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.

In Case You Missed It…

April 20, 2012 at 5:08 pm

This week on Off the Charts, we focused on the federal budget and taxes, state budgets, the safety net, Medicare, and Social Security.

  • On the federal budget and taxes, Chuck Marr concluded our “Thinking About Tax Policy” series by outlining three good first steps to raising taxes at the top of the income scale.  In recognition of Tax Day, he also highlighted our top ten charts related to federal taxes, and we featured some CBPP reports and blog posts that take a big-picture look at the U.S. tax system.
  • On state budgets, Jon Shure rebutted a new report claiming that significant numbers of people migrate from state to state in search of lower taxes.  Liz McNichol reported that states have relied much more on spending cuts than revenue increases to close recession-induced budget gaps over the past years.  She also noted that emergency federal aid helped states close budget gaps but expired too soon.
  • On the safety net, we featured excerpts from Robert Greenstein’s House Budget Committee testimony on the safety net’s anti-poverty impact, the danger of block-granting SNAP (formerly food stamps), and welfare reform’s track record.We also showed that a House bill to cut SNAP funding would affect millions of low-income people and do more damage to economic growth and job creation than any stimulus that the House-passed small-business tax cut of this week could possibly generate.
  • On Medicare, Paul Van de Water explained how health reform has strengthened the program and outlined some further steps that policymakers can take.  He also cited his Health Affairs blog post correcting the myth that the official cost projections of health reform “double-count” its Medicare savings.
  • On Social Security, Kathy Ruffing previewed the trustees’ report on the program’s finances, due out Monday.

In other news, we released Robert Greenstein’s testimony before the House Budget Committee on strengthening the safety net, as well as reports on a House proposal that could jeopardize health reform, the House Agriculture Committee’s proposal to cut SNAP, states’ unbalanced response to recession-induced budget gaps, and how House Budget Committee Chairman Paul Ryan’s Medicaid block grant would have affected states if it had taken effect in 2001. We also released Chad Stone’s statement on House action regarding a small business tax cut and SNAP benefit cuts and a joint letter on improving the strength and solvency of Medicare.

Critical Assistance That Ended Too Soon

April 20, 2012 at 4:53 pm

Our new analysis of state budget data shows that emergency federal assistance during the Great Recession enabled states to avert many spending cuts or tax increases that would have further harmed a weak economy — but ended well before the need did.

The 2009 Recovery Act and an extension enacted the following year included about $156 billion (mostly for Medicaid and education) to help states offset the collapse in revenues and the higher need during the recession.  These funds closed an average of one-third of state budget gaps in state fiscal years 2009-2011.

End of Recovery Act Funds in 2011 Left States on Their Own

But the emergency assistance mostly ended by June 2011, when state revenues were still about 7 percent below pre-recession levels, on average.

With federal aid mostly gone and state reserve funds largely depleted, states had to rely almost exclusively on spending cuts and tax increases to keep their budgets in balance.  They primarily chose to cut spending:  states closed 76 percent of their 2012 shortfalls through spending cuts, nearly twice the previous year’s 40 percent share (see graph).

More federal aid and a more balanced state approach — one that relied equally on new revenues and on service cuts — would have served states better.  As I noted yesterday, state and local governments have shed hundreds of thousands of jobs since 2008 and cut back on core services like education and health care, slowing state economies in the short term and potentially over the long term as well.

States have faced large budget gaps again in crafting their budgets for next year and even more gaps are likely in coming years, but federal policymakers are far more likely to cut ongoing federal funding for states and localities than to give any additional assistance, thereby making state budget challenges even greater.

Yes, Health Reform Strengthens Medicare and Reduces the Deficit

April 20, 2012 at 4:24 pm

Like a zombie, the spurious charges of “double-counting” savings in health reform just won’t die.  Although I’ve debunked these allegations before, I respond at greater length today on the Health Affairs blog.

Here’s the bottom line:  Medicare is a part of the federal budget.  Therefore, spending cuts or tax increases that reduce projected deficits in Medicare also help reduce projected deficits in the overall budget.  It’s as simple as that.  Contrary to critics’ claims, no “double-counting” is involved.