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GOP Budget Proposal for 2012 to Gut Medicaid

April 3, 2011

On Sunday, House Budget Committee chairman Paul Ryan (R-WI) previewed his party's 2012 budget proposal due out Tuesday. Needless to say, its target of $4 trillion in deficit reduction over the next decade won't be met by simply letting the Bush tax cuts expire. Instead, Ryan as widely expected will propose the "voucherization" and inevitable rationing of Medicare. But in a less discussed development, Republicans also hope to slash Medicaid funding by $1 trillion over 10 years while sending the remaining dollars as block grants to the states. As it turns out, that gambit would not only gut the 2010 Affordable Care Act law, but guarantee than millions of low income Americans are deprived of health care.
The Medicaid program for the poor serves roughly 60 million Americans and costs taxpayers about $300 billion a year. While the elderly and the disabled combined account for only 25% of its recipients, the costs of their care constitutes two-thirds of its spending on benefits. But as McClatchy recently explained, the expansion of Medicaid is central pillar of the health care reform law designed to bring health insurance to millions more Americans:

The 2010 law requires that state Medicaid programs in 2014 begin covering all non-elderly people who earn up to 133 percent of the federal poverty level, which would comprise people with incomes of up to $29,400 for a family of four this year.
By 2019, that expansion is expected to add 16 million people to Medicaid, which now provides health coverage for about 60 million low-income Americans. Childless adults and parents who previously earned too much to qualify for the program will make up the bulk of the new enrollees.
Currently, the federal government pays about 57 percent of Medicaid costs on average, while states pay the rest. Under the new law, the federal government will pay the entire cost of the new enrollees for the first three years, after which it will scale down gradually to 90 percent in 2020 and thereafter.

The future implications of the rumored Republican bloodletting are clear. While the Congressional Budget Office estimated the expanded Medicaid program under the ACA would provide coverage for more than 15 million Americans, a Commonwealth Fund analysis projected that almost half of the 52 million people who went without insurance in 2010 could gain it under the new Medicaid provisions in the Affordable Care Act.

But you don't need a crystal ball to see what leaving Medicaid entirely to the states will produce. In states like Mississippi, Texas, Arizona and Florida, that dismal future is now.
Take, for example, the home state of Mississippi Governor and 2012 White House hopeful Haley Barbour. At the National Governors Association meeting in early March, Barbour called for the Medicaid program to be converted into block grants for the states to control. To make his case, Governor Barbour updated Ronald Reagan's old myth of the "welfare queen":

"We have people pull up at the pharmacy window in a BMW and say they can't afford their co-payment."

That whopper didn't merely earn a "Four Pinocchio" rating from the Washington Post. It also obscured the fact that Haley Barbour's Mississippi is already home to perhaps the least generous Medicaid program in the nation:

Mississippi provides some of the lowest Medicaid benefits to working adults in the nation. A parent who isn't working can qualify only if annual family income is less than 24 percent of the poverty line. Working parents qualify only if they make no more than 44 percent of the federal poverty level. Seniors and people with disabilities are eligible with income at 80 percent of the poverty line...
Translated from the federal poverty guidelines, that means a working Mississippi couple with one child could earn no more than $8,150 a year and still qualify for Medicaid, seniors and people with disabilities could earn no more than $8,700, and a pregnant woman could earn no more than $20,000 a year.

But those numbers don't begin to capture the failure of the Mississippi health care system. In its 2009 state scorecard, the Commonwealth Fund ranked Mississippi dead last in its assessment of health care access, prevention, equity, affordability and lifestyles. In December, the "America's Health Rankings" project also put Mississippi at 50th among the states. And in 2009, another UnitedHealth Group funded study concluded that Haley Barbour's home state had the unhealthiest residents in America.
Then there's Texas, ranked a dismal 46th by the Commonwealth Fund. With his cash-strapped state already leading the nation in the percentage of residents (30%) uninsured, last fall Governor Rick Perry floated the idea of opting out of Medicaid altogether. The idea of foregoing $15 billion in federal funds (60% of his state's Medicaid costs) went by the wayside when a study by the state Health and Human Services Commission found that "up to 2.6 million Texans could lose health coverage if the state opts out of Medicaid." Facing a massive $27 billion, two-year deficit due in part to reckless tax cuts and a refusal to raise revenue now, Lone Star State Republicans are nevertheless looking at savaging its Medicaid program now serving 3.1 million people:

The total effect of the cuts -- estimated at $7.6 billion a year, or roughly a third of Texas' Medicaid spending -- will kill jobs, strain the state's economy and put people's lives at risk, experts across the state have said in recent weeks.

Meanwhile, Governor Jan Brewer's real-world death panels are already offering a glimpse into the national dystopian future that is Arizona nightmare present. Still strugglingto stop the growing body count from draconian cuts to the state's transplant surgery program, Governor Brewer last week proposed new Medicaid fees for "adults who lead unhealthy lives." (As McClatchy noted, "A 2008 study by Arizona State University found that that state's structural deficits could be traced to 15 years of tax cuts, mainly income-tax reductions that 'were not matched by spending cuts of a commensurate size.'")
American taxpayers should also be wary of handing their federal Medicaid dollars over to the likes of Florida Governor Rick Scott. As Mother Jones explained last week:

Scott and Florida Republicans are currently trying to enact a sweeping Medicaid reform bill that would give HMOs and other private health care companies unprecedented control over the government health care program for the poor. Among the companies that stand to benefit from the bill is Solantic, a chain of urgent-care clinics aimed at providing emergency services to walk-in customers. The Florida governor founded Solantic in 2001, only a few years after he resigned as the CEO of hospital giant Columbia/HCA amid a massive Medicare fraud scandal. In January, according to the Palm Beach Post, he transferred his $62 million stake in Solantic to his wife, Ann Scott, a homemaker involved in various charitable organizations.

Writing in The New Republic, Jonathan Cohn summed up the predictable path Paul Ryan's rumored proposals would take:

If the law changes and Medicaid becomes a block grant, then every year the federal government would simply give the states a lump sum, set by a fixed formula, and let the states make the most of it. Conservatives claim block grants would give states the flexibility they need to make their programs more efficient. But, as Harold Pollack has noted in these pages, states already have some flexibility. And because demand for Medicaid tends to peak during economic downturns, when state tax revenues fall, the likely impact of a block grant scheme would be to make Medicaid even less affordable at the time it is most necessary.
That's not to say plenty of governors wouldn't take advantage of block grant status to change their Medicaid programs in ways they cannot now. They surely would--by capping enrollment, thinning benefits, increasing co-payments, and so on.

(In a final ironic insult, it will be no doubt become standard practice in the reddest of states to play God with Medicaid funding provided by blue state taxpayers.)
Explaining his desire last fall to end Texas' participation in Medicaid, Governor Rick Perry boasted:

"Let the states be the laboratories of innovation and the good ideas will come out of that."

As his and other states already sadly show, no so much. It's no wonder, as Ezra Klein rightly concluded four years ago, "the 'laboratories of democracy' can't achieve universal health care."


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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