Medicaid in the future

The Kaiser Family foundation has released a report on how the republican House-passed budget will affect medicaid in the next ten years:

This analysis projects the state-by-state impact of converting Medicaid into a block grant and eliminating the planned expansion of the program by repealing the health reform law, as called for under the House Budget Plan. It finds that the plan would trigger major reductions in Medicaid program spending that could result in significant enrollment decreases compared to current projections, a shift with big implications for states, hospitals and tens of millions of low-income Americans who likely would wind up uninsured.

Remember that right now, Medicaid regulations are set somewhat at a federal level.  The federal government than provides matching funds to states to meet those requirements. Block grants would instead give states the money in a large payment, and then allow them to set their own regulations. It’s going to be far less money than they would get in matching payments, however; that’s how you get the savings. The idea is that the freedom from dropping the regulations would make states more innovative so they won’t need the extra money.

KFF has some thoughts:

Potential Impact on Providers.

Decreases in Medicaid spending will translate to decreased revenue sources for providers. Assuming states make equal reductions across all providers, federal and state Medicaid payments to hospitals in 2021 could fall by $84.3 billion relative to current law including the ACA, or 38%.  Other providers such as nursing homes would undoubtedly also lose Medicaid revenue.

As I’ve argued repeatedly, reimbursement under Medicaid is low because it’s underfunded.  Cutting funding even further is not going to fix this.

Potential Changes in Enrollment under Three Scenarios

States will make different policy choices in the face of reduced federal spending for Medicaid.  We examined the potential impact on enrollment in 2021 due to the House Budget Plan under three possible scenarios (Figure 2). All assume that state spending is reduced by the same percentage as federal spending. As with spending, states with the largest changes from ACA will see the greatest reductions in enrollment.

Scenario 1. In the first scenario, Medicaid per person spending would grow at rates equal to those projected under current law, and states make proportional reductions across all eligibility groups (children, adults, elderly and individuals with disabilities).  With these assumptions, there would be 36.4 million fewer people in Medicaid in 2021 than would be expected under current law, a reduction of 48% (17 million from the repeal of ACA and 19.4 million from the block grant).

Scenario 2. In the second scenario, states are able to slow annual increases in Medicaid spending per person to match growth in the economy as a whole. This would mitigate the size of the enrollment cuts.  As with scenario 1, reductions would be proportional across eligibility groups.  Under these assumptions, Medicaid enrollment in 2021 would fall by 30.8 million compared to what would be expected under current law, a reduction of 41% (17 million from the repeal of ACA and 13.8 million from the block grant).

Scenario 3. In the third scenario, states protect eligibility for the elderly and disabled (thus disproportionately making enrollment cuts among adults and children).  This scenario also assumes states reduce Medicaid per enrollee spending growth and cut spending for the elderly and disabled by 10%.  Under these assumptions, Medicaid would cover 43.8 million fewer people in 2021 than under current projections (17 million from the repeal of ACA and 26.8 million from the block grant).  This cut is a 58% reduction in overall enrollment, or a 71% reduction in enrollment of adults and children.

Remember, [nearly] all those people being dropped from Medicaid are likely going to become uninsured. These are people at the very low end of the socio-economic spectrum, and there’s really no other place to go.

But what if states wanted to try and preserve benefits under these reduced payments? What might they have to do?

States would need to increase state funds significantly to maintain eligibility and compensate for the loss of federal funding, without accounting for future coverage gains from ACA.  The analysis shows that states would have to increase their own spending by about $241 billion, or 71%, over the 10 year period if they were unable to reduce per enrollee spending beyond current rates. If states can reduce per enrollee spending growth, they would still need to increase their spending by $152 billion, or 45%.  The spending increases would vary by state, with poorer states that receive more federal matching funds facing steeper percentage increases in state spending.

Last I checked, states don’t seem to have a lot of money laying around.

UPDATE: Edited to accommodate perfectionists.

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