Ryan’s Rx for Medicaid Means Millions More Uninsured or Underinsured Seniors, People with Disabilities, and Children

April 4, 2011 at 3:49 pm

Medicaid Costs 20% Less for Adults than Private Insurance

House Budget Committee Chairman Paul Ryan (R-WI) will unveil a budget tomorrow that would cut Medicaid by as much as $1 trillion over the next 10 years and convert it into a block grant. He and others will likely claim that these changes would merely rein in “out-of-control” Medicaid costs while letting states stretch their reduced federal funding and maintain coverage for people who are on Medicaid now or will need it in the future.

Don’t believe it. The inevitable result would be millions more poor Americans who are uninsured or underinsured and go without needed medical and long-term care

The reason is simple: Medicaid is already lean. It costs Medicaid much less than private insurance to cover people with similar health status (see first graph). While Medicaid provides more comprehensive benefits than private insurance and charges beneficiaries significantly lower out-of-pocket costs, its lower payment rates to providers and lower administrative costs help make the program very efficient.

Over the past 30 years, Medicaid costs per beneficiary have essentially tracked costs in the health care system as a whole, public and private. And over the past decade, costs per beneficiary grew much more slowly for Medicaid than for employer-sponsored insurance (see second graph).

This means that the only ways that states could make up for Ryan’s massive Medicaid cuts would be to contribute much more of their own funds or (as is more likely) to use the greater flexibility they would receive under a block grant to roll back coverage for millions of low-income children, seniors, people with disabilities, pregnant women, and working parents.

A block grant typically lets states override most federal requirements regarding program eligibility and benefits, and block-granting Medicaid would probably eliminate the health reform law’s requirement that states expand their Medicaid programs starting in 2014 (largely at federal expense). As a result, millions of uninsured people would not gain coverage. Many states undoubtedly would have to go much further, cutting eligibility and benefits sharply and raising premiums and cost-sharing charges to levels that many current or future beneficiaries couldn’t afford.

Medicaid Per-Beneficiary Spending Grew More Slowly Than Employer Coverage (2000-2009)

The 16 million seniors and people with disabilities now on Medicaid would likely be at the greatest risk from these cuts. They constitute just under one-quarter of Medicaid beneficiaries but account for two-thirds of all Medicaid spending because of their greater health care needs and because Medicaid is the primary funder of long-term care services and supports, including nursing home care. Any cuts in long-term care services would cause increasing harm over time as the nation ages and the need for these services continues to grow.

States would also have to institute substantial cuts in reimbursement rates for hospitals, physicians, nursing homes, pharmacies, managed care plans, and other providers that furnish care to Medicaid beneficiaries. Many of these providers would likely respond by withdrawing from the program, leaving nowhere to go for care for beneficiaries who remain on the program.

In short, the Ryan plan’s Medicaid changes would profoundly impair health care coverage for seniors, people with disabilities, and people with low incomes.

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More About Edwin Park

Edwin Park

Park is Vice President for Health Policy at the Center on Budget and Policy Priorities, where he focuses on Medicaid, the Children’s Health Insurance Program, and issues related to federal health reform.

Full bio | Blog Archive | Research archive at CBPP.org

5 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Steve Sturycz #

    I think there might be a business element that’s missing from this story. The writer noted that it is more efficient (less expensive than private insurance) to treat a Medicaid patient. In business there’s a term called margin blending which refer’s to averaging out the multiple profit sources a company has coming in. There’s usually a part (the profitable = privately insured) that offsets the less profitable (Medicaid) to create an aggregate. It is paramount to put this in your analysis.

  2. Alexandra Juhre #

    Please keep in mind that those who qualify for Medicaid are the very very poor. Yes, literally, they do not have income to cover aspirin and shampoo and sundries that most of us take for granted. What they do the rest of the time is they Go Without.

    But these are much deeper cuts than aspirin. In New York State, Cuomo has just announced that effective October 1st, anti-viral drugs for AIDS and other immune-compromised patients will no longer be covered under Medicaid. This is a Death Sentence. There is no other source of funding for these people to get the medication they need to stay alive.

    Also being cut are anti-depressant and anti-psychotic medications for the Mentally Ill. This will undoubtedly drive up emergency room visits, crime statistics and aberrant behavior in our streets. Is this world we want for our children?

  3. Stephanie G. Robinson, Ph. D. #

    I have 70 year old mentally ill sister. When her medications work she is a talented, wonderful human being. She has been dependent on Medicare and medicaid for psychological and medical services. She has been able to stay in the community for the most part and lead a constructive life. Cuts in the medicare, medicaid program would endanger my sister’s life, and the lives of hundreds of mentally and physically ill New Jersey residents. I ask the New Jersey legislators to consider the ramifications of sending thousands of helpless people into the streets with the contemplated cuts. (Remember Marlboro State Hospital?)
    The Governor often qotes is mother as a role model. Would he do to his mother what he is contemplating doing to the patients in New Jersy who depend on the already limited funding for medicaid and other New Jersey funded health programs?

  4. 4

    William Garfinkel,
    Ref: Everything you just said.
    {citation needed}

  5. William Garfinkel #

    This is the quote that got my attention: “…The inevitable result would be millions more poor Americans who are uninsured or under insured and go without (needed) medical and long-term care.

    Help me define “needed”. Do we really need to pay for over the counter drugs like aspirin and Ibuprofen? De we really have to pay for Brand drugs when generic drugs will do? Why do we give perfectly ambulatory people free cab or limo rides to the Dr. office when thy have their own transportation or have people in their house who can give them a ride? What do they do the rest of the time? OK, I can see if they use a wheelchair or need a stretcher and need a special vehicle. But, why are they allowed to pick any medical facility they want and not have to go to the nearest one to their home? Where are the pictures, signatures and fingerprints on the Medicaid Cards so they can’t share them with their friends? Why not drug test everyone on Medicaid? Why are Fugitive Felons getting Medicaid and other benefits while they are running from the law? Why is it that some doctors continuously give drug addicts scripts of “pain” medicine and never get questioned? Why not assign them a doctor and require referrals like real people have to do, then make them go to a walk in medical center in an emergency?

    There are simple fixes to save billions of dollars. The problem is they (Congress) do not have a clue what they are doing, nor, would they ask people who have. They really do not want to know.

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