CBO Confirms Ryan’s Medicaid Block Grant Would Likely Harm States, Beneficiaries, and Providers

By Edwin Park

April 6, 2011

The majority of the $1.4 trillion in Medicaid cuts over the next ten years in House Budget Committee Chairman Paul Ryan’s budget would come from converting the program into a block grant. The non-partisan Congressional Budget Office (CBO) issued an analysis yesterday finding that block-granting Medicaid would shift costs to states, beneficiaries, and health care providers — just as we have argued. Among CBO’s key findings:

  • “Under the proposal, CBO estimates federal spending for Medicaid would be 35 percent lower in 2022 and 49 percent lower in 2030 than current projected federal spending.”
  • “Under the proposal, states would have additional flexibility to design and manage their programs to achieve greater efficiencies in the delivery of care. Because of the magnitude of the reduction in federal Medicaid spending under the proposal, however, 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.”
  • “If states reduced spending for their Medicaid programs, there would be a number of potential implications for both providers and beneficiaries. Given that payment rates for providers under Medicaid are already generally lower than they are under Medicare and private insurance, if states lowered payment rates even further, providers might be less willing to treat Medicaid enrollees. As a result, Medicaid enrollees could face more limited access to care. If states reduced benefits or eligibility levels, beneficiaries could face higher out-of-pocket costs, and providers could face more uncompensated care as beneficiaries lost coverage for certain benefits or lost coverage altogether.”
  • “Under the proposal . . . [federal] Medicaid spending would not automatically increase during economic downturns, as it does now under current law. By design, the approach would make funding for Medicaid more predictable from a federal perspective, but it would lead to greater uncertainty for states as to whether the federal contribution would be sufficient during periods of economic weakness.”

Starting in 2013, the Ryan plan would cap federal Medicaid funding and adjust the block grant amount each year only by general population growth and inflation — less than half of the increase now projected for Medicaid to account for factors like rising health care costs and an aging population. The cuts would grow each year, relative to what states would receive under current law, totaling $771 billion over the next ten years. CBO’s analysis confirms that these cuts would likely force states to scale back their Medicaid programs considerably. Low-income children, seniors, and people with disabilities make up the bulk of Medicaid beneficiaries, so they’d be hit the hardest.

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