Paul Ryan’s biggest budget cuts are to Medicaid, not Medicare

August 13, 2012

Paul Ryan's Medicare overhaul may be the most controversial part of his budget.But the proposed cuts to the program are not the biggest cuts in the plan.

As Ezra notes, Ryan's cuts to Medicare "are only 60 percent as large as the cuts to Medicaid and other health-care programs." What's more, his biggest change to Medicare wouldn't kick in until 2023—the start date for his voucher-based premium support program. By comparison, Ryan's cuts to Medicaid are more drastic, and they start sooner: Between 2013 and 2022, it would make nearly $1.4 trillion in cuts to Medicaid that "would almost inevitably result in dramatic reductions in coverage" as well as enrollment, according to the non-partisan Kaiser Family Foundation.

Over the next 10 years, the Ryan plan would cut Medicaid by $642 billion by repealing the Affordable Care Act and by $750 billion through new caps on federal spending—a 34 percent cut to Medicaid spending over the next decade, according to Edwin Park of the Center and Budget and Policy Priorities.


(Source: Kaiser Family Foundation, CBO)

Who would that impact? First, by overturning the ACA, the Ryan plan would prevent 11 million people from gaining Medicaid coverage by 2022, according to the Congressional Budget Office's latest estimates.

At the same time, the Ryan plan would turn the entitlement program into a block-grant program. Currently, the federal government provides matching, open-ended funds to states, which each run their own Medicaid program. The Ryan plan would instead give states a block grant with a hard annual cap that would be adjusted to population growth and inflation, but it would not factor in rising health-care costs or economic conditions that impact state budgets. The result? Much less federal money. In exchange, states would have more flexibility to set the parameters for their Medicaid programs.

States could replace the money with state funds, but they're unlikely to be willing or able to do so to any significant degree: State budgets remain tight. Similarly, states could try to get more bang for the buck by delivering care more efficiently, but Medicaid is already more efficient and better at driving down costs per capita than both private insurance and national health-care costs overall, as the Kaiser Family Foundation notes. Indeed, Medicaid costs much less, per person, than equivalent private insurance.

That's why the CBO believes that $750 billion in Medicaid cuts under the Ryan plan would "probably require states to reduce payments to providers, curtail eligibility for Medicaid, provide less extensive coverage to beneficiaries, or pay more themselves than would be the case under current law."

If states maintained their current level of spending for each Medicaid patient, 19 million more people would have to be cut from the program in 2021 because of Ryan's block-grant reform, according to the Kaiser Family Foundation. If states managed to curb health-care spending growth in Medicaid, 14 million beneficiaries would still lose Medicaid coverage under the Ryan plan. And that's on top of the 11 million Americans who would lose Medicaid coverage because the Ryan plan would repeal Obamacare. So all in all, Ryan's cuts could mean as many as 30 million Medcaid beneficiaries lose their coverage.

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Ezra Klein · August 13, 2012