Medicaid Cuts Would Reduce Access to Health Care for Entire Communities

The congressional Republican budget paves the way for deeply damaging changes to Medicaid that would reduce access to health care, either directly or indirectly, for many of the more than 70 million people enrolled in Medicaid. These changes would hurt not just Medicaid enrollees, but entire communities. That’s because Medicaid is a critical part of our nation’s health care ecosystem, providing coverage to millions of people at all stages of life and supporting providers that serve the broad public.

Proposed Medicaid changes that take away eligible people’s coverage (such as work requirements, more frequent eligibility checks, or restrictions on retroactive coverage) would leave more people uninsured and raise hospitals’ costs for providing uncompensated care to patients whose coverage has been terminated. Policies targeted at adults with low incomes who receive coverage through the Affordable Care Act’s (ACA) Medicaid expansion (like cutting federal matching rates or capping funding per enrollee) would reduce federal Medicaid funding and upend state budgets. And restricting states’ use of taxes on health care providers to help finance the state share of Medicaid spending, or their use of directed payments to ensure access to an adequate provider network, would also undermine the health care system that everyone relies on.

All of these changes would put pressure on states to scale back Medicaid eligibility, benefits, provider payments (which are already significantly lower than the rates paid by Medicare or private insurance), or all three, as state budgets likely couldn’t absorb the increased costs. However states respond, the cuts to Medicaid would destabilize the health care system — harming providers and increasing uncompensated care for hospitals. The downstream effects of all of the proposed federal Medicaid changes would reduce Medicaid enrollees’ access to health care, potentially affecting children, seniors, people with disabilities, and all those who need support and have no other affordable pathway to health coverage.

In fact, many of the changes being considered would reduce health care access for some of the very Medicaid enrollees whom Republicans claim they are eager to protect. For example:

• Individuals over age 65 and people with disabilities could lose access to home- and community-based services (HCBS) due to federal Medicaid cuts. Medicaid is the largest payer of long-term services and supports for millions of seniors and children and adults with disabilities, which can be delivered in a facility or home-based setting. But while long-term services and supports provided in nursing facilities are “mandatory” benefits that state Medicaid programs must cover, most HCBS are “optional,” and there are often waiting lists for certain types of HCBS.

  States faced with budget pressures due to cuts in federal Medicaid funding might reduce the services covered in their HCBS programs or the number of available slots, resulting in longer waiting lists. More individuals would be forced to go to institutional settings for needed care rather than receive services in their own home. The effects of Medicaid cuts on HCBS are not just speculative: when temporary, recession-related federal Medicaid funding increases phased out in 2011 even as states still faced struggling economic conditions, all states responded by pulling back on HCBS, either through spending less per person or reducing the number of enrollees receiving services.

• Non-expansion states harmed by new restrictions on provider taxes would have to target “traditional” Medicaid populations like children and pregnant individuals. Most states that have not adopted the ACA’s Medicaid expansion have three or more provider taxes, which help finance their Medicaid programs. Restricting states’ use of provider taxes could significantly impair their ability to pay for their share of Medicaid spending.

  Because some or all of these states likely couldn’t fully offset the lost revenue if provider taxes were restricted, they would have to cut eligibility or benefits. And, unlike expansion states, they would have to focus those cuts on populations like children, pregnant individuals, and people with disabilities, since most non-elderly adults in non-expansion states are already ineligible for Medicaid coverage.

Also, because health care systems are interconnected, the combination of harmful federal Medicaid changes (such as work requirements or funding reductions) and state actions in response (such as cuts in eligibility or provider payments) would threaten access to needed care for all individuals in the community, especially in rural areas. For example:

• Hospitals facing increased costs might eliminate important services, including obstetrics care. Hospitals would face financial difficulties from increases in their uncompensated care costs or cuts in state reimbursement rates. As a result, hospitals, especially rural hospitals, may be at risk of shutting down departments or closing entirely. In many cases, hospital closures would reduce pregnant individuals’ access to prenatal care and safe birthing facilities, as hospitals often house obstetrics care and/or labor and delivery units.
• With fewer patients and a greater share of uninsured patients, many safety net providers would struggle to stay open. Safety net providers like community health centers and public hospitals are important sources of care for people who are uninsured or have low incomes. As a result of Medicaid cuts, these providers would likely have more patients without insurance, straining their ability to retain staff. If they had to reduce staffing or couldn’t keep their doors open, individuals ranging from children to veterans, seniors, and others could lose key providers of preventive, behavioral, and other services.
• The loss of health care providers would reduce access to primary and specialty care. As Medicaid cuts cause providers to limit services or leave the area, all individuals in the community would have less access to health care. This includes children: Medicaid is a large source of revenue for pediatric providers, since children make up almost half of the Medicaid population. When providers leave, people with other kinds of coverage, including employer-based coverage, private insurance through the ACA marketplace, or coverage provided to current and retired military families, lose access to those providers as well. (Both active-duty and retired military families often receive care from civilian providers, especially for specialty care.)

The bottom line is there is no way to cut Medicaid by hundreds of billions of dollars without weakening health care systems or avoiding widespread harm to people’s health care.