Study: Romney-like plan cuts $1.7 trillion in Medicaid

October 23, 2012

Republican presidential nominee Mitt Romney pointed to his Medicaid funding cuts during Monday night's debate as one way to help balance the budget.

The Kaiser Family Foundation is out this morning with a deep dive into a plan that looks a lot like Romney's. The big takeaway: Medicaid funding would be reduced by $1.7 trillion, with hospitals and nursing homes seeing payments fall by hundreds of billions of dollars.

Kaiser modeled a Medicaid block grant plan, where each state gets a capped amount of money to spend on its Medicaid population. That amount would grow 1 percent faster than inflation, the same target that the Romney campaign set, as did House Republicans in 2012.

Under that growth target, Medicaid funding would drop by $1.7 trillion between 2013 and 2022. About half of that cut would come from repealing the health care law's Medicaid expansion. The other half would come from reducing payments to states for the Medicaid patients they already cover.

The Kaiser study also looks at how many people Medicaid could cover with this reduced funding. The most important thing to focus on here is what's in the red box, which looks at what would happen to the people receiving Medicaid right now if this plan were in place.

There are 17 million Americans who would lose coverage under the Romney plan to repeal the health law's Medicaid expansion. This is the population at the very top of the two bars on the right.

Everything below that represents the people eligible for Medicaid coverage right now. If Medicaid costs keep growing as quickly as they have in the past, Kaiser estimates that the Republican budget would cover 20.5 million fewer Medicaid enrollees.

That's not exactly the Romney plan, though. His economic advisers argue that by turning control of the program over to the states, local leaders will eliminate inefficiencies in the program. They'll experiment with new ways to provide better health care at a lower cost.

“It’s a restructuring of the program that gives states the possibility to pursue different models,” Oren Cass, Romney's domestic policy director, told me in a recent interview. “Governor Romney would give states the flexibility to experiment. He believes if the program is structured properly, spending can go an awful lot further.”

Kaiser models a situation like that, too. In the bar all the way to the right, it looks at how far the budget would stretch if states could limit per-person spending growth to the exact same rate as the rest of the economy. That would be significantly lower than historical growth. Under that scenario, states would see smaller reductions in enrollment: They would drop coverage for 14.3 million people (alongside the 17 million reduction from repealing the Medicaid expansion).
Most of those figures are calculated with expected enrollment growth: Even when states keep their per- person growth low, there's still the challenge of a growing Medicaid-eligible population. "Medicaid is already growth slower, per capita, than private health insurance or Medicare," says Robin Rudowitz, associate director for the Kaiser Commission on Medicaid and the Uninsured. "If you're keeping spending per enrollee low, that doesn't leave many other places to cut."
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