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Please Ask Ryan About This Tonight

Just in time for tonight’s vice presidential debate, the Obama campaign has released an ad about a big government health care plan that Mitt Romney and Paul Ryan have in their crosshairs. But the ad doesn’t focus on Medicare, about which you’ve heard so much this election season. It focuses on Medicaid, about which far too little has been said. Although Mitt Romney and Paul Ryan have proposed to transform both programs, the changes and spending cuts they have in mind for Medicaid would probably be more devastating. And the poor wouldn’t be the only ones to feel it. 

The main reason is a group that many people don’t associate with Medicaid: Senior citizens. Medicaid provides health insurance to low-income people and, at any one time, it does so primarily for non-elderly—mostly kids and their mothers. But two-thirds of the money that Medicaid spends goes to that minority of enrollees who are disabled or over 65, because they are the ones with really big medical bills.

Many of these people are “dual eligibles.” They use Medicare for their regular and acute medical expenses, whether it’s getting a routine checkup or treatment for a heart attack. They rely on Medicaid to pay the portion of the bills Medicare does not cover, like deductibles for hospitals stays. They also rely on Medicaid to pay for long-term care, whether it’s staying in a nursing home or having caregivers at their own homes. That last part is critically important. Staying in a nursing home is very expensive—like $70,000-a-year expensive, according to the Kaiser Family Foundation. Having part- or full-time assistance at home also runs into tens of thousands of dollars a year.

Many elderly Americans can’t pay those bills, at least not for any significant length of time. That’s when they turn to Medicaid. Today, 70 percent of people who live in nursing homes use Medicaid—many of them middle class people who, having burned through their savings, are as dependent upon the program as people who never had the money in the first place.

So what is Romney proposing to do?

Like Ryan, who proposed an almost identical scheme in his budget, Romney would give the states a lot more control over the program. Proponents of this approach suggest that states could use the flexibility to find more creative and, ultimately, less costly ways of providing care. When Romney and Ryan talk about their scheme, they almost always describe it in those terms—as a way to foster innovation.

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In principle, it’s not a crazy idea. Some states would take advantage of flexibility to encourage better care, although the trick, as always, is making sure states don’t exploit flexibility to back out of the program’s commitments to their neediest residents. But Romney and Ryan don’t simply want to change the way Medicaid works. They also want to reduce the money it gets from the federal government. 

Romney has said that, under his plan, the federal government would limit its federal Medicaid contribution to inflation plus one percentage point. That may sound like a reasonable rate, until you remember that health care costs almost always rise faster than regular prices, that the population is growing, and that the population is getting older as it gets bigger. Factor that in, as budget analysts do, and it works out to a cut of $800 billion over ten years, relative to what Medicaid would have cost otherwise. Or, to put it another way, Medicaid spending in 2022 would be about one-third less than it would have been without the block grant. And that figure probably understates the impact. Among other things, Romney has also committed himself to an overall cap on federal spending that would, almost certainly, require steeper cuts

Conservatives point to Rhode Island, which had some success reducing Medicaid costs, as proof that states can live with these cuts. Don’t be surprised if Ryan mentions that tonight, should the topic come up. But subsequent analyses suggested the savings in Rhode Island were not nearly that big. Truth is, it’s virtually inconceivable that states could save enough money to make up for the severe funding reductions that Romney and Ryan have proposed. Instead, states would have to scale back their programs. The only question would be how.

When researchers for the Kaiser Foundation and Urban Institute analyzed the original House Republican proposal, which was based on Ryan’s, they determined that between 14 and 27 million low-income people would lose insurance. That’s the figure I’ve cited on several occasions in this space. But, for the purposes of that analysis, the researchers assumed states would protect the elderly and disabled from cuts. elderly. Most likely, at least some if not all states would also cut spending on long-term care. That would spare some non-elderly people from pain, but only by spreading that pain to everybody else, including the elderly and disabled.

And the pain would be severe. States might respond by paying providers less, which sounds easy and efficient until you realize that Medicaid already pays a lot less than other insurance programs. Nursing homes and home care providers would likely respond by reducing the availability of services—say, limiting the number of nursing home beds available to Medicaid patients—or paying less money to staff, which is a surefire way to attract lower quality providers. If you’ve read any stories about understaffing and abuse in nursing homes, you can understand why this would be a really bad idea. “We are talking about [patients] who are pretty vulnerable and frail,” says Barbara Lyons, a senior vice president at the Kaiser Foundation. “And we know that staffing and quality of nursing homes needs to be improved. You worry what happens if, on top of a system where improvements are needed, what the impact cuts related to a block grant would have.”

Alternatively, states could target beneficiaries directly. They could put a cap on the number of people in the program or do away with existing financial protections—by, for example, ending “spousal impoverishment protection.” Under that provision, which has been part of the federal Medicaid statute since 1987, an elderly couple can apply for Medicaid without completely exhausting assets and income, so that a stronger and healthier spouse can continue to live independently. As a briefing from the Center for Medicare Advocacy explains, “The loss of this statutory protection could return the country to the time when all of a couple’s money was used for nursing home care and the spouse in the community was left with, literally, no income at all.”

States could find even more straightforward ways of passing along higher costs, like asking the people who use long-term care to pay higher deductibles and co-payments. Or they could change the income thresholds for Medicaid, so that fewer people qualify for the program in the first place. “The picture is not pretty,” Howard Gleckman, a resident fellow at the Urban Institute and author of Caring for our Parents, wrote last year. Gleckman, who knows as much about this issue as anybody in Washington, went on to explain that the rules “are already very stringent. For instance, to be Medicaid eligibile a person typically must have less than $2,000 in financial assets.” If the federal government lets states make the rules even more stringent, Gleckman concluded, “people may have to be even sicker and poorer than they are today” in order to qualify.

Other experts offer similar assessments. “Cuts to nursing home payment rates of that size would likely mean significantly reduced access to nursing homes and lower quality of care,” Edwin Park of the Center on Budget told me via e-mail. “And these cuts would be on top of the payment reductions nursing homes and other providers have been experiencing as a result of states closing their budget shortfalls.”

By the way, don’t assume this doesn’t affect you simply because, at the moment, you’re not old or disabled. Age or disability is bound to get you at some point. And before then it will probably get one of your close relatives, if it hasn’t already. A major impetus for the creation of Medicare and Medicaid in the 1960s was the realization that crushing bills for the elderly and long-term care affected entire families, indirectly or directly—punishing those without the resources to keep up with the huge bills. Medicaid and Medicare haven’t completely solved this problem, but they’ve gone a long way towards doing so.

Romney and Ryan would take away that protection. They would expose the elderly and disabled, as well their loved ones, to the kind of suffering this country spent decades trying to eradicate. Sometime tonight, or perhaps in the two remaining presidential debates, I hope the Republican nominees get a chance to explain why they think that’s such a great idea.

Update: For more on why we shouldn't expect all states to use flexibility wisely, check out this recent Ed Kilgore item on what he calls the "Mississippi model." This is a really important subject—Ed really nails it—and I'll have more to say about it very shortly.

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