Benefit Bulletin: July 2017

Benefit Bulletin: July 2017

How Capping Medicaid Would Affect Low - Income Medicare Recipients

Medicaid plays an essential role for both low–income older Americans and middle-income older people who have been made poor by their health care costs. For those whose incomes are low enough, state Medicaid programs pay an individual’s Medicare Part B premiums, as well as out-of-pocket costs. In some states Medicaid covers extra benefits for dental, vision, or hearing. Perhaps most importantly, Medicaid is also the primary payer of long-term nursing home care services and supports — benefits not covered by Medicare.

The House GOP’s Obamacare repeal legislation contains highly controversial provisions to end Medicaid as we now know it and to restructure the program by capping federal spending on the program. The Congressional Budget Office recently estimated that the American Health Care Act would cut federal spending on Medicaid by $834 billion over the 2017 – 2026 period.  By 2026, Medicaid spending would be about 25% less than under current law, the CBO estimated.

If passed into law, this would have a profound impact on low-income Medicare beneficiaries and their families. According to the non-partisan Kaiser Family Foundation, about 1 in 5 people on Medicare, 11 million beneficiaries in all, have incomes so low that they qualify for Medicaid. Yet now, even while the Senate is considering their own health law that would determine the fate of this $834 billion in cuts, President Trump released his fiscal year 2018 budget plan that would cut another $627 billion from Medicaid. Taken together with the health legislation this would cut Medicaid by 45% in ten years.

Medicare and Medicaid are frequently confused. Like Social Security, people become eligible for Medicare based on payroll tax withholdings from their earnings. Eligibility for Medicaid is based on having a low income and is funded by general revenues. Medicaid is a combined state and federal program in which the federal government pays roughly 60% of program costs for all whose income is low enough to qualify under current law. The new House law would end the open-ended nature of funding by capping per-person costs, adjusting reimbursements for inflation using the consumer price index.

By tying increases in Medicaid reimbursements to the rate of growth in medical inflation, costs would quickly outpace federal spending on the program, leaving states to figure out how to deal with the budget shortfalls. By moving to capped costs, states would have to raise taxes or be forced to cut services, restrict eligibility for enrollment, or otherwise ration care when costs rise faster than reimbursements.

Do you know someone who has nursing home coverage due to Medicaid? What do you think about plans to cut federal spending on Medicaid? We want to hear from you!  Send us an email, using “ Topic:  Medicaid Cuts” as your email starting line.