[*] Senior U.S. Senator from Florida. B.A., 1959, University of Florida; J.D., 1962, Harvard University. This Article was adapted by Charles R. Fletcher, Articles Editor, from a series of speeches given by Senator Graham. Return to text.

[1] U.S. CONGRESSIONAL RESEARCH SERVICE, MEDICAID SOURCE BOOK 1 (1993) [hereinafter MEDICAID SOURCE BOOK]. Return to text.

[2] Id. The only state without a formal Medicaid program is Arizona, but since 1982, Arizona has been receiving federal funds through a Medicaid waiver program. Id. Return to text.

[3] Id. Return to text.

[4] Bruce C. Vladeck, Administrator, Health Care Financing Administration, Statement Before the U.S. House of Representatives Subcommittee on Human Resources and Intergovernmental Relations, Jan. 18, 1996, available in Federal Document Clearing House. Return to text.

[5] Id. at 2. Return to text.

[6] Id. Return to text.

[7] Id. Return to text.

[8] MEDICAID SOURCE BOOK, supra note 1, at 811. Return to text.

[9] Id. at 841. Return to text.

[10] See generally U.S. GOVERNMENT ACCOUNTING OFFICE, MEDICARE: EFFORTS TO ENHANCE PATIENT QUALITY OF CARE (1994). Return to text.

[11] MEDICAID SOURCE BOOK, supra note 1, at 11, 13-15. Return to text.

[12] Many of these stories are profiles in courage—the courage of families trying to deal with health setbacks and scarce resources. For instance, Yvette Elkins, of Columbus, Ohio,

[a]fter giving birth to her first child[,] stopped working to stay home with her baby. Shortly after she resigned, she learned that she was pregnant again. Soon after, her husband left her and the baby. For the first time in her life, Yvette began receiving welfare. Two weeks after her second child was born, Yvette began interviewing for full-time jobs. She depended on Medicaid to bridge the gap between homelessness and gainful employment. Medicaid paid for prescription drugs, doctor visits, and emergency visits; all critical services since Yvette's younger child suffered from chronic ear infections. Transitional Medicaid allowed Yvette to catch up on back bills and advance far enough to obtain a job that offers benefits.
141 CONG. REC. S16,645 (daily ed. Nov. 3, 1995). Another example is the story of Donna Guyton of Nashville, Tennessee:
A mosquito bite is irritating, but hardly ever life-threatening. After a fateful family vacation to Michigan in 1990, Donna's son, Patrick, contracted viral encephalitis, possibly from a mosquito bite. He was hospitalized for three and a half months and suffered from severe seizures. He eventually had to be placed in a drug-induced coma. Until September of 1991, he was covered under his father's medical insurance. Then his father's company was bought out, and when they re-enlisted in the plan, Patrick was not covered. Patrick was covered by COBRA for 29 months and in November 1992, he was enrolled in the Medicaid Model Waiver Program at Vanderbilt HMO so that he could receive care from the specialists he needed. But Vanderbilt's Medical director consistently denied the care that the specialists requested. As a result of the poor attention and insufficient medication, Patrick . . . has had other health and emotional problems.
141 CONG. REC. S16,646-47 (daily ed. Nov. 3, 1995). Return to text.

[13] MEDICAID SOURCE BOOK, supra note 1, at 862, 869. Return to text.

[14] Id. at 870. Return to text.

[15] New Medicaid Caps Set off Alarm for Disabled Care, COLO. SPRINGS GAZETTE TELE., Aug. 21, 1995, at D1 ("In the costliest of cases, institutionalizing a severely mentally retarded person . . . can cost $92,000 a year; $72,000 in a group home or private apartment; or $25,000 a year at home with a family."). Return to text.

[16] MEDICAID SOURCE BOOK, supra note 1, at 909, 902. Return to text.

[17] Diane Rowland, Executive Director of the Kaiser Commission on the Future of Medicaid, Statement Before the U.S. House of Representatives Committee on Commerce, Mar. 6, 1996, available in Federal Document Clearing House. Return to text.

[18] The Republican Congressional leadership proposed as part of the 1996 budget reconciliation bill a Medicaid reform package that would have replaced the existing federal-state Medicaid partnership with a new block-grant program that did not provide meaningful federal guarantees of eligibility or benefits. Donna Shalala, Secretary of the Department of Health and Human Services, Statement Before the U.S. Senate Finance Committee, June 13, 1996, available in Federal Document Clearing House.

The block grant program was designed to allocate to each state Medicaid program one lump sum per year. Each state could then do with the money what it wished, with few limitations. This achieved two goals of the Republican Congressional Majority: 1) it vested decision-making authority in the state agencies, and 2) it set a fixed limit on federal Medicaid expenditures by changing Medicaid from a per person benefit to an annual grant. See id.

One of the Clinton Administration's fundamental problems with the block-grant proposal was that it ended the Federal government's commitment to the states to bear part of the burden of changes in demand on state Medicaid programs and left states with the full financial responsibility for providing health care to individuals who would qualify for services in the future due to unanticipated enrollment increases or economic downturns. Id. The Congress passed the block grant proposal as part of a 1996 budget package, but President Clinton vetoed the budget, due in part to his opposition to the Medicaid block-grant program.

In February 1996, the National Governors' Association (NGA) approved the outlines of a bipartisan Medicaid reform plan. This bipartisan effort rejected block grants and adopted elements of the per capita cap approach to Medicaid that I proposed last year and that is discussed in part III of this Article. The NGA proposal held some promise to be a real basis for Medicaid reform. However, the Republican majority in both houses of Congress introduced a revised version of their Medicaid bill, a version that is much more similar to the legislation which President Clinton vetoed last year than is the bipartisan reform envisioned by the governors. Id. at 3.

[The Republicans'] Medicaid proposal is far from the NGA agreement and appears to be more like the proposal vetoed by the President last year and rejected by the Governors at our winter meeting .... [A]ccording to our early calculations, 96 percent of the funding under this new formula is distributed precisely in the same manner as your earlier bills proposed. You have created a block grant for this program with essentially the same language and parameters of the vetoed bill—a block grant that denies a safety net for our most vulnerable citizens.
Id. (quoting a May 29, 1996 letter from four Governors to Senator William Roth, Chairman of the Senate Finance Committee).

As of the writing of this Article, Congressional Republicans and the Clinton Administration have not reached an agreement on Medicaid reform. See id. While the level of the budget cuts and other details of the Republican proposal may change, it remains substantially the same proposal Congress passed last fall—the proposal that President Clinton vetoed. See id. Consequently, if Congress passes the current Republican proposal, it could very well be vetoed again. Return to text.

[19] The Congressional Budget Office projects that a 10% annual increase in Medicaid spending over the next seven years is necessary to maintain existing services levels. CONGRESSIONAL BUDGET OFFICE, THE ECONOMIC AND BUDGET OUTLOOK: FISCAL YEARS 1997-2006 74 (May 1996) [hereinafter BUDGET OUTLOOK: 1997-2006]. The Republican leadership during the first session of the 104th Congress proposed funding Medicaid at a level $182 million below the projected needs over seven years. Christina Kent, Threatened by Reform?, AM. MED. NEWS, Oct. 23, 1995, at 1. This proposed cut would have reduced annual growth from the current rate of 10% per annum to about 2%. Christina Kent, Radical Medicaid Plans Shift Power to States, AM. MED. NEWS, Oct. 9, 1995, at 1. After negotiations, the Congress passed a budget that cut Medicaid by $176 billion, approximately 17% less that the projected need. Christina Kent, AMA Promotes State Feasibility on Medicaid-With Safety Net, AM. MED. NEWS, Dec. 18, 1995, at 3 [hereinafter Kent, State Feasibility]. President Clinton vetoed this budget. Id. In the second session of the 104th Congress, Republicans proposed $72 billion in cuts over 6 years and, as of the writing of this Article, this proposal is still under debate. Return to text.

[20] Expressing his concerns about pending Medicaid reforms to a group of public health officials, former Surgeon General C. Everett Koop, M.D., said he had "never seen such discouragement among health care professionals." Surgeon General Koop later concluded that "most of the reform plans have more to do with political posturing and very little to do with what is best for the health of the American people." Deborah L. Shelton, Public Health Fears Threat from Declining Funds, AM. MED. NEWS, Nov. 20, 1995, at 6. Return to text.

[21] CONGRESSIONAL BUDGET OFFICE, AN ANALYSIS OF THE PRESIDENT'S BUDGET PROPOSAL FOR FISCAL YEAR 1996 45 (Apr. 1995); Telephone Interview with Nani Coloretti, Office of Management and Budget (July 10, 1996) [Coloretti Interview]. Return to text.

[22] See S. 1357, 104th Cong., 1st Sess. §§ 2121, 2122, 7014 (1995). Return to text.

[23] See infra notes 33-50. Return to text.

[24] MEDICAID SOURCE BOOK, supra note 1, at 319. Return to text.

[25] Id. at 319-320. Return to text.

[26] Id. at 321. Return to text.

[27] U.S. GENERAL ACCOUNTING OFFICE, MEDICAID: STATES USE ILLUSORY APPROACHES TO SHIFT PROGRAM COSTS TO THE FEDERAL GOVERNMENT 2 (1994) [hereinafter ILLUSORY APPROACHES]. Return to text.

[28] Id. at 1. Return to text.

[29] According to the General Accounting Office, Michigan, Tennessee, and Texas are among the worst abusers of the DSH program. Id. Return to text.

[30] MEDICAID SOURCE BOOK, supra note 1, at 322. Return to text.

[31] THE KAISER COMMISSION ON THE FUTURE OF MEDICAID, MEDICAID SPECIAL FINANCING ARRANGEMENTS: DISPROPORTIONATE SHARE HOSPITALS (DSH) PAYMENTS, PROVIDER TAXES, AND INTERGOVERNMENTAL TRANSFERS 3 (1995) [hereinafter KAISER COMMISSION]; ILLUSORY APPROACHES, supra note 27, at 5, 10. Return to text.

[32] Rowland, supra note 17, at 4. Return to text.

[33] Telephone Interview with the Health Cost Estimates Unit, Congressional Budget Office (July 10, 1996). Return to text.

[34] 42 C.F.R. § 432.69 (1985); MEDICAID SOURCE BOOK, supra note 1, at 500. Return to text.

[35] The Health Care Financing Administration is the agency within the Department of Heath and Human Services that administers federal Medicaid spending and oversees state Medicaid programs. See Vladeck, supra note 4, at 2. Return to text.

[36] Id. Return to text.

[37] MEDICAID SOURCE BOOK, supra note 1, at 500 (42 C.F.R. § 433.45(b) (1986) listed two conditions regulating the use of donated funds: 1) the funds had to be transferred to the Medicaid agency and be under its administrative control, and 2) the funds could not revert to the donor unless the donor was a nonprofit organization.). Return to text.

[38] Id. at 501. Return to text.

[39] Id. at 502. Return to text.

[40] ILLUSORY APPROACHES, supra note 27, at 12. Return to text.

[41] MEDICAID SOURCE BOOK, supra note 1, at 501. Return to text.

[42] Medicaid Voluntary Contribution and Provider-Specific Tax Amendment of 1991, Pub. L. No. 102-234, 102 Stat. 234 (1991); see MEDICAID SOURCE BOOK, supra note 1, at 500, 511. Return to text.

[43] KAISER COMMISSION, supra note 31, at 2; MEDICAID SOURCE BOOK, supra note 1, at 503-113. Return to text.

[44] See S. 1357, 104th Cong., 1st Sess. § 2121 (1995) (amended by S. Amd. 3028). Return to text.

[45] Studies in Brief: States Like New Hampshire and Louisiana, INSIDE HEALTH CARE REFORM 1 (June 1, 1995). The Center on Budget and Policy Priorities found that the Senate bill would "lock in the historical spending patterns among states." Id.; see S. 1357, 104th Cong., 1st Sess. § 2121 (1995) (amended by S. Amd. 3028). Return to text.

[46] Studies in Brief, supra note 45. While this budget package was vetoed by President Clinton, see supra note 18, similar fixes were part of the Omnibus Consolidated Recision and Appropriations Act of 1996, Pub. L. No. 96-10, § 519 (1996), which was subsequently enacted as a compromise budget. Return to text.

[47] Alabama, Connecticut, Kansas, Michigan, Missouri, New Jersey, South Carolina, Tennessee and Texas. KAISER COMMISSION, supra note 31, at 11. Return to text.

[48] 141 CONG. REC. S16,808 (daily ed. Nov. 8, 1995). Return to text.

[49] The Medicaid Voluntary Contribution and Provider-Specific Tax Amendment of 1991, Pub. L. No. 102-234, 102 Stat. 234 (1991); see MEDICAID SOURCE BOOK, supra note 1, at 321-22. Return to text.

[50] 141 CONG. REC. S16,808 (daily ed. Nov. 8, 1995). Return to text.

[51] Id. Return to text.

[52] See S. 1357, 104th Cong., 1st Sess. § 7481 (1995) (amended by S. Amd. 3028). Return to text.

[53] Id. Return to text.

[54] CONGRESSIONAL BUDGET OFFICE, ECONOMIC AND BUDGET OUTLOOK: AN UPDATE 45 (1995) [hereinafter BUDGET OUTLOOK: AN UPDATE]. Return to text.

[55] Id. Return to text.

[56] Id at 13. Return to text.

[57] Id. at 14, 58-59. Return to text.

[58] Id. Return to text.

[59] Id. at 15. Return to text.

[60] Id. Return to text.

[61] See S. 1357, 104th Cong., 1st Sess. § 7481 (1995) (amended by S. Amd. 3028). Return to text.

[62] 141 CONG. REC. S16,808 (daily ed. Nov. 8, 1995). Return to text.

[63] See Thomas Daschle, Democrats Offer Amendments To Get Budget Negotiations Moving, Correct Worst Problems in Reconciliation Bill, Nov. 2, 1995, available in WESTLAW, File No. 11630810. Senator Daschle called the Roth amendment a "illegal use of nearly $12 billion in COLA funds as offsets to buy Republican votes for reconciliation." Id at 2. This shifting of funds can legitimately be characterized as illegal because the Congressional Budget Act prohibits the use of funds not included in the budget (Social Security) to pay for budget expenses (Medicaid). Id; see 2 U.S.C. § 641(d), (g) (1995). Medicaid is included in the general budget, while Social Security is funded separately through the Social Security Trust Fund. See Daschle, supra, at 2. Return to text.

[64] Daschle, supra note 63, at 2. Return to text.

[65] BUDGET OUTLOOK: AN UPDATE, supra note 54, at 22. Return to text.

[66] Id. Return to text.

[67] As discussed earlier, using saving from an off-budget program, such as Social Security, to fund an on-budget program, such as Medicaid, is a violation of Congressional budget rules. Daschle, supra note 63, at 2; see 2 U.S.C. § 641(d), (g) (1995). Return to text.

[68] As states have felt the pressures of rising Medicaid costs, they have looked for alternative strategies for providing adequate health care while limiting costs. In order to facilitate more effective methods of providing Medicaid services, states have had to deviate from the traditional Medicaid structure. David Parrelle, Statement Before the U.S. House Subcommittee on Human Resources and Intergovernmental Relations, Jan. 18, 1996, available in Federal Document Clearing House. One way that the federal government satisfied this need for flexibility is through waiver programs such as the section 1115 research and demonstration waiver. Id. This waiver allows a state to set up an experimental health care delivery program and determine whether it will meet the needs of the state. Id. at 4. Even though waiver programs are designed to provide flexibility, the Health Care Finance Administration reviews the waiver to ensure it meets certain criteria. Id. at 5. Return to text.

[69] 141 CONG. REC. S16,847 (daily ed. Nov. 9, 1995). Return to text.

[70] Id. Return to text.

[71] Robert Reischauer, Statement Before the U.S. Senate Committee on Finance, Feb. 29, 1996, available in Federal Document Clearing House. Return to text.

[72] This per capita cap proposal, which I proposed in November 1995, 141 CONG. REC. S16,845-48 (Nov. 9 1995), is quite similar to the proposal President Clinton announced in December 1995. Medicaid Per-Capita Cap Locks in State Disparities, WASH. HEALTH WK., Dec. 18, 1995, at 1; see BUDGET OUTLOOK: 1997-2007, supra note 19, at 61. The President's per capita cap proposal is estimated to save $54 billion over six years. Rowland, supra note 17, at 4. The National Association of Governors adopted a Medicaid budget proposal that includes a variation on the per capita cap approach. Coloretti Interview, supra note 21. Return to text.

[73] See, e.g., FLA. STAT. § 361.081 (1995). Return to text.

[74] Id. Return to text.

[75] See Chafee Drops Medicaid Bill; HMOs Weary of Block Grants, INSIDE HEALTH CARE REFORM, June 1, 1995, at 1; Chafee Medicaid Reform Alternative to Block Grants Evolving in Senate, INSIDE HEALTH CARE REFORM, June 15, 1995, at 1. Return to text.

[76] GOVERNMENT ACCOUNTING OFFICE, MEDICAID: RESTRUCTURING APPROACHES LEAVE MANY QUESTIONS 6 (Apr. 1995). This provides great flexibility for states to alter state Medicaid programs to adapt to the changing needs of beneficiaries without having to go through the arduous Medicaid waiver process for each program modification. Return to text.

[77] Per capita caps "put states at full risk for the management of the program." Id. Return to text.

[78] 141 CONG. REC. S16,847-48 (daily ed. Nov. 9, 1995) (quoting David Broder). Return to text.

[79] 141 CONG. REC. S16,848 (daily ed. Nov. 9, 1995). Return to text.

[80] Kent, State Feasibility, supra note 19, at 1; see H.R. 2491, 104th Cong., 1st Sess. (1995). Return to text.