[Congressional Record Volume 148, Number 39 (Thursday, April 11, 2002)]
[Senate]
[Pages S2582-S2583]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself and Mr. Nelson of Nebraska):
  S. 2110. A bill to temporarily increase the Federal Medicare 
assistance percentage for the Medicaid Program; to the Committee on 
Finance.
  Ms. COLLINS. Madam President, I am pleased today to rise, with my 
good friend Senator Ben Nelson, to introduce a bill that would assist 
States through a period when many are experiencing a fiscal crisis. 
Stated simply, for the remainder of this year and next, the bill would 
increase the Federal Government's share of each State's Medicaid costs 
by 1.5 percent and hold the Federal matching rate for each State 
harmless in order to provide approximately $7 billion in fiscal relief 
to States and allow them to expand, not contract, their Medicaid 
programs.
  Last month, I was pleased to join with an overwhelming number of our 
colleagues in passing an economic recovery bill that extended benefits 
for unemployed workers and provide depreciation incentives for 
businesses to invest in new facilities and equipment. In short, the 
bill provided welcome relief to our unemployed workers and to our 
economy. But it also posed a difficult choice to State governments.
  In all but a handful of States, corporate and individual income taxes 
are calculated based on the Federal tax code's definition of income. 
Thus, when we change how taxable income is calculated under the Federal 
code, the changes automatically affect the amount of tax collected by 
States. It has been estimated, for example, that the tax changes made 
by the economic recovery package will reduce State revenues by $14 
billion. States can avoid the revenue loss by ``decoupling'' their tax 
policies from Federal law, but they do so at a price. Decoupling 
increases the complexity of paying taxes and forces businesses to 
devote more resources to compliance. At the most basic level, they 
would have to calculate taxes two different ways and would have to 
factor the dueling tax consequences into their business decisions.
  States that automatically or affirmatively decide to conform to the 
tax law changes in the economic recovery package are faced with finding 
ways to cover the loss in expected revenue. This could mean making 
painful cuts in important areas such as health care, transportation, 
and education. My home State of Maine was faced with a $27 million 
revenue loss over the next two years if it chose to conform to the 
Federal tax law changes, and this on top of a much larger structural 
budget shortfall. The resulting bleak picture forced the State 
legislature to contemplate some extremely problematic alternatives, 
including cuts in the State Medicaid program.
  Today, Medicaid is the fastest growing component of State budgets. 
While State revenues were stagnant or declined in many States last 
year, Medicaid costs increased 11 percent. Maine is only one of a 
number of States that has been forced to consider cuts in their 
Medicaid programs to make up for their budget shortfalls.
  Earlier this year, Maine was facing a $248 million revenue shortfall. 
Faced with nothing but tough choices, our Governor proposed $58 million 
in Medicaid cuts, including reductions in payments to hospitals, 
nursing homes, group homes, and physicians. He was also forced to 
propose a delay in the enactment of legislation passed by the State 
Legislature last year to expand Medicaid to provide health coverage to 
an estimated 16,000 low-income uninsured Mainers.
  While subsequent revisions in the State's revenue forecasts enabled 
the Governor to restore most of these Medicaid cuts, the loss of 
revenue due to the tax law changes in the economic recovery package 
could very well put

[[Page S2583]]

them back on the table, particularly because the Maine legislature has 
decided to defer a decision on whether to fully conform in 2002 to the 
bonus depreciation provisions of the economic recovery package until 
its next legislative session.
  The legislation I am introducing today will help to bridge Maine's 
funding gap by bringing an additional $40 million to my State's 
Medicaid program over the next two years. This should not only 
forestall the need for any further cuts, but will also provide 
additional funds to Maine to proceed with its plans to expand its 
Medicaid program to provide health care coverage for more of our low-
income uninsured.
  I do not want Maine or other States to have to choose between helping 
our economy recover from recession and helping people in need. Our 
States need more Federal assistance in providing health care services 
through Medicaid, not less, which is why I am introducing this bill 
today. By increasing the Federal medical assistance percentage for all 
States this year and next, we can relieve the pressure put on States to 
cut spending on important programs while increasing their capacity to 
provide services through Medicaid. I urge our colleagues to join 
Senator Nelson and me in this effort.
  Mr. NELSON of Nebraska. Madam President, I come to the floor to talk 
about a bill I plan on introducing later on today with my good friend 
Senator Susan Collins. I am pleased to say that our legislation could 
be considered the next step in economic stimulus. A little more than a 
month ago, this body passed and the President signed a bill to 
stimulate the economy and help workers. It was not a perfect bill, but 
few are. But the economy was hurting and it was time to act.
  One of the unintended consequences of the stimulus bill was a revenue 
loss for many states. The final package included a provision that will 
stimulate business development through tax incentives. Unfortunately, 
because the majority of states ``couple'' their tax rates to the 
federal tax rates, this benefit for businesses will mean an estimated 
$14 billion loss in state revenues. States can avoid the revenue loss 
by decoupling from the federal law, but this approach is not without 
its own traps and pitfalls. Decoupling makes the tax codes of states 
just that much more confusing.
  Many states have explored ways to decouple, or in simpler terms, they 
have searched for ways to hold their state harmless from the 
experienced revenue loss. In fact, the state Legislature in Nebraska is 
considering such a measure today, as it attempts to find a way out of 
it's expected $119 million budget shortfall.
  We must now take steps to alleviate the unintended impact of the tax 
reductions on state budgets. In previously debated stimulus packages, a 
provision was included that would have helped state governments by 
increasing the federal contribution of the Federal Medicaid Assistance 
Percentage, FMAP, by 1.5 percent. This provision enjoyed wide support. 
Unfortunately, and over the objections of the crafters of the Centrist 
stimulus plan, it was not included in the final package signed by 
President Bush.
  Even before the passage of the stimulus bill, Medicaid costs were 
rising at the same time state tax revenues were decreasing. States are 
now faced with the choice of either cutting Medicaid services or 
diverting funding from other essential programs to fund Medicaid. This 
``choice'' is no choice at all either cut health care service to 
Medicaid recipients or cut funding for schools, roads, police and 
firefighters. In a time of economic turmoil this ``choice'' can stall 
the economic recovery the stimulus bill was meant to jump-start.
  Our bill would revive the FMAP provision this body earlier 
considered. It would provide a direct response to the false ``choice'' 
faced by states. This bill will alleviate state's Medicaid liabilities 
by increasing the federal government's contribution to the Medicaid 
program by 1.5 percent for this year and next. This would mean an 
additional $7 billion for states. In Nebraska, the savings would amount 
to an estimated $42.7 million. This more than offsets the $34 million 
that Nebraska is expected to lose if they comply with the business tax 
incentives in the stimulus bill and would in fact provide $8.7 million 
on top of what was lost.
  A month ago, we took steps to help the economy recover and to help 
workers. Today, we need to take an additional step to help states 
struggling with fiscal calamity. With this increase in federal Medicaid 
assistance throughout this year and next, states will be given some 
breathing room to deal with the difficult choices they face in 
balancing their budgets. I urge my colleagues to join Senator Collins 
and I in this effort and show the states that Congress is not 
indifferent to their budget problems and that we will step in and 
provide meaningful assistance at a time when governors need it most.
  Mrs. CLINTON. Madam President, I commend my colleague from Nebraska 
for recognizing the extraordinary burdens that are being placed on our 
States both because of the economic slowdown and the increase in health 
costs, as well as the effects of the 9-11 attacks in our State 
particularly, but also because of the unintended consequences of some 
of the efforts that were undertaken in the stimulus bill to stimulate 
investment which have the direct effect of further cutting State 
revenues.
  As a former Governor, I know our colleague from Nebraska understands 
this intimately. I very much appreciate his leadership on this issue 
and look forward to working with him.
  Mr. NELSON of Nebraska. I thank the Senator.
                                 ______