Medicaid! – There’s no magic in block granting

The solution offered by Gov. Romney and Rep. Ryan to fix Medicaid is block granting. To summarize:

The fiscal-year 2013 budget recently passed by the House of Representatives would reduce federal Medicaid spending by $750 billion over the next decade, even if the Affordable Care Act (ACA) is repealed or struck down. It would do so by changing the program from an open-ended program for eligible individuals using matching funds from both the federal and state governments to a block grant of a fixed sum given to states, and the states decide how to allocate the money. The idea is that states can “innovate” at a local level to find ways to deliver needed benefits at reduced cost.

Let’s be clear, though. The savings don’t come from any known interventions. They come from drastically reducing the amount of money the federal government plans to give to the states in the future. That’s how they say they will save money. How much less money will the states be given? Tons:

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.

Of course, you could choose not to cut people. You could just cut reimbursement by the same amount. But (1) Medicaid reimbursement is already very low, and (2) the campaign has made it clear that reducing payments (like through the IPAB) is unacceptable.

There are just over 60 million people covered by Medicaid right now. These changes are very, very large. That’s what happens when you spend so much less.

So what’s the plan?



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