What Cuts Would You Make to Medicaid?

When Washington considers budget reform and deficit reduction, naturally, cuts to Medicaid spending are proposed.  Which proposals would actually reduce spending or make better use of our tax dollars?

Several proposals would repeal the CLASS Act, the voluntary long-term care insurance program included in the Patient Protection and Affordable Care Act (P.L. 111-148). The CLASS Act would nudge people to buy long-term care insurance, usually through their employers. According to the Congressional Budget Office,  implementation of the CLASS Act would cut federal spending by $83 billion between 2012 and 2021.  Employers would withhold premiums from workers’ checks.  The premiums will be based on age at enrollment, so that the earlier  you sign up, the less you’ll pay and cash benefits would vest after five years.  Individuals could choose the level of coverage to buy and the cash benefits could be used to pay for many forms of that help people stay in their homes and out of institutions.   Home-based services cost less than nursing home care, which by law Medicaid must cover.

The proposed State Flexibility Act (H 1683) would repeal the maintenance of effort requirements of the Affordable Care Act and the American Recovery and Reinvestment Act. Maintenance of effort requirements are often included in benefits-related legislation that increases the federal share of spending, so that states won’t be encouraged to drop benefits until the increased federal money is available.  Repeal would allow states to lower income limits, eliminate some optional eligibility groups and/or cut optional services.

Others include:

  • capping Medicaid spending by converting it to a block grant program, perhaps indexing growth in population and increases in the consumer price index.
  • limiting states’ authority to tax  health care providers that receive Medicaid payments
  • requiring dual eligibles, individuals on both Medicare and Medicaid, to join Medicaid managed care plans

It’s not clear how some of these proposals would cut Medicaid spending. CLASS is not  a Medicaid benefit. As a voluntary insurance program, it would increase revenue by collecting premiums.  Benefits, which are limited according to the coverage purchased, would be paid out only after five years of enrollment and premium payments. On the other hand, without CLASS, people who need long-term care and can’t afford it are likely to  turn to Medicaid.

Ordinary families who can’t meet their bills don’t limit their efforts to cutting expenses, they try to increase their income.  If you were tasked with eliminating the deficit, how would you do it?  How important would cuts to Medicaid spending be to the success of your plan?