Medicaid, which is funded jointly by the states and the federal government, provides health coverage to approximately 53 million lower income Americans. The federal government helps fund the program by matching state spending on a per-claim basis and paying a percentage of each state’s Medicaid costs (anywhere between 50 and 75 percent). While both parties are looking for ways to reduce spending on the program, the GOP presidential candidates, along with Mitt Romney, have proposed reducing the federal government’s commitment by block granting its contribution and paying states pre-established grants that are indexed over time. Under such a plan, federal spending would no longer reflect the actual costs of the program, particularly during periods of economic recession when Medicaid rolls swell and costs increase.
“Medicaid alone, by being sent back to the states, and growing the funding by inflation — CPI — plus 1 percent a year, will save a $100 billion,” Romney usually says on the campaign trail. But during a rare yesterday, the former Massachusetts governor took his claim one step further, telling Fox News’ Chris Wallace that reducing the federal government’s payments to the safety-net health care program would not undermine beneficiaries because states would use the reduced funds more efficiently:
ROMNEY: I take the Medicaid dollars, send them back to the states, without the mandates as to how they have to treat –“ WALLACE: “But you’re also cutting the budget by $700 billion dollars.” ROMNEY: “Well what I’d do is I’d take the money, send it back to the states, and say we’re going to grow that funding at inflation, the CPI, plus one percent. By doing that, you save an enormous amount of money. I happen to believe that states can do a better job caring for their own poor, rooting out the fraud and waste and abuse that exists within –“ WALLACE: “But you don’t think if you cut $700 billion dollars in aid to the states that some people are going to get hurt? ROMNEY: “In the same way that by cutting welfare spending dramatically, I don’t think we hurt the poor. In the same way I think cutting Medicaid spending by having it go to the states run more efficiently with less fraud, I don’t think will hurt the people that depend on that program for their healthcare.”
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It’s an ostentatious claim from a governor who reformed the Massachusetts health care system in order to sustain increased federal funding for Medicaid. And while some states could certainly find less painful cuts to Medicaid, a Congressional Budget Office analysis of Paul Ryan’s very similar block granting scheme found that if federal spending for Medicaid decreased, “states would face significant challenges in achieving sufficient cost savings through efficiencies to mitigate the loss of federal funding.” “To maintain current service levels in the Medicaid program, states would probably need to consider additional changes, such as reducing their spending on other programs or raising additional revenues. Alternatively, states could reduce the size of their Medicaid programs by cutting payment rates for doctors, hospitals or nursing homes; reducing the scope of benefits covered; or limiting eligibility,” the budget office concluded. As a result, enrollees could “face more limited access to care,” higher out-of-pocket costs, and “providers could face more uncompensated care as beneficiaries lost coverage for certain benefits or lost coverage altogether.”
Some Republican governors have spoken out against the proposal and condemned additional federal cuts in general. As Nebraska Gov. Dave Heineman (R) indicated in November, states can swallow small cuts, but larger reductions would result in a “cost-shift to the states.” “We know there is going to be a reduction in the Medicaid program. If it’s a small reduction, states are prepared to share in that, we will do our part,” he said. “If it is a dramatic reduction, then it is significantly going to have an adverse impact on state budgets. And when you look at state budgets, there are three big items: Medicaid, the funding we do for the education of our children in K-12 and higher education. So if you dramatically cut Medicaid, you’re going to force us to make dramatic education cuts for our children, that’s not where we ant to go,” Heineman warned.