health care for those who could not pay. Indeed, most Americans believe that everyone is entitled to adequate health care.^[84]