The aging of the baby boom population and growth of health care costs will create serious financial challenges for Medicaid in the future.  As the Congressional Budget Office stated in the executive summary of the Long Term Budget Outlook published in December of 2003:  "Driven by rising health care costs and an aging population, spending on entitlement programs -- especially Medicare, Medicaid, and Social Security -- will claim a sharply increasing share of the nation’s economic output over the coming decades."  These trends have led to calls for changes in the Medicaid program.

There are some who site the growth in the Medicaid program to claim that the program is fundamentally flawed and needs to be dramatically restructured.  However, as the authors of the legislation pointed out, the costs of the program are not going up because the program is inefficient or broken.  The Medicaid program is complex and expensive because policymakers have asked it to serve several vital functions.  The Medicaid program has become our default long-term care program as well as the source of health care for millions of low-income children, disabled and elderly and the primary source of funding for safety net health care providers.  The increased spending for Medicaid is driven by demographics - particularly the increased demand for long-term care with the aging of society, an increase in the low-income population dependent upon the safety net for health insurance and overall health care inflation.   In fact, per capita spending on Medicaid is growing at a slower rate than Medicare or the private sector.

The discussion regarding Medicaid's future must go beyond budgetary issues and consider changes in the broader context of the impact that changes will have on the populations served by Medicaid, health care providers and states.  One of the important features of the commission is that it would bring together key stakeholders in the Medicaid program, including states, health care providers and advocates for Medicaid beneficiaries, to ensure that changes.  Instead of simply looking for policies to meet budgetary targets, policymakers need to consider reforms that make the program more efficient and effective in meeting the needs of vulnerable populations who depend upon Medicaid. 

The Commission would be tasked with identifying inefficiencies in the system and initiatives that have been successful and delivering services more effectively.  This will allow Congress and the administration to consider changes in the Medicaid program based on sound policies  that would improve the program rather than changes driven entirely by budgetary considerations.

The budget submitted by President Bush calls for savings of $60 billion in Medicaid from what the administration refers to as "inappropriate federal spending on Medicaid intergovernmental transfers and other overpayments."  Many of these program integrity proposals may have merit in isolation, but they need to be viewed in the context of the ability of states to serve the Medicaid population. Making changes in the program to achieve savings in the federal budget without considering the impact on other stakeholders will have unintended consequences and would increase the costs of health care in the private sector.

Changes in the Medicaid program are inevitable given the demographic pressures facing the program.  The question is how these changes should be made.  The commission established by the Smith-Bingaman bill will allow for a more thoughtful and rationale discussion about the future of the Medicaid program than the Congressional budget process would allow.