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May 12, 2011

Chastened on Medicare Cuts, GOP Takes Aim at Medicaid

Naomi Freundlich

The part of the Ryan budget proposal calling for an overhaul of Medicare—turning it into a voucher program for seniors to buy private insurance—did not go over well with many Americans. In fact, the outcry from seniors from both political parties was great enough that the House leadership has backed away from their insistence that raising the budget debt limit be dependent on revamping Medicare. But what about Medicaid?

So far, the GOP has not backed down from their plan to “reform” the federal-state program that provides benefits to some 69.5 million poor children and adults as well as the disabled and frail elderly in nursing homes. The Ryan budget proposal calls for cutting federal funding for Medicaid and turning it into a block grant program. It also includes the GOP’s repeal of the Patient Protection and Affordable Care Act which would effectively deep-six the health law’s planned expansion of Medicaid. Together, these provisions would result in federal savings of $1.4 trillion over the 2012 to 2022 period, according to the Congressional Budget Office. Yet the agency concluded that although “states would have additional flexibility to design and manage their Medicaid programs and might achieve greater efficiencies in the delivery of care than they do under current law” they would also be required to reduce enrollment rolls, cut provider reimbursement, slash benefits and increase cost-sharing.

A new report from the Kaiser Family Foundation and the Urban Institute, predicts that those policy changes would lead to some 44 million Americans being cut from Medicaid rolls in 2021. These folks, who draw heavily from the population of poor children, the disabled and elderly in nursing homes (a  group barely represented among potential Republican voters), will be added to the expanding ranks of the uninsured.

As the New York Times reports today, the GOP Medicaid changes might actually have more of an impact on seniors than the Ryan Medicare reforms that were recently put on the back burner. “This is a huge deal for the nation’s seniors, and it’s been largely unrecognized,” Jocelyn Guyer, the co-executive director of the Center for Children and Families at the Georgetown University Health Policy Institute tells the Times. Although the elderly and disabled made up just 23% of the Medicaid population in 2010, they accounted for 64 percent of all Medicaid spending—most for long-term care in nursing homes.

With the insistence by House Speaker John Boehner (R-OH) this week that more than $2 trillion in spending cuts be made in exchange for Republican agreement to raise the U.S. debt limit, it seems increasingly likely that Medicaid is one of the programs that will suffer.

There is some organized resistance to the Ryan block-grant plan; recently Sen.Jay Rockefeller (D-WV) led a rally with six other Senate democrats where he decried the block grant program, calling the Ryan plan “a heartless budget” and Washington a “heartless town.”  He added, “Poor people don’t vote, don’t organize, and those who don’t like them do organize, they’re a vulnerable target.” Providers and hospitals, who would surely see reimbursement drop even further and will also see costs shift to them as more uninsured flood the emergency rooms could also prove to be strong allies along with traditional advocacy groups like Families USA and AARP in the fight against block grants.

So, if transforming Medicare into a voucher system and Medicaid into a block grant program are looking to be politically unfeasible, how will the GOP achieve its trillion dollar cuts? Not to worry; there is another plan in the works, something equally damaging but perhaps more politically feasible that is building momentum in the state as well as federal level.

On Monday, members from both houses of Congress introduced “The State Flexibility Act.” This legislation, introduced by Sen. Orrin Hatch (R-UT), along with Reps. Phil Gingrey (R-GA) and Cathy McMorris Rodgers (R-WA) would repeal the maintenance of effort (MOE) requirements barring states from substantially reducing their Medicaid programs before the health care law’s stepped up federal spending comes into effect in 2013. According to its supporters, the legislation would lead to savings for the federal government of nearly $3 billion over the next five years.

Under the 2009 stimulus bill, states were required to maintain Medicaid eligibility standards, payment levels to providers like doctors and nursing homes, and limit out-of-pocket spending increases through the end of June 2011. The ACA extended this, requiring states to maintain their Medicaid benefits through 2013.

Opponents of the MOE requirements say that faced with crushing budgets, states should be able to make cuts and reform their Medicaid programs as they see fit. And the collatoral damage would be minor: according to Rep. Gingrey, only 300,000 beneficiaries would be eliminated from the program nationwide if MOE rules were suspended.

That number—which is still 300,000 too many poor and vulnerable Americans that will be added to the rolls of the uninsured and shifted back to over-burdened safety-net providers—is questionable and not independently confirmed. According to a recent article in Mother Jones, “GOP’s Kinder, Gentler Medicaid Gutting,” in 2001, “before the federal government made Medicaid money contingent on the MOE rules, states took 1.2 to 1.6 million people off Medicaid. Having already made steep cuts to provider payments and benefits, 'some states will certainly make eligibility cuts,’ says Edwin Park, VP for health policy at the Center for Budget and Policy Priorities.”

The article continues, “Moreover, by introducing new procedural hurdles—Mississippi, for instance, has made it harder for people to renew coverage—states could deter more-vulnerable residents from signing up, says Park. Similar proposals put forward in California would have reduced enrollment by 500,000, he adds.”

The reason why “The State Flexibility Act” is perhaps a greater threat to Medicaid than Ryan’s proposal is that because it seems more moderate, it is likely to gain some support from Democratic governors in hard-pressed states. They in turn will pressure their legislators to support the bill.

In reality, the “Flexibility Act” is just another way of cutting the Medicaid rolls and further harming an already struggling and vulnerable portion of our population. Despite claims from the sponsors of the bill, states already have a pretty high degree of flexibility in how they run their Medicaid programs without applying for a federal waiver. According to Igor Volsky, writing at the Wonk Room, “states can eliminate optional services, add or increase cost sharing for some services and do a better job of managing and coordinating chronic care (since one percent of all Medicaid beneficiaries account for 25 percent of all expenditures). In fact, under the Affordable Care Act, states can even apply for federal funds to better coordinate services for people with chronic conditions and receive federal support to design new models for serving the very expensive dual eligible population."

Medicaid is clearly in the cross-hatches of the GOP—with strong backing from many governors across the country who are alarmed by the increased expense and growing number of beneficiaries coming into the program. This is an unfortunate result of our faltering economy and lack of job growth over the long-term. But gutting the program now doesn’t make any sense at all. Poor people, the disabled and frail elderly will still need care—although if they no longer have Medicaid it will increasingly be the more expensive, urgent kind that occurs in hospital emergency rooms.

Advocates for these vulnerable populations—including governors, members of Congress and even unlikely allies like hospital and provider groups—need to step up opposition to Ryan’s plan to slash Medicaid, as well as this “gentler” approach to gutting the program. Real Medicaid reform is clearly necessary—providers are underpaid, services are often hard to access and fraud is still a problem. But making structural changes in how services are delivered, increasing accountability and improving access to primary care must power this reform, not giving states carte blanche to create barriers to new enrollment and cut the poor from their Medicaid rolls.

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