Jonathan Cohn

Flexibility? No, Medicaid Fight Is Mostly About the Money

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In the coming debate over the future of Medicaid, you’re going to keep hearing one word: “Flexibility.” It’s what many governors covet and what the Republicans propose to give them: The ability to design state Medicaid programs however state officials want, free(r) of federal rules about who to cover and in what way.

I don’t think the case for flexibility is particularly strong, in part because the states already have some of it. But make no mistake. The Republican proposal isn't exclusively or even mostly about flexibility. It’s about money--and the desire by Republicans and their supporters to spend less of it on the health care safety net.

Medicaid, as you may recall, is a joint federal-state enterprise, with Washington picking up about two-thirds of the total cost. The House Republican budget would dramatically reduce the federal government’s contribution. According to the Congressional Budget Office, if the House Republican budget were to become reality, Medicaid spending in 2022 would be 35 percent lower and spending in 2030 would be 49 percent lower.

Yes, you read that right: If the House Republican budget were to become reality, federal spending on Medicaid would shrink to half of its projected value within two decades.

Do the House Republicans have enough political leverage to enact that cut? Probably not. Do they have enough political leverage to enact a less severe, but still significant, cut? Maybe. 

And the effects of such reductions would still be harsh. Medicaid has its problems, but bloated costs is not one of them. Dollar for dollar, it delivers far more benefits than either Medicare or private insurance. It does so primarily by paying providers--that is, doctors and hospitals--far less than other insurance programs do. The providers respond by seeing fewer Medicaid patients, making it hard to get care, particularly if it involves attention from specialists. 

With more freedom to customize their programs, could states stretch those dollars farther? A bit perhaps, particularly if they figure out a way to manage chronic disease better. But it's unreasonable to expect states could find enough efficiencies in this already starved program to make up for anything beyond token cuts from the current baseline. 

With less federal money at their disposal, states would inevitably have to cover fewer people, provide lesser benefits, or pay even lower reimbursements. In other words, Medicaid recipients would lose some coverage or the coverage itself would be worth less. The cuts would be particularly severe during economic downturns, when demand for Medicaid rises but state revenues plummet. And that's not just my opinion. The Congressional Budget Office agrees. So does the Center on Budget and Policy Priorities.

Of course, the current rules of the program prevent states from taking many of these steps. Those are the rules Republicans would waive. So in that sense their proposal really is about flexibility. But it's the flexibility to take Medicaid protections away from many of the the poor, elderly, and disabled Americans who need them.

Update: With a few clarifications, etc.

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