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Trying to Make the Math Add Up on Medicaid

One assertion by Mitt Romney in the presidential debate especially caught my attention. He said he would turn Medicaid into a block grant to the states and that they would “get what they got last year, plus inflation, plus 1 percent.” Sounds reasonable — except when you look at Romney’s other pledges, his support for Rep. Paul Ryan’s budget and what Romney has promised in terms of fiscal restraint overall. 

Here is the first reality from the Ryan budget supported by Romney, according to the Center on Budget and Policy Priorities: It would cut Medicaid by $642 billion — or 34 percent — over the next 10 years. This would happen in two ways: repeal of the 2010 health care law and caps on federal spending. The repeal of the 2010 law would keep 11 million people from getting Medicaid coverage. 

If the hard caps in the Ryan budget did not result in near-miraculous reductions in health care inflation and did not result in states ponying up far more money for the program than they now provide (most unlikely), an additional 19 million people would be cut from the Medicaid rolls, according to the Kaiser Family Foundation.

Beyond the up to 30 million people left without insurance is another serious set of problems for society. As I have pointed out before (and as President Barack Obama inexplicably did not during the debate), the single largest component of Medicaid is long-term care for the elderly. The second largest component, which the president did mention, is care for the seriously disabled. 

Cuts in the Medicaid program mean more than just the tens of millions thrown off the program. For those continuing on, it is almost inevitable, as the Congressional Budget Office pointed out, that there would be reduced coverage and care. Of course, states could pay more to make up the difference — but does anyone seriously think that states will be willing to take more money from education or raise taxes to do so in a meaningful way? 

And while many states will be motivated to do so, Romney’s other policy promises or predilections — including a private but overheard willingness to cut out the deduction for state and local taxes and a willingness, expressed by Romney’s top tax advisers, to cut out the deduction for state and local bonds, raising their interest costs dramatically — would make the states’ ability to raise money much harder.

To be sure, there would be, as there are now, serious efforts at policy innovation, including more incentives for home care of those in nursing homes. But if we consider the ever-growing number of elderly who will be disabled or require institutional care as the population ages and people live longer, there will still be enormous strains on nursing homes. For especially difficult cases of mental and physical disabilities, home health care is simply not going to be an option for the middle-class or poor families of these elderly people — they do not have the room, the resources, the expertise and, in many cases, the inclination to do so. 

The biggest challenges come from the “dual eligibles,” those who qualify for Medicaid and Medicare. As I pointed out in a column more than a year ago, according to Janet Adamy in the Wall Street Journal, the almost 10 million dual eligibles account for 15 percent of Medicaid beneficiaries — but 39 percent of Medicaid spending (and 27 percent of Medicare outlays). Adamy noted that many of the costs come from the lack of coordination between the programs, which leads to waste and mismanagement. Reform to create coordination should clearly be a top priority. But turning Medicaid into a block grant, leaving each state to craft its own program without federal guidelines, would make coordination far more difficult.

And if states decided to drop dual eligibles — the most chronically ill people in the society — from the Medicaid program, it would not only drive up Medicare costs sharply but likely leave many of these cases in limbo. Medicare does not provide long-term care, much less the kinds of Medicaid-funded day programs for those with mental and physical disabilities that allow some to live with families while enabling relatives to work.

Romney did say that if states got into trouble the government could always find ways to help. But to do so would conflict with all the other promises of fiscal restraint. The money would have to come from somewhere, and he has ruled out defense and Medicare and promised deep cuts in discretionary spending. 

Finding ways to restrain future growth in health care spending is an urgent priority. But Medicaid is already far more efficient than private health programs or Medicare, in large part because reimbursement rates to providers are ridiculously low. Cutting rates to providers would be counterproductive, and needs under the program, especially for the most sick among us, are likely to grow. Repealing the health care overhaul and making Medicaid a block grant are, at best, inadequate responses.

Norman Ornstein is a resident scholar at the American Enterprise Institute.

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