Fiscal Responsibility on the Backs of the Vulnerable

Give Paul Ryan credit. When word leaked last week that the House Budget Committee chair's vision for an austere 2012 would primarily rely on some $1 trillion in cuts over 10 years to Medicaid, the federal program that provides health care to the poor and disabled, the conventional wisdom was that he was taking the easy way out. Poor people, after all, don't vote Republican, and ever since the GOP started pandering to the elderly voters they increasingly depend upon -- remember the screams of "Keep your government hands off my Medicare" at countless town halls? -- it seemed that Republicans had decided it was better not to poke the sleeping bear: cuts to Social Security and Medicare.

But then Ryan went ahead and did the seemingly brave thing, winning him predictable plaudits from the Beltway punditocracy: He proposed cutting and completely reinventing both Medicaid and Medicare. While Ryan might deserve credit for offering an honest assessment of what the GOP's low-tax, skimpy-social-safety-net paradise would look like for senior voters, it seems less courageous once you examine what these drastic cuts actually mean for our most vulnerable citizens: the elderly and the disabled.

Ryan's proposal cuts $1.4 trillion from Medicaid over the next 10 years in two ways. First, he would shave $630 billion off the budget by essentially repealing the Affordable Care Act's provisions that expand coverage to include anyone living on less than 133 percent of the poverty rate -- just under $30,000 for a family of four -- and eliminating subsidies for private insurance premiums for those just above the poverty line. The CBO estimates that approximately 17 million people without insurance would have been covered by the Medicaid expansion alone.

Second, his plan would shave an additional $770 billion from what Medicaid's budget would have been without the ACA's expansion. He punts the tough political choices about which specific cuts to make by turning Medicaid into a block-grant program to states and setting a total federal spending limit. This leaves it largely up to the states to determine which essential medical services will be eliminated, thereby absolving Ryan of responsibility for the pain it would inflict.

There are several ways states can pass on the Medicaid savings: reduce eligibility to trim the Medicaid rolls, cut recipients' benefits, and reduce provider payments. Presumably all three would occur, and the balance between them would vary by state.

But not all Medicaid beneficiaries require the same amount of spending, and those who cost the most would most likely see their benefits limited or cut. Older people and people with disabilities make up the majority of Medicaid expenditures but are only about a quarter of Medicaid recipients. They are much more likely than the general population to depend on expensive long-term care and ancillary services like mental health, home-health aides, and occupational or physical therapy. Right now, if a state chooses to cover those needs, the federal government kicks in a significant portion of the cost, but that would change under Ryan's block-grant plan. States would have a financial incentive to cut the most vulnerable because they are the most expensive. "Medicaid is already a pretty lean program, so block grants create a big incentive for states to cut back on things that vulnerable people really need," says Harold Pollack, a professor of social policy at the University of Chicago.

And the cuts would get more draconian over time. The block grants would be indexed to population growth and inflation, but medical care costs rise faster than inflation. Thus, with each year the gap between what the block grant can pay for and what services are needed would grow. It would be even worse in lean years. "Imagine you have a deep recession," says Pollack. "Right now when an individual eligible for Medicaid gets on the program the federal government has to pay, so the state is protected if all of a sudden a lot of people come onto Medicaid. If you block grant it, the state is now vulnerable to the risk of health care costing more than they expected or more people signing up than they expected."

The terrible irony here is that Medicaid is already a relatively efficient program, so there's very little waste to cut merely by capping spending. "We all agree we need to slow the growth in the rate of health-care costs," says Edwin Park, a health-policy expert at the Center on Budget and Policy Priorities. "This approach is the wrong one because it looks only at cost of programs. Medicare and Medicaid costs have grown slower than the private system. [Ryan's proposal] is not dealing with the system-wide problem; it just slashes the safety net."

Advocates for the disabled seem to have been caught somewhat off guard by Ryan's proposal. But their allies on Capitol Hill have taken notice. Sen. Tom Harkin, Democrat of Iowa and chair of the Health, Labor, Education and Pensions Committee and a longtime advocate of disability rights, said in a statement: "The Ryan budget proposal is a disaster for children and adults with disabilities and chronic conditions. ... This is an assault on the safety net that millions of Americans with disabilities rely on to live with dignity in the community." It will be up to Harkin and his allies in Congress to fend off that assault.

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