Funding for Medicaid and discretionary spending on public health programs are at risk as negotiations over a deficit reduction package reached a critical stage in July. The result of these discussions will have a significant and lasting impact on the future of our nation's health.

Republicans are demanding deep spending cuts before meeting an August 2 deadline for raising the debt ceiling and preventing the government from defaulting on its financial obligations. The Obama administration has signaled a willingness to reduce spending on Medicare and Medicaid in return for ending corporate tax subsidies and incentives to boost the economy.

Medicaid, the largest source of funding for mental health services, has been a target for cuts over the last several months. The House in April passed a budget that would make draconian cuts to the program (nearly $1 trillion). Lawmakers have also proposed a repeal of the "maintenance of effort" requirement, which would cut the number of enrollees, and called for global spending caps, which would cripple the service capacity of Medicaid.

The deficit reduction talks are now considering an administration proposal to cut $100 billion from Medicaid over the next decade, primarily by changing the way the federal government makes payments to the states. The proposal would create a "blended rate" for all federal contributions to the state Medicaid and Children's Health Insurance Program (CHIP).

Currently, the federal government pays a percentage of each state's Medicaid costs, known as the Federal Medical Assistance Percentage (FMAP), which ranges by state with a national average of 57 percent. The federal government also pays an average of 70 percent of the costs states incur for running CHIP. Under the Affordable Care Act, a third rate will take effect in 2014 when the federal government begins paying 100 percent of the costs of expanding Medicaid to 133 percent of the federal poverty level. The 100 percent FMAP for this population is set to be reduced to 90 percent by 2020.

Blending these rates into one will reduce the percentage the federal government pays and save an unspecified amount of money. Because states do not have the money to compensate for the reduced federal funding, Mental Health America is concerned that they will likely begin reducing or eliminating covered services in Medicaid and reducing provider rates, forcing providers to go out of business or stop providing services to Medicaid beneficiaries, greatly reducing access.

Discretionary spending for agencies such as SAMHSA and NIH are also vulnerable to deep cuts. Since 2001, the increase in non-security domestic spending, when adjusted for inflation and population growth, has been zero. But the negotiations over a deficit reduction plan propose $3 in spending reductions for every $1 in tax increases.

Senate Budget Chairman Kent Conrad (D-N. Dak.) has presented a proposed budget that would change this equation and protect the social safety net by taking a more balanced approach on spending reductions and revenue increases. It would make only modest reductions to Medicare and Medicaid, preventing the savage changes proposed by House Republicans. Although unlikely to win full Senate approval, Democrats may try to merge some of the plan into a bipartisan deficit reduction agreement.

Negotiations over a deficit reduction plan remain extremely volatile and it is unclear how Medicaid and public health funding will be affected. Congress must also give its approval to any plan before August 2. Mental Health America will continue to oppose any threats to Medicaid and other supports and services for individuals with, or at risk of, mental health and substance use conditions. ::