Medicaid could be scaled back sharply under GOP plans


Conservatives aim to cut federal funding for the state-run health programs for the poor if they control the White House and Congress.


VJune 27, 2012)

By Noam N. Levey, Washington Bureau

July 30, 2012, 8:39 p.m.

WASHINGTON — Nearly half a century after President Lyndon Johnson signed Medicaid into law, conservative critics of the massive government health insurance program for the poor are readying a new push to dramatically scale it back if Republicans control the White House and Congress next year.

GOP governors, emboldened by the Supreme Court decision on President Obama‘s healthcare law, are already balking at expanding Medicaid to meet the goals of the Affordable Care Act. Some are rolling back coverage now, arguing that the program is ineffective and unaffordable.

At the same time, congressional Republicans, backed by influential conservative activists, are renewing calls to convert Medicaid into a series of smaller grants to states, reprising the successful GOP strategy that cut cash welfare programs in the mid-1990s.

Former Massachusetts Gov. Mitt Romney, the presumptive GOP presidential nominee, has thrown his support behind a block grant plan that would cap federal spending, effectively slashing Medicaid funding by more than $1.5 trillion over the next decade in what would be the most sweeping change in the program’s history.

One of Romney’s lead healthcare advisors, Dr. Scott Gottlieb, has claimed that Medicaid is “worse than no coverage at all.”

“If we win, there are no more excuses,” said Rep. Jim Jordan (R-Ohio), chairman of the Republican Study Committee, a coalition of conservative lawmakers backing legislation that would cut about $2 trillion from projected Medicaid spending over a decade.

Virginia Gov. Bob McDonnell, chairman of the Republican Governors Assn., said states, which operate their own Medicaid programs, could handle cuts. “If the federal government would take off a lot of the micromanagement and the bureaucracy … we could probably get by with even less money,” he said.

But the drive to cut federal aid is stoking concern among hospitals and other medical providers that Medicaid cutbacks would swell the numbers of uninsured.

“We know that coverage saves lives,” said Dr. Bruce Siegel, president of the National Assn. of Public Hospitals and Health Systems. “People who have coverage are healthier. They live longer. And they are more financially secure. That is all at risk for millions of our neighbors.”

Siegel called the GOP campaign the most serious threat to Medicaid in decades.

The battle is brewing at the very moment that Obama and other Democrats are planning an unprecedented expansion of the 47-year-old program.

The new healthcare law is designed to make Medicaid the foundation for universal health coverage by guaranteeing insurance to all poor Americans for the first time. Today, the program primarily serves poor children, seniors and the disabled, excluding most other low-income adults.

With an infusion of hundreds of billions of federal dollars, every state’s Medicaid program was supposed to open in 2014 to any American making less than about $15,500. The recent Supreme Court decision to uphold the new healthcare law made that expansion optional for the states.

The guaranteed coverage reflects the belief by many experts that Medicaid, while imperfect, is best positioned to protect a population unable to buy insurance and increasingly shut out of employer-based coverage as businesses drop or scale back health benefits.

Medicaid and the relatedChildren’s HealthInsurance Program, or CHIP, cover about 70 million people at some point during the year. Half of them are poor children.

Another quarter is disabled or elderly. These beneficiaries are by far the most expensive, accounting for nearly 70% of all Medicaid spending, according to the Medicaid and CHIP Payment and Access Commission.

While the average child on Medicaid costs the program about $2,900 a year, the average senior costs more than $16,000. That is driven in part by nursing home and other home care not covered by Medicare. Medicaid is the largest payer of nursing home care in the country.

“You have a program with enormous responsibilities,” said Sara Rosenbaum, a George Washington University health policy professor. “We are talking about people who live outside the mainstream insurance market. They are very poor or they are very disabled or they are very vulnerable.”

States and the federal government, which jointly fund Medicaid, have struggled for years to finance this care. Medicaid now costs more than $400 billion a year, nearly double what it was a decade ago.

Much of the fiscal burden has been borne by the federal government — and will be in the future — but state budgets are being squeezed, forcing many states to cut other services. “To put another dollar into Medicaid means you are taking a dollar from someplace else,” said Wisconsin Health Secretary Dennis Smith, who oversaw Medicaid under PresidentGeorge W. Bush.

Although states have tried to control costs by cutting payments to doctors and hospitals, this has caused other problems as providers close their doors to Medicaid patients, undermining the promise of safety net coverage.

This has fueled a growing sense of crisis among Democrats and Republicans in state government who are struggling to keep their programs afloat even as the Affordable Care Act envisions as many as 18 million new Medicaid enrollees in the next decade.

Proponents of the expansion believe initiatives in the healthcare law to better coordinate care, particularly for costly elderly and disabled beneficiaries, offer the best hope to control spending and improve care. Some of these programs are already underway.

But the stresses on Medicaid have also revived the long-held conservative dream of overhauling the program entirely by converting Medicaid into block grants to states. That would reduce federal spending over time and give states the freedom to design their own programs and cover whomever they choose.

House Republicans have already voted for a budget plan developed by Rep.Paul D. Ryan(R-Wis.) that would do this by capping federal spending growth, though the legislation stalled in the Democratic Senate.

“The states are where it’s at,” said freshman Rep. Todd Rokita (R-Ind.), who is sponsoring an even more austere plan backed by 47 House Republicans that would freeze federal Medicaid spending. “Creativity will unleash significant cost reductions.… Some will do it better than others. But that is the responsibility and the magic of federalism.”

Americans for Tax Reform President Grover Norquist, a powerful force in GOP politics, recently suggested that Medicaid block grants would follow the example of welfare block grants, which he said “helped move people out of being locked into welfare dependency.”

But it remains unclear how states could maintain healthcare protections if federal aid did not keep pace with rising medical costs. The nonpartisan Congressional Budget Office concluded this year that states would find this very difficult under the Ryan plan.

“Even with significant efficiency gains, the magnitude of the reduction in spending … means that states would need to increase their spending on these programs, make considerable cutbacks in them, or both,” budget analysts wrote. “Cutbacks might involve reduced eligibility for Medicaid and CHIP, coverage of fewer services, lower payments to providers or increased cost-sharing by beneficiaries — all of which would reduce access to care.”

The Romney campaign, which has backed Ryan’s plan, has not provided any details about how the GOP presidential hopeful would deal with these trade-offs.

And even some conservatives warn that simply cutting federal spending and giving states flexibility is unlikely to solve the Medicaid problem.

“States are not about to dig up a bunch of money on their own,” said American Enterprise Institute scholar Tom Miller, a former health economist at the congressional Joint Economic Committee. “And this is not a population that is just going to go away.”