The Center on Budget and Policy Priorities has a review of one of the Medicaid proposals the White House has forwarded in budget negotiations, warning that the cost shift it includes would mean a cut in services.
An Obama Administration proposal that’s on the table for budget negotiators would reduce federal Medicaid expenditures by reducing the federal share of Medicaid and CHIP costs, shifting costs to states and likely prompting states to cut payments to health care providers and to scale back the health services that Medicaid covers for low-income children, parents, people with disabilities, and/or senior citizens (including those in nursing homes). Reductions in provider payments would likely exacerbate the problem that Medicaid beneficiaries already face regarding access to physician care, particularly from specialists.
The proposal would replace the various matching rates at which the federal government reimburses states for their costs in insuring people through Medicaid and CHIP with a single “blended rate” for each state. A state’s blended rate would be set at a level that provided the state with less federal funding than under current law, thereby saving the federal government money....
The budget framework that the Administration issued in April envisions at least $100 billion in federal Medicaid savings over ten years. The savings would apparently come from three places: 1) a series of small but significant measures outlined in the President’s fiscal 2012 budget to increase Medicaid efficiency and reduce Medicaid’s costs in providing medical equipment, prescription drugs, and certain other items, which would save somewhere around $10 billion to $15 billion; 2) a proposal to sharply restrict or bar states from raising part of their matching contributions for Medicaid by taxing health care providers, which would save about $25 billion to $45 billion depending on how sweeping the proposal is; and 3) the blended-rate proposal.
By limiting how states can raise funds to help pay their Medicaid costs, the “provider-tax” proposals—like the blended-rate proposal—represents a cost-shift to states. The Congressional Budget Office and the Office of Management and Budget estimate these proposals would reduce federal Medicaid costs because many states would not find other revenues to replace the provider tax revenues—and would have to cut back their Medicaid programs as a consequence, which in turn would lower federal costs.
Under current law, the federal government pays a fixed percentage of each state's Medicaid costs, from 50 to 75% of costs depending on the state with an average of 57% nationally. It pays 70%, nationally, of the children's health program, SCHIP. The Affordable Care Act would increase that commitment to 100% for the population that is made newly eligible for Medicaid under the law, and for the first three years (2014-16) with a reduced commitment until 2019, when it's down to 90%. States that expanded Medicaid to cover patients who aren't traditionally covered (childless adults) could qualify for a higher matching rate from the federal government.
That's all if the ACA is implemented as written, in addition to current law. This new, blended-rate proposal, however, "would replace this mix of matching rates with a single matching rate for each state, which would apparently apply to all of a state’s Medicaid and CHIP expenditures, outside of administrative costs." And that would mean more burden on the states and, likely, curtailed ability on the part of the states to pay providers (meaning fewer doctors taking Medicaid patients) and to cover people who would otherwise qualify.
The blended rate would be set significantly below the combined effect of the various federal matching rates a state would otherwise receive. This would save money for the federal government—the federal government would pay a lower percentage of overall Medicaid and CHIP costs than under current law, and states would bear a greater share. To compensate for the federal funding reductions, states would either have to contribute more of their own funds or, as is more likely, shift costs to beneficiaries and health care providers by scaling back benefits and already-low payment rates....
The only way that the blended-rate proposal would not primarily shift costs to states would be if it produced large administrative savings for states that offset most of their loss of federal funds. But the proposal does not do so. There would be some administrative savings, but they would be slight.
The fact that it would undercut the expansion of Medicaid under the ACA—the most significant part of the law for actually expanding health care—should send White House negotiators back to the drawing board on what to do with Medicaid in these budget negotiations. This kind of across-the-board proposal hits every demographic among Medicaid recipients when, as a nation, we can least afford to have even more people uninsured. The graphic up at the top is a reminder that Medicaid as it currently exists is already "much, much, much cheaper than any other insurance product you can think of. It's cheaper than the health care members of Congress get, than private insurance, than Medicare. There's no trick that could substantially cut its costs below where they are now." Unless it's to cut people off, which is a lousy trick.