The Medicaid Sweater, Children's Health, and the Tiny Hole

Have you ever watched a child in a sweater that gets snagged on something, leaving a tiny hole? You know what happens next--The sweater gets pulled, and stretched; the threads retract into the fabric. And the child, upon discovering this flaw, cannot keep his hands from touching it. Tiny fingernails, like magnets, gravitate to the barely visible little defect, feeling, picking, tugging; the hole widens, and one day, gleefully, the child pokes a whole finger through it. Threads hang loose, unwind, fray. Mom tells him to leave it alone, but soon the kid is pushing whole toys through the hole, catching it on doorknobs, hanging it up by the hole, discovering the fun of pulling whole threads, one by one, all the way out . . . literally unraveling the sweater, piece by piece, until the whole mess of yarn is unfit for the dog to play with. And then it's November, it's getting cold, and Mom wishes she had mended that sweater when she had a chance. In an unseasonably pleasant July in Washington, DC, Congress and President Clinton amicably settled the budget while the rest of us were on vacation. The president signed the Balanced Budget Act of 1997 (H.R. 2015) into law on August 5, 1997, amid much bipartisan backslapping and self-congratulation. The law appears to accomplish a lot of good things, after all. It restores eligibility for Supplemental Security Income (SSI) and Medicaid to some 350,000 legal immigrants from whom it was cruelly taken by last year's Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) (Keigher, 1997). It appears to have saved Medicaid from being turned into a block grant or a "capped entitlement." And thanks to tenacious advocates like the Children's Defense Fund, it takes a substantial step toward extending health care coverage to some of our nation's 10 million uninsured children. Wonderful, right? Well, maybe. The trouble is that hundreds of small Medicaid policy changes were also included in the act, each one a big enough hole in the Medicaid sweater for a Tonka truck. And with the majority of governors and a Republican Congress driving that truck, fueled by political contributions from corporate health care profits--elites who view any government insurance as a threat to free enterprise--we could easily lose the whole sweater before we know what happened. MEDICAID CHANGES The Balanced Budget Act cuts Medicaid by $13 billion over the next five years by making hundreds of arcane changes in existing law with the putative purpose of balancing the federal budget by 2002. Families USA (1997), a Washington-based advocacy organization, reports that the cuts will come from three major areas. The vast majority stem from changes in the Medicaid rules on payments to states that compensate hospitals serving "disproportionately" large numbers of uninsured low-income individuals. "Disproportionate share" hospital (DSH) payments were intended to go to hospitals serving a relatively large volume of uninsured and Medicaid patients, but on occasion, states have manipulated the funds so that all or most hospitals receive them. The new law sets DSH allotments, requires each state to report annually on its method of targeting funds and amounts for each hospital, and curbs payments to institutions for mental diseases (IMDs), facilities with more than 16 beds that provide psychiatric services (including state and private psychiatric hospitals), certain nursing facilities, and large board-and-care homes. This cut will have the greatest effect on state psychiatric hospitals and the beleaguered public hospitals remaining in major cities. In beginning to phase out DSH payments for services in IMDs, it freezes federal IMD-DSH payments at 1995 levels and between 2001 and 2003, phases down each state's payment to one-third of the 1995 level (Families USA, 1997). The second major cut comes from the repeal of the Boren Amendment, which set standards in the Omnibus Budget Reconciliation Act of 1987 (P. …