US healthcare A decade after the Gulf war, the US Congress is once again so preoccupied with foreign affairs and recession that it is neglecting health issues at home - including growing Medicaid deficits, writes Howard Berliner

Published:25/04/2002, Volume II2, No. 5802, Page 26

In 1983, Prince wrote a song entitled We are Gonna Party Like It is 1999. US health policy today is partying like It is 1991. The similarities between the domestic and foreign situation this year and in 1991 run deep, and if history is any guide, the outcome is not good for healthcare.

In 1991 (and into 1992), US troops were in battle in a foreign country (Iraq), the economy was in recession, the number of uninsured was increasing, states looked to Congress to help them with growing deficits in Medicaid budgets, and Congress debated much and enacted almost nothing.

In 2002, US troops are in battle in a foreign country (Afghanistan), the economy is in recession, the number of uninsured is increasing, states are looking to Congress to help with growing Medicaid deficits, and Congress is doing very little to address any significant health issues.

The Medicaid programme, which provides healthcare to poor Americans, is an entitlement programme - everyone who qualifies must be accepted into it.When the economy is slow, and the unemployment rate grows, people lose their health insurance and qualify for Medicaid. But this increases costs to the state at exactly the time when tax revenues are down, leading to deficits. Since states have not been able to reduce the benefits offered or keep people out of the programme, they are forced to raise taxes or reduce spending on other social goods to keep Medicaid going.

States also ask the federal government for various kinds of help - increasing the share of the cost that the federal government pays, subsidising the purchase of private health insurance so that people do not need Medicaid, stimulating the economy so that more people are employed etc.Yet Congress has only been able to take action on things directly related to the war on terror or military preparedness.

While Congress has been all blather and no bite, the Bush administration has made subtle changes in policy, beyond just renaming the Health Care Finance Administration the Centers for Medicare and Medicaid Services. CMS has just approved a request from the state of Utah to allow it to reduce some of the benefits that its Medicaid programme provides in return for allowing more people to enrol. It is now studying a request from another state which would reduce its benefits without increasing enrolment. This would obviously have a major impact on Medicaid and its function as a safety net.

One reason why Congress has been so ineffective is the lack of revenues available to spend on social programmes. It was only a year ago that Congress could not decide how to spend the multi-trillion dollar surplus that the government had projected for the next 10 years. There were many options:

create a drug benefit for the Medicare programme, pay off the remaining federal deficit, improve the public education system, finance health insurance for the uninsured.

But in the end, the Bush administration opted for a massive tax reduction to be started immediately and continue over a decade. Combined with a rapidly slowing economy (particularly after 11 September), the real implication of the tax cut is that there is no money left - the surplus is gone.

Republicans do not want to admit that they have spent all the money, so they are content to have discussions without any real intention of doing anything. Democrats have no desire to make a Republican administration look good by actually passing any legislation.Thus, Congress is locked in a game in which the likelihood of anything but a symbolic outcome is unlikely.

After 11 September, there were suggestions that Congress should increase the federal share of Medicaid so that states could pay less, but this idea was rejected by the White House. So states continue to suffer from a lack of revenue - the state of Mississippi closed down its Medicaid programme in early March (until its new budget begins in April) because it ran out of money and the legislature refused to increase the appropriation.

In 1991 and 1992, similar congressional inaction in a time of recession made healthcare an important element of the presidential election, with Bill Clinton promising major health reform. Even though that reform ultimately came to nothing, the parallel should be troublesome to the Republicans.

Though the next presidential election is still two years away, there will be significant congressional elections this autumn, at which a health backlash may be felt. l