Defunding State Health Insurance Exchanges Would Slow Health Reform

April 24, 2012 at 4:13 pm

The House voted almost a year ago to undercut the Affordable Care Act by repealing its grants to help states set up “exchanges,” the new marketplaces that will allow individuals and small businesses to choose among a number of private health insurance plans.  (The measure didn’t go anywhere in the Senate.)

Here we go again.

The House Energy and Commerce Committee is preparing to vote this week on a similar provision, part of a bill to cut mandatory spending as the House-passed budget plan requires.  (We blogged about another provision of that bill earlier today.)

The Congressional Budget Office (CBO) predicted last year that repealing the exchange grants would delay state efforts to set up the exchanges, which are scheduled to be up and running on January 1, 2014.  As a result, CBO estimated, 2 million fewer people would participate in the exchanges in 2015, which means fewer low- and moderate-income people would receive federal help with premiums, deductibles, and other cost-sharing charges to make coverage more affordable.

A number of states are moving forward to set up exchanges and are using the exchange grants to support their efforts; 34 states have received establishment grants as of April 16.  Congress shouldn’t undermine this important part of health reform.

Social Security: It’s Not 1983

April 24, 2012 at 2:47 pm

The Social Security trustees’ report released yesterday moved up the projected date on which the program’s trust fund will become insolvent from 2036 to 2033.  “Never since the 1983 reforms have we come as close to trust-fund depletion as we are right now,” trustee Charles Blahous is quoted as saying in several news reports.

That comment is literally correct — but easily misunderstood.  Insolvency is now 21 years away; back in 1983, it was three months away.

On April 20, 1983, President Reagan signed major Social Security reform legislation, which Congress had passed by large bipartisan majorities.  The program’s actuaries had warned that — unless policymakers acted — Social Security would be unable to continue paying full benefits in July 1983.  But soon after the law’s enactment, the trustees certified that the trust funds wouldn’t become insolvent until sometime outside their 75-year window for evaluating the program’s long-term finances — that is, until after the late 2050s.

Since then, a variety of factors, chiefly economic and demographic, have brought the expected exhaustion date to 2033.  (The projections vary every year; in the mid-1990s, the trustees estimated that exhaustion would occur as early as 2029.)

Yes, we’re closer to trust-fund exhaustion now than we’ve been since 1983 … but there’s a vast gulf between three months and 21 years.

While Social Security isn’t in crisis, 1983 does have lessons for us.  One is the importance of bipartisanship; much of the credit for pushing a deal — sometimes ascribed to the so-called Greenspan Commission — actually belongs to then-Speaker Tip O’Neill and President Ronald Reagan and pragmatists from both parties.

Another lesson is the importance of phasing in changes gradually.  The 1983 changes — which included accelerating already scheduled payroll tax increases and eventually raising the full retirement age — had relatively little impact on beneficiaries then on the rolls.  That’s important, because current beneficiaries have little opportunity to make up for benefit cuts by working or saving more.  (It’s also easier politically to gain acceptance of gradual changes than sudden ones.)

We co-wrote a paper with Chuck Blahous in late 2010 in which we noted that policymakers ought to act soon to make Social Security solvent — not because the program is in crisis, but because prompt action would enable us to spread out the needed adjustments in revenue and benefit formulas and help people plan their work, savings, and retirement.  As we concluded:  “Reasonable and well-intentioned people will have differences over the best way to resolve the Social Security shortfall. We share a common interest, however, in taking action to do so at the earliest practicable time.”

Repealing Health Reform’s Medicaid Provision Would Weaken Coverage, Not Fight Fraud

April 24, 2012 at 1:06 pm

The House Energy and Commerce Committee will try again this week to repeal a part of health reform that requires states to maintain their current Medicaid and Children’s Health Insurance Program (CHIP) programs until other parts of the law take effect.

Contrary to critics’ claims, these “maintenance-of-effort” (MOE) requirements don’t interfere with ongoing state efforts to fight Medicaid fraud.  And the Congressional Budget Office (CBO) estimates that repealing them would cause 300,000 more people to be uninsured in 2015 than under current law.

Under the MOE provisions, states must keep their current Medicaid eligibility rules for adults until 2014, when new, nationwide Medicaid eligibility rules will take effect and state-based health insurance exchanges will begin operating.   States must also maintain their Medicaid and CHIP eligibility rules for children until 2019.

CBO’s analysis of an effort to repeal the MOE last May explained that the vast majority of those who would become uninsured would be children.  That analysis also found that half of the states would terminate their CHIP programs by the end of 2016 and others would cut back CHIP eligibility levels.

Repeal would also put coverage for many seniors and people with disabilities at risk, as our report on this issue last year explained.  These individuals could lose critical home- and community-based services that keep them out of institutions.

As my colleague Sarah Lueck explains, the provisions do not affect any of the tools and initiatives that states and the federal government use to combat fraud and abuse and recover misspent funds.  In fact, anti-fraud activities have increased since Congress enacted the MOE as part of health reform.  Nor does the MOE affect ongoing efforts to identify and remedy Medicaid payment errors that don’t involve fraud or abuse.

In short, repealing the MOE provisions wouldn’t make Medicaid more efficient, and it would mark a big step backward for one of health reform’s core goals: preserving and expanding affordable health coverage.

Examining the Trustees’ Reports

April 23, 2012 at 5:23 pm

We have released statements on the new reports from the Social Security and Medicare trustees on the programs’ finances:

Social Security:

The trustees’ report, with its projection that, in the absence of policy changes, Social Security will be able to pay full benefits only until 2033 — and about 75 percent of scheduled benefits after that — indicates Congress should act soon to address the program’s long-term financing shortfall.  The projected 2033 date is three years earlier than the date in last year’s trustees’ report, although it is consistent with various earlier trustees’ reports.  Over the past couple of decades, the year when the trustees project the Social Security trust funds will be exhausted has ranged from 2029 to 2042, moving both closer and farther away with new developments and projections relating to the economy, demographics, and other factors. . . .

Click here for the full statement.

Medicare:

The new report from Medicare’s trustees shows little change from last year’s report in the near-term outlook for the program, while indicating that the program continues to face significant financing challenges in the long run.  The projected date of insolvency for Medicare’s Hospital Insurance (HI) trust fund is 2024 — the same as projected last year. . . .

Click here for the full statement.

What If Chairman Ryan’s Medicaid Block Grant Were Already in Effect?

April 23, 2012 at 3:09 pm

House Budget Committee Chairman Paul Ryan’s proposal to block-grant Medicaid would cut federal funding by one-third by 2022 and even more after that, we recently explained.  To help show how states would likely fare under the proposal over time, we compared how much federal funding they would have received under the block grant if it had been in effect for fiscal years 2001-2010 to what they actually received (excluding the temporary funding increases that the White House and Congress provided during the last two recessions).

We found that the Ryan block grant — which the House passed as part of Chairman Ryan’s overall budget — would have cut federal Medicaid funds to most states by more than 35 percent by 2010 and to several of them by more than 50 percent.

Every state would have received substantially less from the federal government than it actually received, but some states would have received much, much less.

  • States would have received $555 billion — or 31 percent — less over the 2001-2010 period.
  • In 2010 alone, the cuts in federal funding would have totaled about $81 billion, or 37 percent (see table).

To cope with cuts of this size, states would have to boost their own funding substantially or, more likely, sharply scale back their Medicaid programs by tightening eligibility, shrinking benefits, and cutting reimbursement rates to providers.

Such changes would add millions to the number of uninsured Americans.  Last year, when Chairman Ryan included a similar Medicaid block-grant proposal in his budget, the Urban Institute estimated that it would prompt states to drop between 14 million and 27 million people from Medicaid by 2021 — in addition to the 17 million people who would no longer gain coverage because of the Ryan budget’s repeal of the health reform law’s Medicaid expansion.

Estimated Cuts If Ryan Medicaid Block Grant Had Been in Effect,
2001-2010 ($ millions)
STATE Reduction in Federal Funds, 2010 Percentage Cut, 2010
NATION $80,724 37%
Alabama 1,015 31%
Alaska 407 53%
Arizona 4,477 71%
Arkansas 1,444 49%
California 7,109 34%
Colorado 808 40%
Connecticut 718 26%
Delaware 335 52%
DC 432 35%
Florida 4,397 46%
Georgia 1,885 37%
Hawaii 305 41%
Idaho 490 52%
Illinois 2,757 36%
Indiana 1,597 41%
Iowa 688 35%
Kansas 488 33%
Kentucky 1,308 33%
Louisiana 1,383 30%
Maine 445 30%
Maryland 1,564 44%
Massachusetts 1,853 32%
Michigan 2,656 36%
Minnesota 1,447 38%
Mississippi 1,278 41%
Missouri 2,311 45%
Montana 229 36%
Nebraska 207 21%
Nevada 380 50%
New Hampshire 121 18%
New Jersey 1,105 22%
New Mexico 1,418 57%
New York 5,707 23%
North Carolina 2,645 39%
North Dakota 99 23%
Ohio 4,073 42%
Oklahoma 1,109 44%
Oregon 927 37%
Pennsylvania 3,666 36%
Rhode Island 268 27%
South Carolina 1,235 35%
South Dakota 157 31%
Tennessee 1,946 35%
Texas 6,561 42%
Utah 491 40%
Vermont 363 49%
Virginia 1,445 45%
Washington 918 26%
West Virginia 444 24%
Wisconsin 1,531 39%
Wyoming 86 32%
Source:  CBPP analysis based on CMS Medicaid spending data.  To determine states’ block grant amounts under the Ryan proposal, we use federal Medicaid spending in 1998 as the base, adjusted annually by national population growth and the growth in the Consumer Price Index.  We exclude federal Medicaid spending related to temporary federal matching rate increases in 2003, 2004, 2009, and 2010.