Republican Budget Resolutions Rely on Tired Gimmicks | Commentary

Posted April 6, 2015 at 10:00am

By Elizabeth G. Taylor The new GOP controlled House and Senate have swiftly approved their budget resolutions for fiscal 2016 and, not surprising, both take a hatchet to the safety net. While they may not have the force of law, they offer an unsavory preview of what the party has to offer for the next two years. In short, they spell disaster for the mandatory spending program that 68 million people rely on: Medicaid.  

The top budget ploys of choice are, once again, block grants and spending caps. Both are being argued for under the assumption that Medicaid spending is out of control and must be fixed. House Budget Chairman Tom Price of Georgia may have promised to lead a new path on health care, but block grants and caps are from the same playbook that cost-cutters go back to every time. Look back at Rep. Paul D. Ryan’s, R-Wis., budget resolution that passed the House last April.  

The Republican budget resolutions talk in broad strokes about handing flexibility to states, but are suspiciously short on details. A quick examination of the impact of both resolutions explains why. They save money by pushing more costs to the states. Currently the federal government pays between 50 percent and 75 percent of Medicaid’s costs, but that rapidly dwindles under a block grant or cap. A block grant would provide a fixed amount of money to the state for all enrollees. And once that dollar limit is reached, the state is liable for the full bill. Per capita caps may sound like a better compromise, but they function similarly. Under a cap, the federal government makes a fixed payment for each Medicaid enrollee.  

In practice, both measures function as massive cuts. They do this in two ways: they save the federal government money by generally underfunding the initial allocation and by insufficiently adjusting the amount provided to the state each year. Medicaid then becomes chronically underfunded and the dollar gap worsens over time.  

For state governors and budgets, Medicaid block grants and caps are a wolf in sheep’s clothing. On first blush, they may offer flexibility, but they come with a price tag in dollars and cents down the road. Block grants, by their nature, fail to keep funding at pace with enrollment. If enrollment balloons, states must foot the bill. Caps are similar. If an unforeseen health crisis arises or a new drug hits the market (think Solvadi), per capita caps—which limit spending on a per enrollee basis regardless of actual health care costs—increase the amount for which states are liable.  

Limiting the total amount of dollars states receive — regardless of what happens during the year — would cripple state budgets. The promised flexibility appears illusory when numbers are crunched. The plan also runs counter to the way Medicaid was intentionally designed, which is to be counter-cyclical. Medicaid is supposed to spend more in times of greater need. If block grants or caps are enacted, states would have to fend for themselves when they are most strapped for cash. In proposing to fix the federal budget, the schemes merely pass the costs on to states.  

A Medicaid block grant or cap would leave states with few recourses: raise taxes, slash provider rates and services or drop enrollees. The latter two options would be terrible for providers and beneficiaries alike. Indeed, this is why it is no coincidence that the same groups who have long-advocated to cut Medicaid funding readily support block grants and caps.  

The budget resolutions ignore the fact that, if lower-income and vulnerable people are to have quality health care coverage, Medicaid is the cheapest way to do it. On a per-person basis, Medicaid costs less than private health insurance. The alternative to Medicaid is allowing these people to become uninsured (again). And that alternative would not be cheap. It would push costs back to the federal and state governments, providers and all of the rest of us, in the form of uncompensated care that the health care system must absorb. That is a significant price tag when millions of people are currently insured by Medicaid.  

Balanced solutions exist to manage federal health care spending that include revenue raising, small spending cuts and improved efficiency in providing care. For example, states are currently testing ways to reduce expensive emergency room usage, and they are exploring ways to boost access to cheaper primary care. These are promising practices that could bear fruit in the long term—both controlling costs and improving care.  

We cannot get there by simply cutting our way to a solution.  

Elizabeth G. Taylor is the executive director of the National Health Law Program (NHeLP). 

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