In his proposed federal budget for FY 2006, President Bush is proposing $60 billion worth of cuts to the Medicaid program. Concerned about perceived gaming by states and not wanting to open up the far more troubling can of worms that is Medicare, the Administration singled out Medicaid for the largest cuts. Their eagerness to contain Medicaid is not surprising given 211 percent spending growth over the past five year.

However, this comes at a time when states face enormous challenges in meeting the relentless fiscal demands of the world’s largest, most complex, and fastest growing health program. In recent years, the bulk of cost increases are due to a massive 40 percent increase in enrollment and the demands of caring for low-income seniors and persons with disabilities. In fact, 42 percent of state Medicaid budgets go to cover health care for Medicare beneficiaries.

Working through the National Governors Association (NGA), the governors are united in resisting cuts to Medicaid and pushing for greater flexibility. And provider groups and patient advocates are organized in their opposition as well.

To better understand the debate over Medicaid spending, check out Medicaid in 2005: Principles & Proposals for Reform. This excellent new briefing paper describes the toughest issues and challenges facing Medicaid today, dispels key myths, and offers principles and basic options for reform. Written by Vern Smith and Greg Moody of Health Management Associates, the paper was commissioned by the NGA.