House Budget Plan Would Cut $1.4 Trillion, Reduce Enrollees by 44 Million, Report Says

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Federal spending on Medicaid would fall by about $1.4 trillion from 2012 to 2021, and between 31 million and 44 million fewer people would have Medicaid coverage under the budget plan approved April 15 by House Republicans, according to a report issued May 10 by the Kaiser Family Foundation.

Under the House budget plan approved on a mostly party-line vote, projected federal spending on Medicaid would fall 34 percent from current law over the 10-year period, House Republican Budget Plan: State-by-State Impact of Changes in Medicaid Financing said. By 2021 states would receive $243 billion less annually in federal Medicaid funding, a 44 percent reduction, than would be the case under current law, it said.

The analysis was conducted by the Urban Institute for the Kaiser Commission on Medicaid and the Uninsured, part of the Henry J. Kaiser Family Foundation.

The House budget plan would convert the existing Medicaid program from open-ended federal spending that matches state expenditures to a block grant under which federal spending would be capped and distributed to states based on a formula rather than actual costs, the report said.

In addition, the House bill would repeal the Patient Protection and Affordable Care Act, which expands Medicaid eligibility for nonelderly people earning up to 138 percent of the federal poverty level, the report said. In 2014 PPACA is estimated to cover 16 million people who are uninsured. President Obama opposes the House bill and it is unlikely to be approved by the Senate.

The approximately $1.4 trillion in estimated federal savings from the House budget plan includes $750 billion from converting Medicaid to block grants and limiting federal spending growth rates, and $610 billion in savings from repealing PPACA, the report said.

Under current law, including PPACA, federal Medicaid spending is projected to total $4 trillion over the 2012 to 2021 period, the report said. With the repeal of PPACA, total federal spending for Medicaid over the same period would be $3.4 trillion, it said. Total spending under the House budget plan would be $2.7 trillion.

Impact on States Would Vary.

The impact on individual states from repealing PPACA would vary, according to the analysis. Cuts in federal spending over the 10-year period would range from 26 percent in Washington, Vermont, Minnesota, and the District of Columbia, to 44 percent in Florida and Wyoming.

State spending would have to increase by about $241 billion, or 71 percent, over the 10-year period if states were unable to reduce spending per enrollee below gross domestic product plus 1.4 percent, the report said. Poorer states that receive more federal matching funds would face steeper percentage increases in state spending to keep up, it said. Medicaid is one of the biggest expenses states face.

“In the face of reduced federal dollars, program cuts are likely because states have held rates of increase in spending per enrollee below those of other payers,” the report said.

If states made equal reductions to all health care providers, federal and state Medicaid payments to hospitals could fall by $84.3 billion from what is expected under current law, a 38 percent decline, the report said. Hospitals are the largest Medicaid providers, it said.

Other providers such as physicians, nursing homes, and managed care plans would see reductions of about 31 percent, the report said. For nursing homes, in particular, the Medicaid cuts would be significant because Medicaid accounts for more than 40 percent of the nation's nursing home spending.

Deficit Reduction.

“It is indisputable that the U.S. deficit is a serious matter and that entitlement programs need to be examined as part of a range of options,” the report said. The president's National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center Debt Reduction Task Force made recommendations for reductions in Medicaid, including emphasis on better managing the care of Medicare and Medicaid dual eligibles and taking steps to “reduce the gaming by states of the federal-state matching formula,” the report said. President Obama also has put forth a proposal to achieve federal deficit reduction.

“The House budget plan goes much further than the president or either commission,” it said. “The repeal of [PPACA] along with reductions in federal spending for Medicaid through the block grant would almost inevitably result in dramatic reductions in coverage and similarly dramatic increases in the number of uninsured in the country,” it said. “Cuts in federal spending would result in large scale reductions in enrollment in Medicaid. This outcome would hold even if states were able to achieve substantial efficiencies by adopting policies to reduce the rate of growth in spending.”

From the federal perspective, capped financing would limit liability, make funding predictable, and generate savings, the report said. However, “In exchange for benefits to the federal budget, these changes could mean shifting costs and risk to states, localities, providers and beneficiaries,” it added.

“Medicaid currently plays a significant role in providing care to many low-income individuals, including children, the elderly and individuals with disabilities, financing long-term services, and provid[ing] support to safety net providers,” the report said. “Medicaid's ability to continue this role would be significantly compromised under this proposal, with no obvious alternative to take its place.”

By Sara Hansard


House Republican Budget Plan: State-by-State Impact of Changes in Medicaid Financing is available at http://www.kff.org/medicaid/8185.cfm.