[Congressional Record Volume 141, Number 177 (Thursday, November 9, 1995)]
[Senate]
[Pages S16845-S16848]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            MEDICAID PROGRAM

  Mr. GRAHAM. Mr. President, today I conclude a series of talks on the 
Medicaid Program. I began a four-part presentation last Friday by 
debunking the myth that the Medicaid Program has been a failure. In 
fact, an objective review of the accomplishments of this Federal-State 
partnership tells us that the Medicaid Program has been an American 
success story.
  Just a few examples: The decrease in infant mortality rate from 10.6 
deaths per thousand livebirths as recently as 1985 to 8.5 in 1992, 
largely attributable to an expanded effort in the Medicaid Program;
  The improved quality of long-term care for millions of elderly 
citizens in a manner befitting their human dignity;
  The deinstitutionalization of 125,000 profoundly handicapped 
Americans.
  With that record of accomplishment established, on Tuesday of this 
week, I examined why Federal spending on Medicaid has increased 
throughout its history and why it is expected to increase in the next 
years. I pointed to such things as the demographic changes in America, 
particularly the increasing longevity which has driven up the number of 
persons who are in need of long-term care.
  I addressed the numerous programmatic expansions in Medicaid that 
reflected compelling policy decisions, such as the decision to reduce 
infant mortality. That has led to increased costs as well.
  Finally, I cited the erosion of private health coverage for millions 
of children, an issue which has become a major subject of public 
concern this week with the publication of a study in the Journal of the 
American Medical Association on that very topic, documenting the trend 
that as private sector insurance abandon children and their parents, 
the Medicaid Program picked up the slack, helping them get 
immunizations, checkups, and, when needed, specialty care.
  Mr. President, this is not to say that part of the increase in the 
cost of Medicaid was not attributable to abusive or wasteful practices. 
Yesterday, I spoke about the abuses in the Disproportionate Share 
Hospital Program, known as DSH. I decried how the Senate, by its vote 
on October 27, rewarded with millions, and in some cases billions, of 
dollars those very States that gamed the DSH program. What is worse, 
the Senate majority voted to fund these rewards by raiding the Social 
Security trust fund and by perverting sound budgetary practices.
  Mr. President, with that backdrop in place, I come to the Senate 
floor today with a message of hope. I bring to this Chamber a proposal 
that recognizes the importance of maintaining the Federal-State 
partnership in Medicaid and restraining costs.
  The Senate is not in a posture of block grants or bust. There is 
another way. Why should we consider an alternative? We should consider 
an alternative because the alleged benefits of block grants--
flexibility to the States particularly--are minimal, and the costs and 
loss of a Federal partner in a time of need for the most vulnerable of 
Americans are great.
  The foundation upon which the block grants have been built, that they 
enhance flexibility for the States, is on shaky ground--shaky ground 
which erodes by close examination; shaky, that is, unless you define 
``flexibility'' as the freedom to raise State taxes or local property 
taxes, or the flexibility to pit the elderly against children as 
beneficiaries for the Medicaid Program. Otherwise, there is precious 
little flexibility the States can receive that they cannot already get 
under the current Medicaid program waiver.
  The Department of Health and Human Services has pioneered, with 
willing States, extraordinary demonstration projects where statutory 
and regulatory requirements can be waived to permit new approaches to 
health care. In my State of Florida, we have been in the vanguard of 
this waiver movement, particularly in the area of providing community-
based services for older citizens and expanding the use of managed care 
for poor children.
  Before the Senate brought the Medicaid legislation to the floor, I 
met with Mr. Bruce Vladeck of the Health Care Financing Administration, 
generally known as HCFA. My question to him was:

       What flexibility, to allow innovation, would the block 
     grants give States that they cannot get today through the 
     waiver program?

  Here is a summary of his answer:

       States today can test new approaches to publicly supported 
     health care by obtaining waivers to statutory requirements 
     and limitations. Waivers permit States flexibility from 
     Federal Medicaid statutory and regulatory requirements. State 
     Medicaid demonstrations present valuable opportunities to 
     both State and Federal policymakers to refine and test 
     policies that improve access to the quality of care for 
     vulnerable Medicaid populations and to more effectively 
     manage the cost of providing that care.

  Mr. President, I ask unanimous consent that the full statement by Mr. 
Vladeck be printed in the Record following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. GRAHAM. What do the States relinquish in exchange for the 
marginal new flexibility that they will allegedly receive? The Federal 
partnership to assist them, if they experience caseload growth, will be 
surrendered. The Federal partnership, during times of economic hardship 
or recession, will be surrendered. And the Federal partnership, if 
there is a natural disaster--when Hurricane Andrew hit south Florida, 
Mr. President, our Medicaid caseload shot up by 12,000 people. Not only 
had their homes been blown away, their jobs had been blown away. 
Therefore, people who had been employed and self-supporting needed the 
assistance of Medicaid during that time of crisis.
  Under block grants, a State that is knocked down to its knees by a 
flood, earthquake, hurricane, would not find a helping hand from the 
Federal Government at the time it needed help to get back on its feet. 
No, Mr. President, acts of God and block grants do not mix.
  Mr. President, this is not a new debate. In January 1982, during his 
State of the Union Address, on the 26th day of that month, President 
Reagan recognized the issue of the States and the Federal Government's 
partnership in Medicaid. Did President Reagan advocate that Medicaid 
ought to be turned back to the States in the form of a block grant? Did 
he advocate that the States be left alone to deal with issues of 
changes in their growth, changes in economic circumstances, natural 
disasters? No, Mr. President, that was not the position of President 
Reagan.
  Let me quote from his State of the Union Address what President 
Reagan said on January 26, 1982:

       Starting in fiscal year 1984, the Federal Government will 
     assume full responsibility for the cost of the rapidly 
     growing Medicaid Program, to go along with its existing 
     responsibility for Medicare. As part of this financially 
     equal swap, the States will simultaneously take full 
     responsibility for Aid for Families with Dependent Children 
     and food stamps.

  Mr. President, that was the swap that President Reagan proposed on 
January 26, 1982. I believe the President's advice, in terms of a 
greater, not a lesser, Federal role in Medicaid, was wise then, and it 
is advice that we should seriously consider following today.
  If block grants are as bad as I suggest they are, is the only 
alternative to them business as usual? No, Mr. President. There is a 
way to have the best of both worlds, and to contain costs while 
maintaining the Federal-State partnership in Medicaid. 

[[Page S 16846]]

  The best of both worlds is the per capita cap proposal that is 
gaining momentum as the win-win answer to the block grants' lose-lose 
proposition.
  The per capita cap approach provides that health care and coverage 
could be protected, and costs can be controlled by disciplining the 
program with an annual limit in Federal spending per beneficiary.
  This approach maintains the individual guarantee to Medicaid services 
and creates an incentive to maintain health care coverage. Funding 
would follow the people in need, not some political entity.
  The per capita cap approach, which I presented to the Senate 2 weeks 
ago, saves $62 billion over the next 7 years. It enhances State 
flexibility, and it reduces the rate of growth in Federal Medicaid 
spending to a level that is sustainable for the States, the 
beneficiaries, and the Federal Government.
  The per capita cap assures that States with innovative demonstrations 
already underway can continue to operate their programs, and that other 
States wishing to innovate have the resources and ability to do so.
  Let me briefly outline how the per capita cap approach would work.
  Federal funding would be allocated to States on a per person in need 
basis. For example, one of those categories of per persons in need are 
poor children. If the cost of providing services to a poor child in 
California, for example, has been $1,000, then the Federal Government 
would continue its Federal-State matching share, which in the case of 
that State is 50 percent State, 50 percent Federal, and the Federal 
Government would continue to provide $500 per each poor child 
qualifying for Medicaid services in the State of California.
  If needs increase because the population of poor children goes up, or 
if they decrease because the population goes down, or if there is a 
natural disaster or a public health calamity and more children become 
eligible for coverage, the Federal partnership and the contribution of 
$500 per child would be guaranteed, unlike a block grant, where a fixed 
sum of money is allocated regardless of change in circumstances.
  The incentive is to reduce costs and not cut people off coverage 
because if you arbitrarily cut children off, you lose the Federal 
match.
  Costs are what must be controlled. If, for example, California were 
to spend more than $1,000 per child, then the State of California would 
be required to make up the difference between the actual cost and what 
Medicaid would cover--$500 of State and $500 of Federal funds.
  Again, under a per capita cap, the money follows the need and the 
person. As a result, during economic booms, or if health care needs 
decline, the Federal Government would share in the savings--also unlike 
a block grant which straitjackets and obligates money regardless of 
need.
  The Federal Government would make payments to each State based on the 
statutory Federal matching rate or the per capita rate, whichever is 
lower. The cap would be stated in inflation terms.
  Our proposal, Mr. President, is that that inflation term be stated at 
1 percentage point below the projected rate of medical inflation in the 
Nation. Today it is projected that the medical rate of inflation for 
the next 7 years will average 7.1 percent per year per person. We 
would, therefore, propose to set the inflation rate under the per 
capita cap at 6.1 percent, thus producing the $62 billion in savings 
over the next 7 years.
  The cap would be cumulative and thus allow States enough flexibility 
to apply savings under the cap from one year to the next. Caps would be 
applied separately to each of the four principle categories of Medicaid 
beneficiaries: the elderly, the disabled, children and their mothers. 
This separation into four distinct groups avoids the sinister zero-sum 
game that is endemic to block grants, where one group's interests are 
pitted against another.
  Mr. President, on first hearing this formula, some may say it sounds 
very complicated. For those who have had a background in State 
government, it really is a clone of the way States allocate and 
distribute school dollars to individual school districts. In fact, with 
only four categories of beneficiaries to consider, it is far simpler 
than most per pupil school district formulas.
  The per capita cap idea is not a new idea. It is one which should be 
familiar to many of our Republican colleagues. It is a concept that was 
supported in health care proposals introduced within the last year by 
Senators Dole, Packwood, Gramm, and Chafee.
  Mr. President, among those merits, the Medicaid per capita cap 
approach permits the States to move toward managed care and other types 
of arrangements which save money without having to secure specific 
Federal waivers. That, Mr. President, is real flexibility.
  Another advantage of the per capita cap approach is that many other 
detailed rules and process-oriented requirements would be phased out. 
States would be held accountable to performance outcomes with respect 
to certain quality access measures. The Federal Government would be 
interested in the outcomes of State health long-term care delivery 
systems but would not be mandating how to achieve those outcomes.
  Finally, the per capita cap approach would cap and retarget future 
growth in the Disproportionate Share Hospital Program, referred to as 
DSH. My colleagues who have read about or possibly heard my remarks 
yesterday on the flagrant, unflinching abuse of the DSH program by some 
States will no doubt breathe a sigh of relief.
  Mr. President, the per capita cap approach I outlined today would 
assure 18 million children, 8 million low-income women, 6 million 
disabled, and 4 million elderly Americans continued coverage for 
hospital, physician, and nursing home care services. This approach 
would cut costs, not cut people.
  Mr. President, suppose for a moment that in 2 years oil prices fell 
as they did in the early and late 1970's, another economic recession 
were to strike a region of our country such as the southwestern States. 
Suppose the same phenomenon ensued with layoffs, real estate fire 
sales, and businesses start canceling health insurance coverage.
  As we know from the history of the last 15 years, suppose, further, 
that families ran through their savings, ran out of money to care for 
their elders. This may sound far-fetched, but it was not that long ago 
that the former Governor of Texas held a garage sale and sold personal 
items to generate cash during those hard times.
  For purposes of this discussion, we will say that the citizens of the 
Southwest ran out of money, so their frail elderly turned to Government 
for long-term care. With no help from the Federal Government in their 
hour of need, those States would be in a financial straitjacket under 
block grant.
  Mr. President, this is insanity, and unnecessary insanity.
  Under per capita caps, those same States would get help. The Federal 
Government's contribution would increase as the need increased. Most 
important, the elderly, the disabled, the children, and pregnant 
mothers would not pay for the economic downturn with their help if not 
with their lives.
  Mr. President, this makes sense. There is a legitimate national 
interest in such an outcome. The $62 billion reduction in spending 
amounts to a surgical cut, not the meat-ax approach that the $176 
billion block grant legislation that passed the Senate 2 weeks ago 
represents.
  Further, Mr. President, the per capita cap approach would continue 
the Federal-State partnership in detecting fraud and punishing 
defrauders. Medicaid fraud, the DSH abuse and the uncontained spending 
amount to a cancer on our Nation's health and long-term care delivery 
systems. But it is treatable--not a terminal condition. In our zeal to 
cure this affliction, let us not kill the patient in the process; let 
us not kill the very Federal-State partnership that has served this 
Nation so well for 30 years.
  For the past week, Mr. President, I have attempted to spotlight the 
Medicaid Program, to expose the recklessness of $176 billion in block 
grant cuts and the raid on the Social Security to reward DSH abusers.
  Today, I propose another way, a way that maintains the Federal-State 
partnership while still containing costs. After all, Mr. President, 
behind those $176 billion in cuts are human beings who will pay the 
price for our free-lance legislating, for our don't-ask, don't-care 
indifference, to the casualties of these block grants. 

[[Page S 16847]]

  Mr. President, I ask unanimous consent that a column by Mr. David 
Broder, which appeared in the Washington Post on August 6, 1995, 
entitled ``Race to the Bottom?'' be printed in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 2.)
  Mr. GRAHAM. Mr. President, we will all be able to read that in 
addressing the Medicaid and welfare block grant debates, Mr. Broder 
wrote eloquently of the fear that under block grants the States will 
engage in a ``race to the bottom that shreds the social safety net.''
  He predicted the likeliest scenario under block grants would be as 
follows: ``What would happen when Federal funding is reduced and 
Federal standards are eliminated is that 50 legislatures would become 
the arena, each year, in which the welfare population would have to 
compete against other claimants for scarce dollars.''
  Mr. President, I share this view of the future in America under block 
grants. You cannot have a race to the bottom without casualties along 
the way. Along the way in the block grant race to the bottom will be 
eye glasses for elderly, unfilled prescriptions that used to be covered 
under Medicaid. They will not survive the race to the bottom.
  Along the way in the race for block grants, the race to the bottom, 
will be families torn apart by unnecessary nursing home placements and 
institutionalization. Communities' care for the elderly and other 
Medicaid waiver services are not likely to survive the race to the 
bottom.
  Along the way in the block grant race to the bottom will be ugly 
legislative sessions in 50 States, legislatures where the frail elderly 
will be pitted against children, and the mentally retarded against the 
AIDS sufferer in a battle royal for block grant money.
  Is that what we want for America? Mr. President, there is another 
way. The race to the bottom has yet to begin and it need not begin. 
There is still time.
  Per capita cap legislation is our way out of the race to the bottom 
and is our ticket to a 21st century that maintains an American Federal-
State stake in the health and welfare of its citizens.

                               Exhibit 1

                       Statement of Bruce Vladeck

       Senator Graham. What cannot be waived under this 1115 
     program for either legal or administrative policy reasons?
       Mr. Vladeck. States can test new approaches to publicly 
     supported health care by obtaining waivers of statutory 
     requirements and limitations from the Secretary of the 
     Department of Health and Human Services. Waivers permit 
     States flexibility from the Federal Medicaid statutory and 
     regulatory requirements that cannot be altered through the 
     Medicaid State plan amendment process. State Medicaid 
     demonstrations present valuable opportunities to both States 
     and Federal policy makers to refine and test policies that 
     improve access to, and quality of care for vulnerable 
     Medicaid populations, and to more effectively manage the 
     costs of providing that care.
       Although, section 1115 authority is very broad, certain 
     statutory restrictions exist for State demonstrations. In 
     addition, HHS has made a number of policy decisions that 
     affect statutory provisions we will and will not waive for 
     demonstration programs.


                          statutory provisions

       FMAP Rates. The rate at which the Federal government 
     matches States expenditures cannot be waived.
       Services for Pregnant Women and Children. The obligation to 
     cover certain women and children described in section 1902(1) 
     cannot be waived under section 1115 authority.
       Drug Rebate Provisions. Section 1902 also requires that a 
     State provide medical assistance for covered outpatient drugs 
     in accordance with section 1927, which also contains the drug 
     rebate program provisions. Section 1927 excludes drugs 
     dispensed by HMOs from the requirements of the drug rebate 
     program. Since the drug rebate provisions are imposed on drug 
     manufacturers, and not on the State, this provision cannot be 
     waived through a waiver of section 1902. Only those drug 
     rebate and best price provisions of section 1927 which apply 
     directly to the State may be waived, not those which apply to 
     drug manufacturers.
       Copayments and Other Cost Sharing. Section 1916 enables 
     States to impose deductibles, copayments and other cost 
     sharing requirements on Medicaid beneficiaries, but also 
     prohibits States from requiring copayments from 
     categorically-eligible beneficiaries who are enrolled in 
     managed care systems. The Secretary's authority to waive this 
     restriction is limited. These limitations make it impractical 
     to waive section 1916 to enable states to require copayments. 
     Copayments and other cost sharing can be imposed for managed 
     care services, however, in the case of medically needy 
     individually and on individuals who are newly Medicaid-
     eligible due to the demonstration.
       Spousal Impoverishment Provisions. Section 1924 prohibits 
     the Secretary from waiving spousal impoverishment provisions 
     for institutionalized individuals.
       Work Transition. Section 1925 prohibits waiving work 
     transition provisions extending Medicaid eligibility for 
     certain individuals who lose their eligibility for Medicaid 
     through their loss of eligibility for Aid to Families with 
     Dependent Children.
       Qualified Medicare Beneficiaries, Specified Low Income 
     Beneficiaries, and Qualified Working Disabled Individuals. 
     Section 1905 requires States to provide coverage to these 
     groups of individuals regardless of an 1115 demonstration.
       Competitive Bidding. Procurement rules in Part 74 of the 
     Code of Federal Regulations require States and other entities 
     to use competitive bidding ``to the extent practical''. 
     Because the statutory basis for these rules exists outside of 
     Title XIX, section 1115 cannot be used to waive this 
     requirement.


                            policy positions

       Reduced Quality of Care. Programs or policies which 
     inappropriately reduce access, benefits, or otherwise reduce 
     quality of care for current eligibles cannot be approved.
       Quality Assurance. States are expected to maintain quality 
     assurance processes (e.g., eligibility quality control, 
     external medical review requirements, etc.).
       Budget Neutrality. Demonstrations must be budget neutral. 
     That is, Federal expenditures under the demonstration may not 
     exceed the projected level of Federal payments to the State 
     in the absence of a demonstration.
       Through negotiations with the National Governors 
     Association, HHS has agreed that States may achieve budget 
     neutrality over the life of the project, rather than on a 
     year by year basis.
       Unnecessary Utilization and Access Safeguards. Section 1902 
     requires safeguards against unnecessary utilization of 
     services. The statute also protects access to care by 
     requiring States to make adequate payments to providers. Such 
     safeguards must be maintained.
       Boren Amendment. States must meet the Boren amendment's 
     access and payment requirements in fee-for-service settings. 
     Because these provisions do not apply to managed care 
     settings, States do not need a waiver of the Boren amendment 
     for managed care programs.
       Contract Provisions. Most existing contract requirements 
     for comprehensive managed care plans in section 1903(m) will 
     continue to apply to managed care demonstrations. HCFA will 
     consider waiving the enrollment composition requirement (the 
     ``75/25 rule'') and disenrollment on demand if the State 
     plans to substitute a data-oriented, quality improvement 
     system for these statutory provisions.
       Duration. The terms ``experiment,'' ``pilot'', and 
     ``demonstration'' all suggest that programs authorized under 
     section 1115 should, some point, conclude. Thus, States and 
     health care providers potentially affected by section 1115 
     demonstration projects should be aware that section 1115 
     demonstrations are time-limited.

                               Exhibit 2

                           Race to the Bottom

                          (By David S. Broder)

       The Republicans in Congress are proposing a revolution in 
     domestic policy and in the relationship between the federal 
     government and the states. Last week, at their meeting in 
     Burlington, Vt., the nation's governors tried but failed to 
     agree whether the proposed changes would be a blessing or a 
     disaster. The 30 Republicans, 19 Democrats and one 
     independent could agree only to disagree.
       Now the proposition is before Congress. This month the 
     Senate is debating several alternatives to the House-passed 
     welfare reform. After Labor Day, the House will launch a 
     similar debate on Medicaid.
       On the face of it, the fight is about money. The welfare 
     bill was blocked for weeks in the Senate by a dispute between 
     states like Wisconsin and Massachusetts, which have high 
     benefits and little growth in their welfare populations, and 
     those like Texas, which have low benefits but are 
     experiencing rapid growth. Senate Majority Leader Bob Dole 
     found a solution by coming up with enough money to guarantee 
     current allocations to the first group of states while 
     providing a bonus for the second.
       That will be much harder when it comes to Medicaid, the 
     program that provides long-term care for the indigent elderly 
     and disabled and basic medical services for other welfare 
     families. It is by far the biggest single federal-state 
     program today, and the Republican budget calls for $181 
     billion in savings from it in the next seven years. Finding a 
     way to distribute the pain will be difficult.
       But money is just one of the dimensions of this struggle. 
     Equally important is the question of minimum standards--and 
     where they will be set. Until now the floors have been 
     established in Washington for Medicaid and for the main 
     welfare program, Aid to Families with Dependent Children 
     (AFDC). The states have been the junior partners, both in 
     designing and paying for these basic ``safety net'' programs.
       What the Republicans want to do is reverse that. By capping 
     the amount of money the 

[[Page S 16848]]
     federal government would appropriate for these two programs and 
     converting them from individual entitlements to state block 
     grants, they would force the states, over time, to pay for a 
     bigger share. In return, the states would be given much wider 
     leeway, immediately, to redesign the programs to their own 
     taste.
       The hope is that this will encourage experimentation that 
     may reduce costs while actually improving outcomes for 
     beneficiaries. The Medicaid population could benefit from 
     moving into managed-care programs, it is argued. Welfare 
     programs could be tailored more easily to local 
     circumstances, helping people move off the dole and into 
     paying work.
       The critics' fear is that instead of innovating, the states 
     will engage in a ``race to the bottom'' that shreds the 
     social safety net.
       In back-to-back speeches to the governors, Dole argued that 
     the first of those results is likeliest; Clinton said he 
     worried that the second would be the case.
       No one can be certain, but logic and experience suggest 
     that the second scenario is more likely. What would happen 
     when federal funding is reduced and federal standards are 
     eliminated is that the 50 legislatures would become the 
     arena, each year, in which the welfare population would have 
     to compete against other claimants for scarce dollars.
       The reality is that, as Clinton said, ``the poor children's 
     lobby is a poor match'' for other interests that pressure the 
     legislatures. Teachers, road builders, law enforcement 
     people, county and local governments, universities all have 
     more clout. That was demonstrated this year in states from 
     New York to California, where welfare benefits were trimmed 
     to avert deeper cuts in other parts of the budget.
       Dole, who is shepherding the welfare bill in the Senate and 
     who would like to challenge Clinton in next year's 
     presidential race, cozied up to the governors by expressing 
     his indignation at Clinton's ``race to the bottom'' charge. 
     ``I wonder which states he thinks would participate in such a 
     race,'' Dole said. ``Which states does he believe cannot be 
     trusted with welfare, education and protection of their 
     people?''
       But it is not a question of trust. The political realities 
     of the legislatures are much as Clinton described them. To 
     ignore that reality is to court trouble--not just for the 
     aged and the poor but for the federal system.

  Mr. GRAHAM. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Coats). The Clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________