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Know the consequences of cutting Medicaid

Medicaid has a huge economic effect, not only on its recipients but also on the hospitals and clinics in many ill-served communities. Lives hang in the balance.

September 09, 2012|Michael Hiltzik
  • Former President Clinton said in his Democratic convention speech Wednesday that the GOP plan to “block grant Medicaid and cut it by a third” is “going to really hurt a lot of poor kids.”
Former President Clinton said in his Democratic convention speech Wednesday… (Brian van der Brug, Los Angeles…)

Of the nation's major social insurance programs, Medicaid tends to be the one that gets the least respect.

The reason is not because it's small — with some 53 million enrollees, the federal-state program is slightly smaller than Social Security but larger than Medicare — but because it serves the poorest and sickest Americans, those with the fewest healthcare options.

Yet Medicaid (or Medi-Cal, as it's known in California) may also have the greatest economic impact of those programs, not only on its recipients but also on the hospitals and clinics in many ill-served communities. In many cases their financial health depends on Medicaid.

That's why government officials should be careful when they talk about reining in the program or narrowing its reach. If you've been paying attention during this politically turbocharged year, you know that careful is exactly what they're not.

GOP vice presidential candidate Paul Ryan has proposed converting Medicaid from a traditional reimbursement program into a block grant, through which states would get a lump sum from Washington to spend on beneficiaries as they please; this plan was part of the budget passed this year by the GOP House and has been endorsed, at least implicitly, by Mitt Romney's presidential campaign.

Meanwhile, the governors of six Southern states have announced that they'll be rejecting a sizable expansion of Medicaid written into the 2010 healthcare reform act. They've been empowered to do so by the U.S. Supreme Court, which eliminated the government's ability to enforce the expansion in the same decision in which it upheld the rest of the healthcare act. Five other states are leaning toward nonparticipation but haven't pulled the trigger. Eleven so far, including California, have committed to expansion.

Much of this maneuvering has flown under the radar or been lost in the noise devoted to Medicare reform proposals. But former President Clinton highlighted the issue during his Democratic convention speech last week.

"You won't be laughing when I finish telling you this," he remarked, explaining that the GOP wants to "block grant Medicaid and cut it by a third over the coming 10 years. Of course, that's going to really hurt a lot of poor kids."

In the interest of fact checking, Clinton's figure was a bit exaggerated: The Ryan budget would cut Medicaid by about 22% over the 10-year period; it's in Year 10 that the shortfall reaches 34%, compared with projections under the current program.

As for the Medicaid expansion that the governors of Florida, Texas and four other states are so cavalierly rejecting, it was designed to take more than 16 million residents off the rolls of the uninsured. It does so by expanding Medicaid eligibility to all those under 65 earning less than 138% of the federal poverty level, or $15,415 for an individual. In practical terms, the most heavily affected groups are low-income parents and childless adults; most states have more forgiving rules for children.

Some of these individuals would still be eligible for federal subsidies to buy private insurance if their states reject the Medicaid expansion, but according to the Congressional Budget Office, two-thirds would be left without coverage.

Here's the kicker: For the first three years of the expansion (2014 through 2016) the federal government will pay 100% of the cost; after that, the federal share declines in steps, reaching 90% in 2020 and sticking there.

"I just don't understand how any state could refuse 100% funding for the first three years," says Jim Lott, executive vice president of the Hospital Assn. of Southern California, a veteran of healthcare funding wars. "Take the money and provide your citizens with coverage."

Hard to understand? No kidding. The two biggest states to reject the expansion, Texas and Florida, rank first and second in their percentage of uninsured residents (25% and 21%, respectively). The Medicaid expansion rejected by their governors, those outstanding humanitarians Rick Perry and Rick Scott, would provide insurance to as many as 4.2 million residents, according to the Kaiser Family Foundation.

Are these governors looking out for their constituents' interests? Perry, in his truculent letter to Health and Human Services Secretary Kathleen Sebelius rejecting the expansion, labeled it, along with the creation of an insurance exchange to provide lower-cost private coverage to individuals, "brazen intrusions into the sovereignty of our state." The egregious Scott — whose former company, Columbia/HCA, pleaded guilty in 2000 to 14 federal felony counts and paid $840 million in fines and penalties to settle charges that it defrauded Medicare and Medicaid — groused that what he called "ObamaCare" would eventually become a "burden" on Floridians.

Patient advocates, knowing political poseurs when they see them, are hoping that hospitals and other providers in those states will lead their governors toward the light.

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