At a time when Congress is deciding how best to stimulate the sagging economy, the Bush administration is pushing ahead with cuts in Medicaid funding that will further strain state and local budgets and reduce services to children and people with chronic illness and disabilities. Congress should include a moratorium on these rule changes in its stimulus package. This would give federal and state lawmakers more time to evaluate the practical and economic impact of the changes and to look for alternatives.

Maine’s commissioners of health and human services and education announced Wednesday that the state faced $45 million in reduced Medicaid funding in 2008 and 2009 due to rule changes set to go into effect on March 1. Communities, including schools and service providers, which would in many cases still be required by federal law to provide these services, would see a reduction of more than $140 million. The first change, set to go into effect March 1, would disallow federal payments for targeted case management – the coordination of medical, social and education services to help Medicaid recipients live in a community setting.

Additional rule changes that reduce or prohibit additional federal Medicaid payments for rehabilitation services, transportation for school-aged children and outpatient services provided by hospital-based physicians are expected in coming months. The total cuts could exceed $11 billion over several years.

The Centers for Medicaid and Medicare Services say the changes are needed to comply with the Deficit Reduction Act of 2005, but analyses have shows that CMS has gone far beyond what Congress intended when it passed the act. That is reason enough to slow down the rules. Congress had passed a moratorium on rehabilitation services rule changes as part of its bill on the children’s health insurance; the president’s veto quashed that moratorium.

On the issue of case management for children in foster care, for example, Sen. Charles Grassley, then chair of the Senate Finance Committee, expressed concerns about CMS’s interpretation of the law in 2006. The disallowance of reimbursement for targeted case management services for children in foster care “is in direct contradiction to congressional intent,” the Iowa Republican wrote to then Health and Human Services Secretary Michael Leavitt.

Despite such concerns, CMS has moved ahead with that and other rule changes.

If the impact on people were not enough, the rules will be a further drag on the economy. “Reduced federal spending on health care of that magnitude would have a dampening effect on the economy and would undermine the goals of the economic stimulus legislation to increase consumer buying power and increase employment,” concluded Covington & Burling, a law firm hired by a group of states, including Maine, to analyze the rule changes.

The Senate is now considering the stimulus package and amendments to increase Medicaid funding to the states are expected. Such an increase in funding would largely be negated by the CMS rule changes, so a moratorium, which Sen. Olympia Snowe, a member of the Finance Committee, supports, would be a bigger help.

Rather than further depress the economy and risk leaving thousands of vulnerable people without the services they need, Congress should delay these changes.