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February 2008

Update on Federal Activities

On February 4, 2008, the administration submitted its budget for fiscal year 2009. The new budget aims to slow growth in health care spending, with $18.1 billion in cuts to Medicaid and $183 billion in cuts to Medicare. At the same time, the budget includes a $19.5 billion increase in the SCHIP program. All of these numbers are based on Office of Management and Budget projections over the next five years. The response from Democratic Congressional leaders to the budget proposal has been mostly negative; Senate Finance Committee Chairman Max Baucus called the budget “dead on arrival.”

The Medicaid cuts would primarily come by decreasing state match rates for certain services and by expanding the populations that states can enroll in managed care plans. The reduction in expenses in the Medicare program is primarily driven by decreases in provider reimbursement. The increase in funding for SCHIP of $19.5 billion over the baseline is primarily a result of revised estimates of how many children would take advantage of the program. The new numbers are not based on current enrollment; rather, they reflect an expectation that a higher percent of children who are eligible will be enrolled.