The Center joined with a wide variety of leading organizations today on a letter that urges President Obama and congressional leaders, as part of their budget negotiations, “to protect programs for low-income families and individuals and make sure that deficit reduction is achieved in a way that does not increase poverty.”
Any agreement on deficit reduction should neither cut low-income assistance programs directly nor subject these programs to cuts under automatic enforcement mechanisms. Cuts to programs that help low-income people meet their basic needs or provide them with opportunity to obtain decent education and employment would inevitably increase poverty and hardship.
The major bipartisan deficit reduction packages of recent decades have adhered to the principle we espouse here. In fact, all deficit reduction packages enacted in the 1990s reduced poverty and helped the disadvantaged even as they shrank deficits. In addition, every automatic budget cut mechanism of the past quarter-century has exempted core low-income assistance programs from any automatic across-the-board cuts triggered when budget targets or fiscal restraint rules were missed or violated. The 1985 and 1987 Gramm-Rudman-Hollings laws, the 1990 Budget Enforcement Act, the 1993 deficit reduction package, the 1997 Balanced Budget Act, and the 2010 pay-as-you-go law all exempted core low-income programs from automatic cuts.
For the full letter and list of signatories, click here.
This week on Off the Charts, we talked about the budget and the economy, Medicare, food assistance programs, and housing.
- On the budget and the economy, Kathy Ruffing highlighted the Congressional Budget Office’s new long-term budget outlook, which reinforces the argument that policymakers should pursue gradual deficit-reduction that does not jeopardize the economic recovery. Chad Stone explained why large, immediate spending cuts would hurt the economy. Jared Bernstein outlined policies that could help middle-class families struggling to make ends meet. He also noted that some Republicans’ support for a deficit-cutting deal that reduces tax expenditures is good news. We also showed that a proposal before budget negotiators to shrink deficits by reducing Medicaid spending would shift costs to states.
- On Medicare, Paul Van de Water corrected the misperception that higher-income people pay no more for Medicare than other people.
- On food assistance programs, Dottie Rosenbaum debunked the claim that SNAP (formerly known as food stamps) is beset by out-of-control growth and widespread waste and fraud.
- On housing, Barbara Sard supported legislation that would strengthen the housing voucher program. Will Fischer explained the need for a new approach to funding public housing repairs.
In other news, we hosted a media briefing with Peter Orszag, former Director of the Office of Management and Budget, on ways to transform the U.S. health care system. We showed why a tax holiday for overseas corporate profits would fail to boost the economy and would encourage companies to shift even more jobs overseas. We revised our study of proposed cuts to the WIC nutrition program, and updated our rebuttal of claims that WIC has high administrative costs. We demonstrated how an unbalanced, spending-cut-focused approach to deficit reduction could cripple housing and community development programs. Center experts testified before Congress on policies to boost the economy, help struggling middle-class families, and improve the housing voucher program. Finally, we updated our state-by-state breakdown of how many weeks of unemployment insurance are available.
A report sponsored by the Department of Housing and Urban Development estimated today that the nation’s public housing developments faced $26 billion in unmet needs for repairs and renovations in 2010. Many renovation projects supported by the 2009 Recovery Act’s $4 billion in public housing capital funding were just getting underway when the study was carried out, but even after those projects are done, the unmet need will still stand well above $20 billion, threatening the long-term viability of an important part of the safety net.
Public housing provides decent, affordable homes to more than 1 million low-income households, nearly two-thirds of which include at least one person who is elderly or has a disability. But years of federal underfunding have led to the extensive repair needs that the new report identifies, which range from leaky roofs to old and inefficient heating systems. Many developments have deteriorated to the point where they must be demolished or sold, squandering decades of federal investment. More than 165,000 public housing units have been lost and not replaced by new public housing since 1995.
Funding for public housing renovation has fallen by 46 percent since 2001 in inflation-adjusted terms, and the $2 billion that Congress provided for this fiscal year (2011) won’t even cover the new repair needs that accumulate each year. For 2012, Congress must avoid further cuts that would hasten the deterioration of developments — and also adequately fund separate subsidies that help cover the developments’ day-to-day operating costs. But the new report makes clear that even a sizable increase in capital funds won’t come close to matching the need.
We need a new approach, and the President’s 2012 budget would provide one that holds promise. It would fund a limited number of public housing developments through the Section 8 rental assistance program rather than the public housing program. As our analysis of the plan explains, this would provide more adequate and reliable funding. More important, it would allow agencies to obtain private investment more easily, providing a major new resource to renovate public housing.
Public housing repair needs are daunting, but the President’s plan offers a realistic and cost-effective step toward addressing them. It deserves prompt action by Congress.
The Center released a report today on one of the proposals that budget negotiators are considering to reduce federal deficits:
An Obama Administration proposal that’s on the table for budget negotiators would reduce federal Medicaid expenditures by reducing the federal share of Medicaid and CHIP costs, shifting costs to states and likely prompting states to cut payments to health care providers and to scale back the health services that Medicaid covers for low-income children, parents, people with disabilities, and/or senior citizens (including those in nursing homes). Reductions in provider payments would likely exacerbate the problem that Medicaid beneficiaries already face regarding access to physician care, particularly from specialists.
The proposal would replace the various matching rates at which the federal government reimburses states for their costs in insuring people through Medicaid and CHIP with a single “blended rate” for each state. A state’s blended rate would be set at a level that provided the state with less federal funding than under current law, thereby saving the federal government money.
The blended-rate concept has two significant weaknesses.
- First, it would essentially shift costs to states, rather than constrain them. The proposal produces little administrative-cost or other efficiency savings, as explained below. States, which face their own budget problems, likely would compensate for the reduction in federal funding by scaling back the services that Medicaid and CHIP (the Children’s Health Insurance Program) cover, cutting payment rates to health care providers, or both. Some Medicaid beneficiaries already have limited access to physician care, particularly from specialists, due largely to Medicaid’s already-low reimbursement rates. The shift in costs to states under the blended-rate proposal would make that problem worse.
- Second, the federal government would find it extremely difficult to calculate each state’s blended rate fairly and accurately. Under last year’s health reform law, the federal government will pay a substantially higher matching rate (i.e., cover a much larger share of the costs) for covering the large numbers of low-income people whom that law makes newly eligible for Medicaid starting in 2014. To compute a blended rate for each state, federal officials would have to make a number of assumptions about each state’s future Medicaid and CHIP enrollment and expenditures, including how many people in each state who become newly eligible for Medicaid under health reform will actually enroll in the program and how healthy or sick they will be (since that will affect the health services that they use and, hence, their average health care costs). Federal officials also would have to estimate how many people in each state who are now eligible for Medicaid but not enrolled will enroll after health reform’s coverage expansion and insurance mandate take effect, as well as what their health status will be. These assumptions would be rife with uncertainty, because they would not be based on actual state experience. As explained below, federal officials would be making other estimates as well, for which hard data are not available, that would affect the blended rate a state is assigned.
Thus, the blended rates almost inevitably would produce intense controversy, with many states likely challenging the federal estimates and contending that their blended rate has been set too low.
The budget framework that the Administration issued in April envisions at least $100 billion in federal Medicaid savings over ten years. The savings would apparently come from three places: 1) a series of small but significant measures outlined in the President’s fiscal 2012 budget to increase Medicaid efficiency and reduce Medicaid’s costs in providing medical equipment, prescription drugs, and certain other items, which would save somewhere around $10 billion to $15 billion; 2) a proposal to sharply restrict or bar states from raising part of their matching contributions for Medicaid by taxing health care providers, which would save about $25 billion to $45 billion depending on how sweeping the proposal is; and 3) the blended-rate proposal.
By limiting how states can raise funds to help pay their Medicaid costs, the “provider-tax” proposals — like the blended-rate proposal — represents a cost-shift to states. The Congressional Budget Office and the Office of Management and Budget estimate these proposals would reduce federal Medicaid costs because many states would not find other revenues to replace the provider tax revenues — and would have to cut back their Medicaid programs as a consequence, which in turn would lower federal costs.
Depending on the specifics of the provider-tax proposal that is adopted, the blended-rate proposal could well be the principal Medicaid cut in a deficit-reduction package and account for the majority of the federal Medicaid savings in the package.
Click here for the full report.