Choose Your Own Adventure, Medicaid Edition: President Romney’s Block Grants

by Mike Miesen

Most Americans who are keeping up on election-year politics (excluding maybe the Undecided Voter) understand that Election Day is a pretty big deal this year. What most people might not be keeping up with is that Medicaid will incur some of the most profound changes, in ways that are like to affect how you and your family purchase and consume health care.

But, first things first: you read my last post, right? In it, I gave a 30,000 foot view of Medicaid – who is eligible, what it pays for (you’ll be surprised, I bet), and how much it costs. All in all, it’s the status quo, and it’s what Medicaid will look like if America re-elects President Obama in the November edition of Choose Your Own Adventure.

Wait, you haven’t read the post yet? OK, tell you what. You read it, and while I’m waiting I’ll learn to dance Gangnam Style. It’s a win-win.

Now that you have the basics down, let’s dive into the policy weeds to see what may happen under a Romney/Ryan administration. By now, you’re well acquainted with the Medicaid Motto, but it’s worth repeating: It’s complicated.

So, it’s November 2012 and President-elect Romney is putting together his health policy team in advance of his inauguration. Before we get too deep, though: in order to keep this relatively simple, let’s assume that President Romney will be able to successful nullify PPACA by issuing waivers to states, his oft-repeated vow. As Timothy Jost writes at the HealthAffairs blog, this is a significant assumption, and currently isn’t even possible until 2017. Full-out repeal is even less likely (let’s be honest: I can’t ever pass up an opportunity to link to the “I’m Just a Bill” Schoolhouse Rock video), but let’s assume it happens; the Medicaid expansion, health exchanges, subsidies – all goners.

Once PPACA is dead and gone, the Romney administration would be free to implement its Medicaid plan. At the core, this involves “block granting” federal funding for each state. As this helpful Kaiser Health News article mentions, block granting Medicaid would, in effect, remove it from the list of “entitlements” (think Medicare – everyone over age 65 is eligible, regardless of how much it costs the federal government) and cap the amount the federal government would provide. In Romney’s plan, program funding would grow at inflation + 1%.

If inflation + 1% seems low to you: congratulations, you’re a wonk! If you’re not One of Us and want a different way to look at things, check out the graph I created below – it tracks Medicaid spending growth and inflation from 1990 to 2010. The blue line is inflation (data culled from the Bureau of Labor statistics here), the red is Medicaid spending growth (from Kaiser Family Foundation, naturally), and the green is inflation averaged over the equivalent timelines as Medicaid was (to give an apples to apples comparison). 

Put simply: Medicaid spending growth was higher than inflation + 1% every year except from 2005-2007. This means that federal Medicaid spending is likely to decrease under the Romney administration’s proposed cap. How much? $1.26 trillion over nine years, according to a recent study by Bloomberg Government. That’s roughly one-third of projected federal Medicaid spending over that time period (See Table 1, row 1).

That’s a pretty significant cut to a program that already only pays 72% of what Medicare pays. To take it a step further, Avik Roy – a blogger and member of Mitt Romney’s Health Care Advisory Group — used data from a 2009 Urban Institute study to create a map of Medicaid reimbursement relative to private insurers. As you can see, Medicaid pays significant less across the board:

 

The 1.26 trillion-dollar question, then, is: how will cuts in Medicaid funding affect you, your friends, and your family?

Proponents of block granting adhere to the idea that states, unburdened by federal requirements and regulations, will be in a better position to innovate. In doing so, they would drive down the cost of covering vulnerable populations while maintaining access to high-quality care. In this case, the cuts are offset by efficiency gains, and the hope is that you aren’t less healthy as a result.

It’s an open question as to whether spurring innovation will mitigate the deep cuts made to the program, or if the necessarily lower reimbursement rates will keep physicians from accepting new Medicaid patients – after all, nationwide 31% of physicians already refuse to do so (though some wonks will quibble about how much this actually differs from private insurance).

Opponents of block granting hold that the Romney plan will significantly reduce access for some of the neediest Americans, and that no amount of innovation or administrative efficiency gains offset a $1.26 trillion gap. In this case, lower reimbursement may cause even more physicians to refuse to accept new Medicaid patients, and the ones who are covered may have increased co-pays, deductibles, and co-insurance rates.

Significantly, Medicaid is a “counter-cyclical program” – more people need it when times are bad (see: 2008 – present) and they’ve either lost their jobs (and possibly their employer-sponsored insurance) or live with less income. As currently outlined, Governor Romney’s plan doesn’t take this into account; if 100,000 Minnesotans become eligible for Medicaid as a result of a recession, Minnesota’s block grant doesn’t increase in proportion. As a result, Minnesota has to spread its limited funds more thinly.

As should be clear by now, a Romney administration’s plans for Medicaid are much different than that of the Obama administration. While the implications are not yet fully understood, it is clear that you, your friends, and your family would likely pay for, and consume, health care in a profoundly different way, depending on who is inaugurated in January.

Choose your own adventure wisely.

_____________________________
Mike is a healthcare consultant specializing in hospital operations who graduated from the University of Wisconsin-Madison. Follow him on Twitter @MikeMiesen.

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3 thoughts on “Choose Your Own Adventure, Medicaid Edition: President Romney’s Block Grants

  1. […] government to the elderly. His Medicaid plan is much, much more severe (as I’ve written about here) – each state would receive a set amount of money from the federal government, and would be free […]

  2. […] The last post I wrote outlined what would happen to the Medicaid program under a Romney Administration. We can now add the tag “things that never happened” to it. […]

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