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Congressional Budget Would Add Tens of Millions to Ranks of Uninsured

The House-passed budget agreement that the Senate will consider next week would repeal health reform and cut Medicaid over the coming decade by roughly half a trillion dollars on top, making tens of millions more Americans uninsured.

Repealing health reform’s coverage expansions — including its Medicaid expansion and the subsidies to purchase marketplace coverage — would eliminate coverage for the estimated 16.4 million people who have newly obtained it and prevent millions more uninsured from gaining it in the future.  Repeal would ultimately leave 25 million more uninsured Americans than under current law, the Congressional Budget Office estimates.    

The budget agreement would also deeply cut the rest of Medicaid.  While it doesn’t clearly say by how much, the cut appears to be roughly $500 billion (or about 13 percent) over ten years.  (The total Medicaid cut, including repeal of the Medicaid expansion, would be about $1.35 trillion, relative to current law, over that period.) 

Nor does the agreement clearly specify how this cut would be achieved, stating only that it envisions Medicaid proposals supported by the chairmen of the Senate Finance and House Energy and Commerce Committees, which have jurisdiction over the program.  Those chairmen, Senator Orrin Hatch and Rep. Fred Upton, have proposed to fundamentally restructure Medicaid by capping federal funding through block grants or a “per capita cap.” 

Under a block grant, the federal government would no longer pay a fixed share of states’ Medicaid costs.  Instead, states would get a fixed dollar amount of federal funding, which would have to fall further behind states’ needs each year in order to produce the roughly $500 billion in federal savings the budget agreement assumes. 

A block grant would likely generate even larger funding cuts over time.  It wouldn’t account for faster-than-expected increases in enrollment or per-beneficiary health care costs, such as during a recession or after a new breakthrough health care treatment that improved patients’ health but raised costs.  And it likely wouldn’t account for the aging of the population; Medicaid spending per beneficiary for seniors will grow faster over the next two decades than in the past as baby boomers move from “young old-age” to “old old-age,” when average Medicaid costs are considerably higher.  The federal government and the states now share in any unanticipated costs; under the budget agreement, states alone would bear them.

Under a per capita cap, states would receive a fixed dollar amount of federal funding per beneficiary, with these amounts set to grow annually at a rate well below expected growth in Medicaid per-beneficiary costs and thus generate roughly $500 billion in federal savings over ten years.  Unlike a block grant, a per capita cap would allow for increased federal funding if states experience higher-than-expected enrollment.  But, as under a block grant, states would face shortfalls in federal funding if Medicaid costs per beneficiary rose faster than anticipated due to an epidemic or a new blockbuster medication or due to demographic changes.  In such circumstances, states would receive no additional federal funding above the already inadequate per-capita cap amount.

Given the budget agreement’s deep Medicaid funding cut — whether through a block grant, a per capita cap, or a combination of the two — states would have to contribute much more of their own funds or, more likely, significantly cut eligibility, benefits, and payments to health care providers, using the increased flexibility they would receive.  Many low-income Medicaid beneficiaries would end up uninsured or underinsured, on top of the tens of millions who would lose coverage or be unable to gain it due to health reform’s repeal.