UNIVERSITY OF MICHIGAN

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DISSENTING VIEWS OF MEDICAID BUDGET

RECONCILIATION AMENDMENTS (TITLE IV, SUBTITLE C)

We are compelled to register our strong opposition to the Medicaid Budget Reconciliation Amendments of 1989, reported by the Committee on Energy and Commerce on July 13, 1989. The five Medicaid provisions will greatly increase Federal spending in the Medicaid program, and accomplishes this by means of a Reconciliation bill which is supposed to be a budget-cutting vehicle. Under the Concurrent Resolution on the Budget for fiscal year 1990 (H. Con. Res. 106), $200 million of new budget entitlement authority [NEA] is available for fiscal year 1990 Medicaid spending. And, by slipping effective dates on some of the pending provisions so that only one calendar quarter's worth of spending occurs in fiscal year 1990, the provisions will technically meet the budget target. But in the outyears, these Medicaid provisions will cost additional billions of dollars. The Administration estimates that, taken together, these Medicaid measures will increase Federal spending in the Medicaid program by approximately $8.6 billion over a 5-year period.

We also think this legislation must be considered in the context of the Gramm-Rudman-Hollings Law. The Administration is the of ficial scorekeeper, and to the extent that the legislation matches the Health Care Financing Administration [HCFA] estimates, the fiscal year 1991 budget deficit will be increased by $1.2 billion. This is at a time when the Gramm-Rudman-Hollings deficit target is set at $64 billion.

Irrespective of the various merits of these Medicaid provisions, the spending levels that these measures will produce violate any sense of restraint on increases in the Federal budget. And we must also not forget the Medicaid expansions that Congress has already enacted in the last few years as part of the Medicare Catastrophic Coverage Act, The Family Support Act, OBRA-87, and the Tax Technicals of 1988 which will have a major impact on Federal spending in fiscal year 1990. In fiscal year 1990 alone these four laws will increase Federal Medicaid expenditures by over $1 billion and the 5-year costs will exceed $11 billion.

Another major concern we have in the attempt to rationally analyze these Medicaid provisions is the vast difference between the cost estimates of these measures by the Congressional Budget Office [CBO] and the Health Care Financing Administration [HCFA]. The Congressional Budget Office estimates the Federal costs of these Medicaid provisions at approximately $4.1 billion over 5 years. Preliminary estimates from HCFA are 5-year costs of $8.6 billion. The fact that these estimates by CBO and HCFA differ by $4.5 billion over a 5-year period makes it extremely difficult to evaluate the true fiscal impact of these provisions. Though forecasting is not an exact science, a difference of this magnitude is truly disturbing.

In the recent past when we were considering the drug benefit under the Catastrophic Coverage Act in the Medicare program, there was a similar dispute between HCFA and CBO about the projected costs of a benefit. When the Catastrophic legislation was being considered, HCFA actuaries estimated that the cost of the drug benefit would be two to three times the cost estimated by