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Wisconsin would cut Medicaid spending by $500 million over the next two years, with much of the savings coming from Family Care, under Gov. Scott Walker's budget released Tuesday.

But state Medicaid spending still would go up overall because the state must pay $1.3 billion over the two years to replace federal stimulus money that has been supporting the program. That money ends this year.

The moves would fill the state's $1.8 billion Medicaid gap, half of its $3.6 billion budget shortfall.

Medicaid, the state-federal health plan for the poor, includes BadgerCare Plus, Family Care, SeniorCare and other services. It covers 1.2 million people in Wisconsin, or one in five residents. Enrollment has swelled in recent years as eligibility expanded and the recession led more people to sign up.

Walker called the program "an unsustainable budget challenge" and proposed $500 million in cuts.

About $110 million would come from Family Care, which provides long-term care for people who are elderly or disabled. The reductions mean about 5,000 people on a waiting list for care would be taken off indefinitely, said Lynn Breedlove, executive director of the advocacy group Disability Rights Wisconsin.

"For some people, it could mean they'll be forced into a nursing home," he said.

SeniorCare recipients who qualify for Medicare Part D would have to enroll in the federal drug program instead, saving the state $15 million.

Other trims would come from limiting payments for end-stage kidney disease, getting rid of birth control services for men and eliminating supplemental payments to some hospitals.

To achieve much of the savings, the state would scrutinize Medicaid enrollment and make patients pay more for services.

Walker's budget repair bill for this year, introduced last month but stalled after 14 Democrats boycotted a vote in the Senate, would give the state Department of Health Services new powers to restrict eligibility, modify benefits and make other changes to Medicaid with less legislative review than is required now.

If the federal government doesn't let the health department make certain changes this year — such as reviewing people's income levels more frequently, verifying residency and checking if enrollees are eligible for private insurance — the state would drop at least 50,000 people from Medicaid next year, saving the state $57 million a year or more.

Under the proposed biennial budget, patients would face "modest co-pays and premiums as they transition from the safety net that these programs provide to gainful employment," Walker said.

Jon Peacock, research director for the Wisconsin Council on Children and Families, said the changes "could cause many families in the state to lose coverage because they can't afford the higher BadgerCare premiums or the coverage offered by their employers."

Walker was among some Republican governors who asked the Obama administration last weekend to change Medicaid from an entitlement program to a block grant, as was done for welfare in the 1990s. The move would cap state funding for Medicaid and give states more control over the program.

"I'd like to have a block grant so we could make adaptations, state by state, as we see fit," Walker said by telephone during the National Governors Association meeting in Washington, D.C.

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