A Glimpse into Medicaid’s Future

A short while ago, I argued that it would be very difficult to cut Medicaid without significantly attacking benefits, beneficiaries, or physician reimbursements:

Make no mistake about it, under the block grant plan in the budget proposal approved by the House, states must innovate. Even if the ACA’s Medicaid expansion were eliminated, the House budget would reduce federal Medicaid spending by $163 billion in 2022. That’s a 34% reduction 10 years from now.

How can states possibly account for that difference? Where’s the magic in innovation? If states refuse to cut benefits and spend the same per enrollee, then even if the Medicaid expansion of the ACA never takes place, an additional 19 million people need to be dropped from the 2021 Medicaid rolls to meet budget cuts. That’s about one-third of all people on Medicaid. If states cut benefits or somehow slow spending to that of GDP growth, they still need to remove 13.8 million people from Medicaid in 2021, in addition to forgetting the ACA Medicaid expansion. If states act to protect the elderly and blind or disabled persons by holding their spending/benefit reduction to 10% (which is still a large cut), then 27 million people, most of them children and pregnant women, need to be dropped from Medicaid in 2021 even if ACA’s Medicaid expansion never occurs.

Yesterday at Politico, Matt Dobias gave us a glimpse of how “innovation” might occur:

House Republicans want to stop rewarding states for finding and enrolling low-income children in Medicaid and the Children’s Health Insurance Program, and public health advocates are livid.

The Republicans say it’s a smart fiscal move that will better protect the program against fraud; their critics say it’s undermining years of progress states have made in identifying and enrolling a hard to serve population…

Energy and Commerce Committee Republicans voted last week to strip about $400 million earmarked for a bonus program created by the 2009 law to extend the Children’s Health Insurance Program. The bonus payments run through 2013.

The provision, sponsored by Rep. Joe Barton (R-Texas) and passed without Democratic support, is part of a $115 billion package of health care savings included in the House’s reconciliation process. The House Budget Committee plans to mark up the reconciliation package on Monday. And although the package won’t make it through the Senate, some of these health cut proposals could resurface this year.

Some of the supporters of this measure have argued that provisions like this bonus program lead to “fraud” in Medicaid. But none of those reports of fraud have linked the potential waste to this program, or to children’s health care. Others have argued that while the federal government is subsidizing the increased rolls now, when that support ends, the states will now have to pay for the new children enrolled in Medicaid.

Ironically, that’s exactly the problem with shifting Medicaid entirely to the states for “innovation” and “block grants”. States will be left on the hook, unable to run short term deficits when they need to. They’ll be responsible for all coverage, as the amount given to them shrinks and shrinks.

I’ve long argued that there are no easy answers here. We’ve seen an early example as to how Medicaid might be cut – by making it harder for kids to become beneficiaries. And there are still many more cuts to come.

[Cross-posted at The Incidental Economist]