BLUE DOG BUDGET PROPOSED; INCLUDES PER CAPITA CAP ON MEDICAID
PROPOSAL WHICH WOULD FREEZE CALIFORNIA'S RECEIPTS AT LOW
LEVEL
The group of Capitol Hill lawmakers that call themselves the "Blue Dog Democrats," of
which Rep. Gary Condit (Ceres) is a key leader, introduced its budget balancing proposal on
Wednesday. The proposal's authors calculate that the plan would achieve $500 billion in deficit
reductions between FY1998 and FY2002, reaching a budget surplus by 2002 if Social Security and
other trust fund surpluses are factored in, and by FY2007 if they are not.
The proposal would, however, impose a state-by-state per capita cap on Medicaid spending
in order to save $26 billion over seven years. The per capita cap concept, which is also proposed by
the Clinton Administration, would hamstring California. A state-by-state per capita cap favors states
which already provide rich levels of medical service to a narrow range of patients -- such states could
simply expand coverage and take in federal dollars at a high matching rate. California, however, is at
the other end of the spectrum -- providing very cost-efficient service to a wide range of patients.
(According to GAO, California ranks lowest among states in spending per patient, yet we are 6th
highest in breadth of patient coverage.) A Medicaid per capita cap would permanently lock in the
high federal receipts of free-spending states, and prejudice cost-conscious states. Thus, a new patient
in, say, New York would have the benefit of many more federal dollars than his or her counterpart in
California -- at California taxpayers' expense. One positive note on the Medicaid front for California
is the proposal to provide additional funds for states with low per capita limits, though details were
not provided.
Other proposals in the Blue Dog budget plan include a 0.8% downward adjustment in
indexation of the Consumer Price Index (CPI) which is used to calculate increases in Social Security
and other programs and to index tax brackets. It proposes to save $119 billion under Medicare,
including $38.3 billion from hospitals in part achieved by removing Graduate Medical Education and
Indirect Medical Education payments and creating a teaching hospital trust fund. It would also
reserve funds to allow currentl resident legal immigrants to continue receiving SSI and food stamps
for two years. The Blue Dog budget proposes to save $166.5 billion through reductions in myriad
discretionary spending programs in education, health, agriculture, research, defense and other areas.

Volume 4, Bulletin 7 -- February 27, 1997