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Senate Budget Chairman’s Plan Would Block-Grant Much of Medicaid, Repeal Medicaid Expansion

Like House Budget Committee Chairman Tom Price’s budget plan, Senate Budget Committee Chairman Mike Enzi’s new plan proposes to radically restructure Medicaid by converting much of it into two block grants and cutting federal Medicaid funding by roughly $400 billion over the next decade.  And like the Price plan, it would repeal health reform’s Medicaid expansion.  The combined Medicaid cut would exceed $1.3 trillion over ten years, relative to current law, leaving millions of Americans uninsured or underinsured.

Repealing health reform’s Medicaid expansion means that at least 14 million people would lose their Medicaid coverage or no longer gain coverage in the future, as we explained in our analysis of Chairman Price’s plan.  In addition, the large and growing cut in federal Medicaid funding from the two block grants would almost certainly force states to scale back or eliminate Medicaid coverage for millions of low-income people who now have it.  All told, after also accounting for the plan’s proposed repeal of health reform’s marketplace subsidies, tens of millions of people would likely become uninsured.

Under the plan, the federal government would no longer pay a fixed share of states’ Medicaid costs for children and non-elderly, non-disabled adults, including pregnant women; these beneficiaries account for 78 percent of total enrollment today.  It would also alter federal financing for long-term care services and supports (such as nursing home care for seniors), which account for about a quarter of all Medicaid spending.  Instead, states would apparently get a fixed dollar amount of federal funding for these spending categories in the form of two block grants.  Chairman Enzi’s budget plan doesn’t specify how either block grant would be initially set or how they would be adjusted each year.  (Federal funding for acute care services furnished to seniors and people with disabilities would apparently continue as under current law.)

Federal funding in the two block grants would fall further behind state needs each year, in order to produce the $400 billion in federal savings that the budget assumes.  That’s a cut of nearly 11 percent in federal Medicaid funding over the next decade compared to current law.  And that doesn’t count the loss of the large amount of additional funding that states would receive to expand Medicaid under health reform.

Moreover, the loss of federal funding under the two block grants would be even greater in years when enrollment or per-beneficiary health care costs rose faster than expected, such as during a recession or after the introduction of a new breakthrough health care treatment that improved patients’ health but raised costs.  In addition, the long-term care block grant would likely fail to account for the effects of the aging of the population; over the next several decades, Medicaid spending per beneficiary for seniors will grow faster than in the past because the large baby-boom generation will move from “young old-age” to “old old-age,” when average long-term care costs are considerably higher.  Currently, the federal government and the states share in all of these higher costs; under the Enzi plan, states alone would bear them.

In the face of these sizeable and growing Medicaid funding shortfalls, states would have to contribute more of their own funds or, more likely, use the increased flexibility they would be given under the two block grants to significantly cut eligibility, benefits, and payments to health care providers.  And while the proposed structure wouldn’t directly affect the existing federal financing system for acute care services for seniors and people with disabilities, states would likely have no choice but also to make deep cuts to those parts of Medicaid to compensate for the federal funding cuts they would face under the block grants.  Substantial numbers of low-income Medicaid beneficiaries would thus end up uninsured or underinsured.