Medicaid and the Myth of GOP Cost Cuts

[1]In the first post in this series [2], I noted that in the "Path to Prosperity" [3] — which Republicans approved unanimously — Rep. Paul Ryan cited Medicaid as one of the biggest drivers of our national debt. The Republican budget formerly known as the Ryan budget, it followed, was all about putting the brakes on "What Drives Our Debt," as the "scare graph" that drove the point home was titled.

There are at least two problems with Republican's assertions about Medicaid. Like I said earlier, Medicaid and Medicare are not the problem. They are part of of the bigger problem of skyrocketing health care costs. The problem is, Republican cuts to Medicaid don't lower health care costs. It increases them.

The First Cuts Are The Deepest

Republicans incessantly declare that their budget will not reduce benefits for anyone 55 years old and up [4], but it ain't necessarily so. The 55-and-up claim is designed to reassure seniors about the GOP's proposed cuts to Medicare for the rest of them. ("Sure, your children and grandchildren will feel the pain, but you'll be fine. Don't worry!") Cynical as that claim may be, in its assumption that our parents and grandparents are happy to let their children and grandchildren suffer the GOP cuts, it's also just plain wrong. The Republicans make deeper and more immediate cuts to Medicaid that will matter a great deal to Americans 55 years old and up. Not to mention their children and grand children.

Like I said earlier, look at the distribution of Medicaid dollars [5].

Republicans can call Medicaid "welfare" all they want, but nearly 70 cents of every Medicaid dollar is spent on the elderly and disabled. That means Medicare is not "just a program for poor people." It's an important program to middle- and working-class families too.

We all have parents or grandparents. As they age, the medical care most of them will need will only get more expensive. Some of them will need long-term care or nursing home care, the cost of which will outstrip our families already stressed financial resources.

A year in a nursing home costs an average of $72,000 [6], according to the Department of Health and Human Services [7], and that's if there aren't an additional costs beyond just getting a bed in a nursing home. Medicare pays for about a month. It's not hard to see how easily and quickly our parents and grandparents can "spend down" their assets to quality for Medicaid.

We love our parents and grandparents, and we won't want their lack of resource or ours to keep them from getting the they need. Families USA's report, "Cutting Medicaid: Harming Seniors and People with Disabilities," [8] shows that Medicare is a big part of how our parents and grandparents get the care they need.

• Medicaid is the primary payer for an estimated 63.6 percent of all nursing home residents. In all states but one, Medicaid is the primary payer for more than 50 percent of nursing home residents.
• In seven states and the District of Columbia, Medicaid is the primary payer for more than 70 percent of all nursing home residents. Those states are the District of Columbia (80.1%), Mississippi (74.7%), Alaska (73.8%), Louisiana (73.0%), New York (72.3%), West Virginia (72.2%), Georgia (71.9%), and Hawaii (70.1%).

It all means that Medicaid is an important program for middle- and working-class families, too.

As columnist Harold Pollack underscores, people with disabilities are part of our families and communities too [9]. Already in line to suffer as states slash Medicaid budget, they would suffer even more under the Republicans' proposed budget.

An excellent Chicago Tribune story by Rex Huppke details the impact of cuts to home and community-based services in Illinois. Huppke recounts the story of 81-year-old Lorraine Phifer, who cares for her son William, who has cerebral palsy. Phifer has a wheelchair van, but she can't maneuver him into it by herself anymore. He has also required help with a wheelchair lift to get into and out of bed. Staff from the University of Illinois at Chicago Assistive Technology Unit have come out to the Phifer home and provided valuable help. That unit now faces a 70 percent budget cut.

UIC's intellectual disabilities family clinics, which offer a range of services that are hard to access elsewhere, also face deep cuts. My intellectually disabled brother-in-law occasionally uses these facilities, too. I'm not a disinterested observer.

...Nearly everyone involved has a parent or other relative who receives Medicare. And most expect to rely on Medicare, too, when they grow old. Seniors are a powerful constituency. If they find a proposed policy too unsettling, it probably won't happen.

The tone and the politics change when things turn to Medicaid and related safety-net services. Dozens of states are making painful cuts right now. The disadvantaged people most directly affected are playing conspicuously small parts in the accompanying political process. In Washington and in state capitals, too, few influential stakeholders have any strong personal stake in such matters. Few have sat on either side of the counter in some welfare office, county hospital or public health clinic.

Given Medicaid's low per-person cost and its relatively restrained projected cost growth, there's little room to comfortably cut. Safety-net services are already shoestring operations. Under-funded and stressed, they have many shortcomings. There is no way to meet the above spending reduction targets without shifting costs and risks onto the states, covering markedly fewer people and services, or further underpaying Medicaid providers.

No one can firmly say how states would respond to the reduced federal support. I fear that's precisely the point. Block grants provide both states and the federal government with useful political cover to cut important benefits. If a particular state eliminates Medicaid home care services or by dropping the working poor from coverage, Congressional Republicans can say: "Don't blame us. That's what this state chose to do." Meanwhile governors can say, with equal justification: "Don't blame us. We're doing the best we can, given limited federal resources."

I wish that Rep. Paul Ryan, R-Wis., architect of the House Republican budget plan, could accompany my wife and her brother to waste hours sitting in a gritty welfare office. I wish he had the responsibility of helping an intellectually disabled person with a nasty toothache, when the state Medicaid program no longer covers dental care.

If Paul Ryan can't Pollack's brother in law, he could probably accompany a constituent in his own district where 12,900 seniors and persons with disabilities will lose benefits, along with 1,900 whose nursing home expenses are paid by Medicaid, plus 47,000 children (including 3,900 newborns), if the GOP successfully uses Medicaid cuts to shift costs on to their shoulders.

Cost-Shifting Is Not Cost-Cutting

The CBO estimates that the Republican budget's $771 billion in Medicaid cuts over ten years amounts to a 35% cut in Medicaid funding to states. The transformation of Medicaid into a block grant [10] program, ensures that funding will decline because the Republican budget increases these grants annually at the rate of inflation [11], adjusted for population growth — not the rate of inflation for health care, which is far above the general inflation rate [12].

In other words, it's build into the budget that states won't be able to keep up with the costs of the program under the Republican budget, because the Republican budget doesn't take the rate of growth in health care costs into consideration. So, states cut back on the very Medicaid services that the elderly and disabled, and their families, rely upon.

The GOP budget cuts a total $2.17 trillion from Medicaid and related health care programs [13] — $771 billion in Medicaid cuts, plus $1.4 trillion from nixing the Medicaid expansion in health care reform — Some of it by eliminating health care coverage for at least 32 million people [14], and some through drastic cuts in nursing home care coverage [15].

Seniors: An overwhelming majority of Medicare beneficiaries who live in nursing homes rely on Medicaid for their nursing home coverage. Because the Ryan plan would require such deep cuts in federal Medicaid funding, it would inevitably result in less coverage for nursing home residents and shift more of the cost of nursing home care to elderly beneficiaries and their families. A sharp reduction in the quality of nursing home care would be virtually inevitable, due to the large reduction that would occur in the resources made available to pay for such care.

 

Persons with disabilities are up for deeper cuts too, and sooner than the GOP would like us to think.

 

People with disabilities: These individuals constitute 15 percent of Medicaid beneficiaries but account for 42 percent of all Medicaid expenditures, mostly because of their extensive health and long-term care needs. Capping federal Medicaid funding would place significant financial pressure on states to scale back eligibility and coverage for this high-cost population, many of whom would be unable to obtain coverage elsewhere because of their medical conditions.

Children — 49% of Medicaid enrollees — aren't spared either.

 

Children: Currently, state Medicaid programs must provide children with health care services and treatments they need for their healthy development through the Early Periodic Screening, Diagnostic and Treatment (EPSDT) aspect of Medicaid, which provides regular preventive care for children and all follow-up diagnostic and treatment services that children are found to need. A block grant would likely permit states to drop EPSDT coverage, meaning that children, particularly those with special health care needs, would not be able to access some care that medical professionals find they need (because Medicaid would no longer cover certain health services and treatments for children, and their parents wouldnt be able to afford to pay for that care on their own).

 

[16]Passing those costs to the elderly and disabled on Medicaid is really passing it on their families, who will have to assume responsibility for their care and/or paying for it. Imagine a middle class family with two working parents making just enough to keep themselves afloat — treading water, economically speaking, rather than breast-stroking their way to greater prosperity and security. In this economy, They're lucky that both parents are working, even if one of them has already been furloughed for a week, and the other has taken a significant pay cut to keep his job.

Now imagine them having to figure out what to do now that grandma no longer has Medicaid to pay for her nursing home care. Perhaps one parent ends up dedicating her salary almost solely to keeping grandma where she's getting the care she needs. Maybe both parents end up contributing a portion of their salary to cover the annual cost of $72,000. And this is assuming that one or both parents earn move than the $50,221 median annual income for American families. [17].

Perhaps one parent quits his job, and brings grandma home to care for her, but under all the same circumstances mentioned above. Now the family is down one income. So, how does that affect, the mortgage and utilities? Not to mention their own health care costs, and one of the kid's just got braces. How about those college savings? Now suppose one of the kids has an accident, or the remaining employed parent gets sick, or loses his or her job?

Cost Sharing Is Cost Shifting

"Cost Sharing" — which basically means imposing premiums on Medicaid recipients — is like to increase [18] if Republicans simultaneously slash Medicaid funding to states and give states the "flexibility" to slash Medicaid benefits. Again, it may mean fewer government dollars are spent on health care, but it's cost shifting passed off as cost cutting.

If the goal is simply to get people off Medicaid rolls, then cost sharing can be said to work. A recent study showed that imposing even a 3% premium on participants in Wisconsin's Badger Care program would result in 49,422 fewer children and parents being enrolled in the program. Some of those families might find coverage elsewhere, but the declining levels of employer-provided coverage for low-income workers means that many of them would probably become uninsured. But they're off Mediciad, right? So, the government's not paying for their health care. Thus, costs go down.

Sort of. But look at Oregon [19]. Its experiment in cost-sharing cause an exodus of low-income participants from its Medicaid program. The problem is, those people still needed medical care, eventually. So they used emergency rooms instead of primary care.

Republicans from George W. Bush to Mississippi Governor Haley Barbour [20] have long been fond of saying all Americans have access to health care, because we can all go to the emergency room [21]. But the uninsured have already been overwhelming emergency rooms [22], and in many cases they land there because of health problems developed into acute conditions, the treatment of which is far more expensive than the primary and preventative care that Medicaid covers.

The result is that hospitals are hit with huge unpaid medical bills, because since 1986 emergency rooms are required to treat all patients regardless of ability to pay [23]. So, hospitals pass those costs on to paying customers, or those of us who have health insurance, which means we all pay more in the end [24]. The only difference is that instead of supporting Medicaid with our tax dollars, for a far cheaper price than private insurance, we actually up paying more for emergency room care for the uninsured.

That's bad enough, but the Republican budget actually makes it worse by handing hospitals an $84 billion loss of Medicaid revenue [25] at the same time it increases the ranks of the uninsured, who will eventually make their way to — you guessed it — hospital emergency rooms.

So, we go from "cost sharing" to more cost shifting, and with a huge mark-up.

Republican Cuts Increase Costs

Finally, as if to add insult to injury, the Republicans' manage to cut nearly everything but health care costs. Those, it turns out, go up.

Former OMB director Peter Orszag explained how Medicare beneficiaries would pay more.

[26]

As the government paid relatively less for Medicare, beneficiaries would bear an increasing share of the cost of their care. It is no great accomplishment, however, merely to shift health expenditures from the federal government to consumers, without doing anything to decrease them in total.

The CBOs analysis of the Ryan plan confirms that federal expenditures would be reduced, by a lot. By 2030, payments for a typical beneficiary would be more than 20 percent lower than current projections, according to the report, and the beneficiarys personal costs would increase.

So far, nothing unexpected. On the critical metric of whether the Ryan plan would reduce total health-care costs, though, the CBO conclusion is shocking: The plan would not only fail to decrease health-care costs per beneficiary, it would increase them - by an astonishingly large amount that grows over time. By 2030, health spending on the typical beneficiary would be more than 40 percent higher under the Ryan plan than under existing Medicare, according to the CBO report.

Health-care costs would not be reduced on the backs of seniors; they would be raised on the backs of seniors.

And the CBO explained how Medicaid beneficiaries — low-income families, the elderly, children and people with disabilities — would pay more too [27].

If states reduced spending for their Medicaid programs, there would be a number of potential implications for both providers and beneficiaries. Given that payment rates for providers under Medicaid are already generally lower than they are under Medicare and private insurance, if states lowered payment rates even further, providers might be less willing to treat Medicaid enrollees. As a result, Medicaid enrollees could face more limited access to care. If states reduced benefits or eligibility levels, beneficiaries could face higher out-of-pocket costs, and providers could face more uncompensated care as beneficiaries lost coverage for certain benefits or lost coverage altogether.

That's where the real cost sharing kicks in. When out-of-pocket costs skyrocket for our elderly parents and our brothers and sisters with disabilities, they skyrocket for us too. Those middle class families who are already struggling through this recession will -- some immediately -- have to assume massive health care costs of loved ones who will no longer receive the services Medicaid has paid for.

The Republican budget only cuts the amount of money our government spends on health care for low-income, elderly, and disabled Americans. It won't reduce what our families spend on health care. It won't reduce our loved ones' need for health care, or their need for health coverage. In that sense, it actually emulate the "successful" 1990s-style welfare reform it's modeled after [28].

In the unlikely event that Ryan's budget proposal becomes actual policy, it's going to have the same effect as the late 90s welfare reform that Ryan uses as his model. The primary measure of its success will be the declining numbers of people receiving services from the programs Ryan is targeting.

It's highly unlikely that those people — the elderly, the disabled and children — will be better off. That goes for their families, too. As DailyKos' Joan McCarter [29] points out, a quarter of Medicaid spending pays for long term care for the elderly. Without Medicaid, families who are already taxed more under Ryan's plan [30], have to pick up those costs. That's an added burden for middle class families.

Taking Medicaid funding from families with disabled children and parents and grandparents in nursing homes compounds that.

Plenty of middle-class families only remain middle class because they're spared crippling medical and long-term care costs. A decade or two of the Ryan plan, and there will be no more middle class in America.

But that's why it will be a success. Making people better off, by reducing their need for assistance, isn't the point of conservative welfare reform. The point of conservative welfare reform is reducing the fewer people receiving help, not the reducing the need for help. That's why it's so successful, if you're a conservative like Paul Ryan. Because all you have to do is cut.

...Eric Cantor [31] made headlines when he said of Social Security, "We're going to have to come to grips with the fact that these programs cannot exist if we want America to be what we want America to be."

Paul Ryan is saying the same thing, though not as succinctly, in his plan. He and conservatives like him are showing us what they want America to be. And it's not an America where fewer people need help, because more of them are working at jobs that offer, livable wages, good benefits, and a chance to raise their economic standing. It's an America where fewer people are getting help.

If Medicaid, Medicare, and Social Security cease to exist in any recognizable form, America will be what Republicans want it to be, Nearly all of us will pay a high price for it, and benefit little from it.