fresh voices from the front lines of change







Stan Collender is right. The NY-26 election special election will change the budget debate. In fact, it already has. Democrat Kath Hochul’s victory over Republican Jane Corwin, in a solidly Republican district, in special election that became a referendum on Rep. Paul Ryan’s budget proposal — which Corwin endorsed — turned up the volume on the debate over the Republican plan to "destroy Medicare as we know it." The Medicare rhetoric will only get louder.

Though we’ll all hear more about the GOP’s dastardly plans for Medicare, we’ll probably hear less about their equally destructive plans for Medicaid. That’s dangerous, because Medicaid is just as important as Medicare, and the GOP’s plans for it could have devastating consequences for millions of Americans.

Forewarned is forearmed. Here’s what you need to know about Medicaid and the Ryan/GOP Budget.

  1. Medicaid is not the problem. It’s part of a larger health care cost problem.
  2. Medicaid is not "just a program for poor people." It’s also important to most middle- and working-class Americans.
  3. The Republican cuts to Medicaid don’t lower health care costs. They shift costs to poor, elderly, middle- and working-class Americans.
  4. The Republican cuts to Medicaid are just as unpopular as the Republican cuts to Medicare. Democrats compromise with Republicans on Medicaid cuts at their peril.

I’ll address each of these in upcoming posts.

What Republicans Want To Do To Medicaid

It’s not really a question of "what". If the Republican budget (which shouldn’t be called the Ryan budget, since House and Senate Republicans voted for it almost unanimously) "ends Medicare as we know it," it effectively guts Medicaid. That’s the "what"; ending Medicare as we know it, and gutting Medicaid — a program that provides health care for nearly 60 million low-income seniors, children, and low income families.

The Republican Budget, according to a Families USA report, would:

  • Convert Medicaid into block grants to states starting in 2013.
  • Eliminate federal regulations prohibiting states from trimming their Medicaid rolls or erecting new barriers to enrollment.
  • Cut federal Medicaid funding to states by $771 billion over ten years.
  • Cut federal
  • Cut Medicaid by a total $1.4 trillion over the next decade.
  • Eliminate the Affordable Care Act’s expansion of Medicaid.

Medicaid Is Not The Problem

In "The Path to Prosperity," Paul Ryan cites Medicaid as big drivers of our debt, and thus a huge problem. He even includes this "scare graph" to drive his point home.

Yeah, but Paul Krugman, borrowed a chart from the Centers for Medicare & Medicaid Services, and he says Medicaid and Medicare are big. Big parts of a bigger problem, that is.

Ezra Klein is right, of course, to say that Medicare and Medicaid costs are part of a larger health cost problem. But it’s worth bearing in mind a point I’ve written about before: we’re already more than half way to a system of government health insurance. Here’s the data:

What Is Medicaid?

Medicaid was created — along with Medicare — on July 30, 1965, when President Lyndon Johnson signed the Social Security Act of 1965 into law at the Harry S. Truman Library in Independence, Missouri, with former President Truman by his side. Johnson held the ceremony there to honor Truman’s commitment to health insurance, which he first proposed in 1945.

What’s the Difference Between Medicare and Medicaid?

One of the biggest difference is that Medicaid is a state governed program, while Medicare is a federal governed program.

Here are some other differences.

Medicaid is for low income:

  • Pregnant women
  • Children under the age of 19
  • People 65 and over
  • People who are blind
  • People who are disabled
  • People who need nursing home care

Medicaid is applied for at a state’s Medicaid agency.

Medicare is for:

  • People over 65
  • People of any age who have kidney failure or long term kidney disease
  • People who are disabled and cannot work

Medicare is applied for at the local Social Security office.

Some people qualify for both Medicaid and Medicare. Medicaid is sometimes used to help pay for Medicare premiums. People who qualify for both programs are called ‘dual eligible’.

Back in 2007, Krugman reminded us that "there is no such program as Socialsecuritymedicareandmedicaid." Now it falls to Ezra Klein to remind us that "The problem is not Medicareandmedicaid. It’s health care."

So I’d take Krugman’s point a step further: There sort of is a program called MedicareandMedicaid. But it’s very difficult to imagine a world in which the costs for Medicare and Medicaid have slowed but the costs for private health-care insurance haven’t. The right analogy, perhaps, is food prices. If the cost of food skyrockets, my grocery bills will go up, and so too will school-lunch programs go up. The same goes for health care: So long as health-care costs are rising, Medicareandmedicaid and The Washington Post and IBM will all see costs going up. The reason? They’re all buying the same product.

There’s also a practical reason Medicare and Medicaid’s spending can’t look too different from the private sector’s: imagine a world in which a doctor gets paid $50 to see a Medicare patient and $150 to see a patient covered by Aetna. Which doctor is going to remain in the Medicare program? As Joe Newhouse puts it, "Part of the reason that the sustainable growth rate" — which would have held Medicare’s costs down — "has not been sustainable politically is the need to keep Medicare rates within striking distance of commercial rates." Either everyone pays less or no one does.

But let’s say you somehow managed to solve the cost problems in MedicareandMedicaid without solving it in the broader health-care system — and, incidentally, I’d like to know how you did it — America’s health-care cost problem isn’t solved. Washington has a bias towards problems that are "on-budget" for the federal government, and for good reason: Washington is where the federal government’s budget gets written. But the budgets of businesses and households matter, too. If they get crushed by health-care costs, but Washington manages to escape, America is still in bad shape. "Thinking of it as a budget deficit problem misses the point," writes Jon Bernstein. "Shut down Medicare completely and you solve the budget deficit part of it, but you still have an important dysfunctional situation with regard to health care."

Ryan, in the Republican budget, offers a helpful explanation of the difference between "debt" and "deficit," before he goes on to blame Medicaid for driving one and thus causing the other.

When the government spends more than it takes in through taxes, it has to borrow money to cover the shortfall. The deficit is how much the nation has to borrow to fund the gap between spending and revenue in a given year. The debt is the total amount outstanding that the government owes – it represents the accumulation of deficits over time.

But our fiscal problems didn’t start in 2010, and have more to do with the continued contribution of conservative policies than with Medicaid. In fact, Medicaid is already cheaper than most insurance products.

Critics of Medicaid argue that program costs are growing out of control and that the current federal financing structure is a prime cause, because the federal government will pick up a percentage of states’ Medicaid costs however high those costs are. They also contend that the financing structure remains highly vulnerable to “gaming,” under which states use creative financing mechanisms to maximize federal funding. They claim that the only way to control federal Medicaid spending growth is to block-grant or cap federal funding.

These claims do not fare well under scrutiny. For example, over the past 30 years, average annual Medicaid cost growth per beneficiary has essentially tracked health-care cost growth systemwide.[3] In fact, in recent years, costs per beneficiary in the Medicaid program have been rising less rapidly than costs in private insurance.[4]

In addition, the average cost per Medicaid beneficiary is significantly lower than under private insurance (after adjusting for differences in health status), despite Medicaid’s more comprehensive benefits and significantly lower cost-sharing charges, because of Medicaid’s lower payment rates to providers and lower administrative costs (see Figure 1).[5] Since Medicaid cost-growth largely mirrors health care cost growth systemwide, slowing the rate of growth in Medicaid costs over the long run requires controlling costs throughout the U.S. health care system, which the health reform law takes some significant initial steps to achieve. Addressing Medicaid in isolation from the rest of the system would sharply shift costs and risks to states, beneficiaries, and providers, as explained below.

And the CBO concluded, the Ryan/Republican Budget would not lower costs.

Don’t take it from me. Take it from Robert Reischauer, who directed the Congressional Budget Office from 1989 to 1995 and now leads the Urban Institute. “If this is a competition between Ryan and the Affordable Care Act on realistic approaches to curbing the growth of spending,” Reischauer says, “the Affordable Care Act gets five points and Ryan gets zero.” But Ryan would repeal the Affordable Care Act and replace it with his own wishful plan. In doing so, he makes it harder, not easier, for us to balance the budget.

To understand why Reischauer gives Ryan a zero, you need to understand the technical trick that gives Ryan his savings. His proposal says the federal government’s contributions to Medicare and Medicaid can’t grow at more than the rate of inflation. Then he told CBO to score his plan based on that assumption. That’s where his money comes from. But it’s nonsense.

Health-care costs don’t grow at the rate of inflation. Ever. Previously, Ryan acknowledged that. His Roadmap capped federal contributions between inflation and the actual cost of medical care. He then developed a more bipartisan version of the idea with Alice Rivlin, who founded the Congressional Budget Office and directed the Office of Management and Budget under Bill Clinton. That one was capped at the growth of GDP plus 1 percentage point. Both targets were far more plausible than the fantasy target Ryan is now using.

So why the switch? He has not said. I suspect he couldn’t make the numbers add up without tax increases. The problem now, however, is that his numbers don’t add up at all. Rivlin — a budget hawk’s budget hawk — has abandoned the proposal that Ryan says she helped write. “The growth rate is much, much too low,” she says.

So, if Republicans aren’t gutting Medicaid to save it, or even to save money, why gut Medicaid?

I’ll try to answer that in my next post.

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