Trahant: Warning: Budget tsunamis forecast

Mark Trahant
7/7/10

The health care reform law should significantly boost the amount of money pumped into the Indian health system. That’s the good news. Now brace for the bad: Really bleak budgets are coming soon.

The reasons are global: Governments all across the world are cutting spending and restricting eligibility for programs that people now take for granted. This trend is a wave gathering force like a tsunami. The first notice of this massive wave was when Greece could no longer support its debts with new borrowing. But that country is not alone because the trend is worldwide.

The new government in the United Kingdom is a stark example. The Liberal-Conservative coalition last week said some agencies could face budget cuts of up to 40 percent. According to The Guardian in London, “the only departments not included in the Treasury trawl will be health and international development, which have been ‘ringfenced’ for the current parliament.” Interesting word and concept: A ringfence is a transaction, or in this case a budget, walled off from the rest of the government’s budget. In other words: The National Health Service is supposed to be protected.

But this, too, is a reflection of the tsunami. The cuts to the National Health Service will be more targeted around the issue of efficiency. But there will be cuts.

Of course the United States is different. While we don’t have national health care, federal and state budgets propelled in part by rising Medicaid costs are crashing under the same financial tsunami. Medicaid is a state-federal partnership. Much of the political focus of Medicaid is its role providing health insurance to some 60 million low-income Americans.

According to the Kaiser Commission on Medicaid and the Uninsured health care reform could add another 16 million people to the program over the next five years. But while the focus on Medicaid is on the poor, the program spends two-thirds of its benefits for seniors and for people with disabilities. In theory, a state could end its partnership and save billions of dollars by not participating in Medicaid – but that’s not going to happen because so many of the people who benefit from Medicaid, especially seniors, vote. (One reason why cutting the program’s benefits for low-income people gets so much more attention.)

President Barack Obama has argued – I believe correctly – that this is exactly the wrong time to cut spending. People across the country need help from their government because of the recession. Yet Congress is starting to say “no” anyway, trimming spending that was once considered essential, such as extending unemployment benefits and assistance to buy COBRA health insurance (a subsidy I have relied on since my job disappeared with the death of the Seattle Post-Intelligencer newspaper). The problem for the president is that with a super-majority required in the Senate – 60 votes – there will be far more “no’s” than “yea’s” when it comes to more spending.

“Democrats are leaving Washington for the July 4 recess without passing key parts of their health care agenda,” writes Andrew Villegas for Kaiser Health News. “… with states hit hard by the recession, an extension of extra Medicaid funds also seemed likely.” But because of a “contentious debate, with conservative Democrats and Republicans opposing programs that could add to the deficit.” The result, Villegas writes, is “the Medicaid and COBRA subsidies are still in limbo.”

Many American Indian and Alaska Native patients in the Indian health system are in a precarious spot because of this battle. Some of the increased spending for Indian Health Service depends on increasing Medicaid rolls. This is important because Medicaid, unlike the IHS budget, is an entitlement. Once a person is eligible, the money is supposed to be there (in contrast to a straight budget line that runs out of money once it’s spent). This problem should be simple: States don’t have to pay for patients in the Indian health system because the federal government eventually picks up the cost. But the problem is each state will define eligibility and a tightening of state rules will mean that patients who should be eligible for Medicaid, won’t qualify.

It would be easy to dismiss states as uncaring. But the problem is there are fewer dollars available from tax collections during the recession. State budgets are wrecked by too many promises, ranging from pension obligations to constitutional promises to always balance the budget.

The best course ahead is to be innovative, tap into as much new money now, and prepare for the worst. Indian country can’t pretend that budgets will magically be dammed (or as the British say, ringfenced). The tsunami is on its way.

Mark Trahant is a Kaiser Media Fellow examining the Indian Health Service and its relevance to the national health care reform debate. He is a member of Idaho’s Shoshone-Bannock Tribes and writes from Fort Hall, Idaho. Comment at www.marktrahant.com.

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