Senate Dems eye cuts to state Medicaid funds

In an attempt to win over some Republican support for a federal jobs bill, Senate Democrats are suggesting phasing out additional federal funding for state Medicaid programs, The Hill’s Mike Lillis reports.

The American Recovery and Reinvestment Act, otherwise known as the federal stimulus, provided states with a 6.2 percent increase in the federal share of Medicaid funding through 2010. Democrats have been insisting that the Medicaid money remain in the bill to aid vulnerable patients and help cushion the economy against potential layoffs in state governments. The U.S. House removed the money last month to cut the cost of the bill, but, under pressure, the U.S. Senate added it back.

Now, in an effort perceived to be geared towards winning over moderate Maine Republican Sens. Olympia Snowe and Susan Collins, Democrats are proposing a phased cut to the funding.

Instead, Democrats are now proposing to provide a 5.3 percent increase in federal Medicaid funds in the first quarter of 2011, and a 3.2 percent increase in the second quarter of 2011.

Researchers with the Iowa Fiscal Partnership reported in November that federal stimulus for Medicaid created a $252 million increase in the value of goods and services produced in the state during fiscal year 2009, and $114 million in income for 2,354 workers in created or saved jobs.

Because Medicaid recipients save money on their health care bills, they are able to spend most of their incomes on meeting necessities through local payments for housing costs and through purchases from Iowa retail stores and service providers. In turn, these retailers and service providers are better able to keep their workers employed and have more income to spend purchasing from other businesses or residents in the state.

Iowa Policy Project Research Associate Andrew Cannon says that since the funding will likely expire in the middle of Iowa’s fiscal year, it could create a $120 million hole in the state budget.

“If Congress fails to extend the increased [Federal Medical Assistance Percentage], Iowa’s lawmakers will be forced to cut spending in other critical state services to fill the Medicaid deficit or drastically cut Medicaid spending when the General Assembly reconvenes in January,” Cannon said.

As Janet Hook of the Los Angeles Times points out, while ideas have been floated to cut Medicaid, Medicare and unemployment benefits, the $32 billion in tax breaks also included in the legislation will undoubtedly remain untouched.

In the hunt for ways to cut costs, neither party has proposed curbing the panoply of narrow tax preferences, which Congress has routinely extended each year. …

… At issue are dozens of tax credits, deductions and other write-offs that have been in place for years but approved for only one year at a time. The largest among them is the credit for business spending on research and development — an idea that enjoys bipartisan support, and that accounts for $6.7 billion of the $32-billion price tag.

The rest are narrower in focus: tax credits for makers of biodiesel fuel; tax breaks for restaurant improvements; and write-offs to encourage movie producers to film in the U.S.