Senate Committee on Finance Hearing on
“The Future of Medicaid:
Strategies for Strengthening America 's Vital Safety Net”

Statement of Barbara Kennelly, President
National Committee to Preserve Social Security and Medicare
June 15, 2005

Mr. Chairman and Members of the Committee:

Chairman Grassley, Ranking Member Baucus, and members of the Committee, I appreciate your leadership in holding this hearing on the future of Medicaid—a program of vital interest to our nation's seniors.

Over the next few months, Congress will be considering a number of changes to Medicaid, likely involving substantial cuts to the program. On behalf of the 4.6 million members and supporters of the National Committee to Preserve Social Security and Medicare, I strongly urge you to oppose cuts to the Medicaid program.

For the past forty years, the Medicaid program has played a crucial role in our country's health care system by providing public health insurance for low-income Americans. The program protects those that are among the most medically and economically vulnerable—children, adults, disabled individuals, and seniors—who do not have access to or cannot afford private health insurance. According to the Congressional Budget Office, in 2005 Medicaid will provide health coverage to 58.5 million people (including 5.4 million senior citizens and 9.2 million disabled individuals) ¹.

Older Americans benefit from an array of important services provided by Medicaid, such as: hospitalization, physician services, long-term care, prescription drugs, clinic services, prosthetic devices, hearings aids, and dental care. While seniors represent only 9 percent of Medicaid's enrollees, they receive over a quarter of Medicaid's expenditures. Seniors receive a larger share of Medicaid's expenditures because they require more frequent and expensive medical attention. The Kaiser Family Foundation estimates that in 2003 the Medicaid program spent almost $13,000 per senior. ²

Senior citizens also benefit from Medicaid because of its leading role in our nation's long-term care system. The program's spending accounts for 43% of our nation's total spending on long-term care. For example, Medicaid provides vital financing for nursing homes, which rely on the program for about half of their total funding. Further, nearly 60 percent of all nursing home residents receive Medicaid.

The fiscal year 2006 budget resolution passed by Congress targets the Medicaid program for billions of dollars in reconciled cuts over the next five years. The National Committee strongly opposes any cuts or funding caps to the Medicaid program. Cutting the program or imposing caps on federal payments to the states would disproportionately hurt seniors by ending coverage for millions of beneficiaries and/or shifting rising health care costs on to state governments that are already struggling to meet the needs of an aging population.

It is impossible to make meaningful reforms to the Medicaid program without examining the flaws in our nation's health care system. The growth in Medicaid spending is symptomatic of the larger problems with health care, such as: growing health care costs, skyrocketing prices of prescription drugs, declining employer-sponsored health care coverage, and the increasing number of the uninsured. Despite these daunting facts, Medicaid's overall growth rate is significantly lower than that of private health insurance premiums (6.9 percent for Medicaid versus 12.6 percent for private insurance premiums) ³.

About twenty-two percent of National Committee member households have incomes below $15,000 per year and many are eligible for Medicaid benefits. Our members know that the program's financing structure has proven highly successful in responding to difficult economic times because it guarantees coverage to all those who are eligible. Therefore, we believe it is essential to preserve the current structure of the Medicaid program.

Thank you for giving me this opportunity to discuss Medicaid and to share the National Committee's views on the program before this Committee. As always, I look forward to working with you on the host of issues impacting America 's seniors.

1Congressional Budget Office. “Fact Sheet for CBO's March 2005 Baseline: Medicaid and the State Children's Health Insurance Program”. Washington , D.C. : March 2005.

2 Kaiser Commission on Medicaid and the Uninsured. “The Medicaid Program at a Glance.” The Henry J. Kaiser Family Foundation. Washington , D.C. : January 2005.

3These figures refer to the average growth rate per enrollee for acute care from FY2000-2003. For additional information, see John Holahan and Arunabh's article “ Understanding The Recent Growth In Medicaid Spending, 2000-2003” from the January 26, 2005 edition of Health Affairs.

The National Committee is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the board of directors and professional staff. The work of the National Committee is directed toward developing a secure retirement for all Americans.