The Trump Administration and congressional Republicans seem to be moving full speed towards capping federal payments for Medicaid–a design sometime called block grants. But they may be missing a key piece of the story: Two-thirds of the program’s dollars go to the frail elderly and younger people with disabilities.
The stereotype of a Medicaid beneficiary is a poor mom and her kids. And, in fact, three quarters of the program’s recipients are children and non-disabled working-age adults. But that isn’t where most of the money goes.
More than four out of every 10 Medicaid dollars are spent on people with disabilities, for both medical care and long-term services and supports (LTSS). One-quarter of program’s funding is used for older adults, mostly for nursing home care or personal assistance at home. In 2014, Medicaid spent as much as $150 billion on LTSS.
While they are often ignored, these people would be profoundly affected if the program is redesigned.
To understand why, remember what Trump and the GOP want to do. House Speaker Paul Ryan (R-WI) and Trump’s designated secretary of Health and Human Services, Tom Price, are both enthusasitic advocates of remaking Medicad in three key ways. They’d:
Limit the federal share of the program. In 2015, the feds picked up about two-thirds of Medicaid costs (including the 100 percent federal share of the Medicaid expansion under the Affordable Care Act). Under today’s law, the federal contribution automatically increases as costs rise, either because medical expenses grow or more people enroll.
The various GOP proposals floating around Capitol Hill would cap that federal contribution at a fixed dollar amount. As costs rise, the states would be on the hook for the extra expense. They’d have to either cut benefits, cover fewer people, or raise taxes to finance the extra costs.
Boost out-of-pocket costs for enrollees. Beneficiaries would have to pay more for their care through premiums or higher copayments. Backers say this would make participants better consumers and help control costs. Critics say cash-strapped enrollees would forgo care and become sicker.
Increase state flexibility. While states currently operate Medicaid, they must comply with complex federal rules. The GOP bills would grant states far more flexibility. This could help them use limited dollars more creatively and more easily combine Medicaid benefits with funds for other support programs such as transportation and housing. However, it is also likely to greatly increase the variation in benefits among states, as some governors use the new flexibility to cut spending.
Backers and critics usually debate the effects of these changes on young families. But what would they mean for older adults and younger people with disabilities?
To start, Medicaid LTSS benefits are already insufficient in most states. Payments to nursing homes are so low that many quality facilities are abandoning the long-term care business. And Medicaid home care benefits rarely provide enough assistance for seniors or younger people with disabilities.
If the cap on federal payments results in even more paltry benefits, more seniors will go without needed personal assistance and, as a result, may end up in hospitals where care is far more costly. And since hospital care is usually billed to the feds through Medicare, it will eat up much of the Medicaid cost savings.
What about making beneficiaries work or pay more? That idea too founders on the rocks of reality.
It is not reasonable to expect the 6.5 million frail elderly who receive Medicaid benefits to work or pay more for their care.
The story is a more complicated for the 10.5 million younger adults with disabilities who participate in Medicaid. Many have such high levels of disability that they cannot work. They often live on just $735-a-month in Supplemental Security Income (SSI) benefits, and cannot pay for medical care.
On the other hand, many people with disabilities would like to work but are discourged by Medicaid’s own rules. That’s because if they make more than a fixed anount of money, they are dropped from the program. And if the GOP succeeds in repealing the Affordable Care Act, their pre-existing conditions may make it impossible to purchase insurance in the individual market.
The right reforms could help them work without losing Medicaid benefits and, in return, ask for small premium payments. Those with slightly higher incomes could even buy into Medicaid.
What about state flexibility? In theory, it could help frail older adults. For instance, if states could mix-and-match federal Medicaid and housing dollars, they could add services to subsidized housing—a step that could help people avoid institutional care. The challenge: Giving states flexibility while protecting beneficiaries from spending cuts.
Medicaid block grants are on the table. But advocates for change must not forget those millions of seniors and people with disabilities who rely on the program.
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