Obama’s Medicaid Proposal Would Also Shift Costs To The States

The Center on Policy and Budget Priorities (CBPP) is out with a new report criticizing President Obama for proposing reforms to the Medicaid program that 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.” The new rate would be “set at a level that provided the state with less federal funding than under current law,” saving money for the federal government and shifting those costs to the states. The idea, which is currently being considered in Vice President Joe Biden’s debt negotiations, is also an administrative nightmare:

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.

For all the talk about finding savings within “the system,” there is actually very little meat on the Medicaid bone. The program already underpays providers and they, in turn, are turning away Medicaid patients. And so, instituting additional cuts or shifting costs to the states are ways of saving the program by throwing more people off of it.