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Medicaid in the Crosshairs

The assault on Medicaid is about to begin. GOP sources have told Politico's Jonathan Allen that House Republicans will propose $1 trillion in cuts from the program. Exactly what form those cuts would take is not entirely clear. But a trillion dollars over ten years is serious money and Capitol Hill sources are saying such a large cut would likely take the form of two dramatic changes: Eliminating the Medicaid expansion that takes place under the Affordable Care Act and then converting the entire program into a system of block grants.

[Click here to read about the House Republican plans for Medicare.]

My sources know more about what happens in the Democratic caucus than in the Republican caucus, so (as they admit) they could be wrong. What they say is consistent with other reporting, not to mention the right's recent rhetoric. But the Politico story could be a trial balloon--or even misinformation. It's possible the Republicans will end up proposing something less drastic.

I'll obviously have more to say about the proposal, whatever it contains, once it's official. In the meantime, though, I hope that anybody writing on these proposals mentions, prominently, that rolling back the Affordable Care Act's Medicaid expansion would entail taking health insurance away from about 15 million people. That's the official, Congressional Budget Office projection of how many people will get coverage under Medicaid once the Act is fully in place.

As for turning Medicaid into a block grant, here's a quick refresher on what that involves. Right now, Medicaid is an entitlement program. That means the federal government, in partnership with the states, must enroll everybody who meets the program's guidelines. In other words, if millions of additional people become eligible because, say, they lost their job-based insurance in the recession, than the feds and the states have to provide them with coverage and find some way to pay for it. And it can't be spotty coverage, either. By law, Medicaid coverage must be comprehensive. 

At least, that's the way it works now. If the law changes and Medicaid becomes a block grant, then every year the federal government would simply give the states a lump sum, set by a fixed formula, and let the states make the most of it. Conservatives claim block grants would give states the flexibility they need to make their programs more efficient. But, as Harold Pollack has noted in these pages, states already have some flexibility. And because demand for Medicaid tends to peak during economic downturns, when state tax revenues fall, the likely impact of a block grant scheme would be to make Medicaid even less affordable at the time it is most necessary.

That's not to say plenty of governors wouldn't take advantage of block grant status to change their Medicaid programs in ways they cannot now. They surely would--by capping enrollment, thinning benefits, increasing co-payments, and so on.

In the past, states have cut Medicaid (or stretched it, depending on your perspective) by reducing what it pays doctors, hospitals, and other providers. But the payments are so ridiculously low now that many providers have simply stopped seeing Medicaid patients. It's hard to imagine states could find more savings by reducing payments even further, although I'm sure a few would try, making it even more difficult for beneficiaries to get timely care. 

Oh, and keep in mind that the elderly and people with disabilities are the ones responsible for most of the program's spending. [See graph above.] As Paul Van de Water of the Center on Budget and Policy Priorities noted recently:

The risks would likely be greatest for poor people with severe disabilities, who often need an extensive array of health services. Indeed, states would likely curtail benefits such as mental health services and therapies, many of which are critically needed by people with disabilities and children with special health care needs.

Medicaid has its problems, for sure. But is it really a better source for deficit reduction than agriculture subsidies, defense spending, and tax cuts for the wealthiest Americans?

Update: I tweaked the second paragraph (twice) to make clear that we still don't for sure what the Republicans will actually proposing. I'm certainly hoping it turns out to be something less severe.

Graphic: Kaiser Family Foundation