June 27, 2017
Realizing the unpopularity of their health care plan, the Republicans are now playing games with the word “cut,” to deny that their proposal would lead to large cuts in Medicaid spending over the next decade and beyond. The NYT ran a piece that ostensibly was intended to clarify the issue, but likely left readers more confused than they had been previously. The piece tells readers:
“At issue is whether the funding changes should be compared to the increases that would occur under current law, the Affordable Care Act, or whether the focus should be on the modest annual increases that would happen under the Republican bill.
“The White House says that Republicans are being victimized by a broken budgeting system that unfairly casts their fiscal restraint as callous cutting.”
The baseline for spending against which the Republican proposal is being measured is a baseline that assumes current levels of services and eligibility requirements are left in place. This can perhaps best be explained by a comparison with Social Security.
Under the law, workers are entitled to Social Security benefits based on their work history and their age. With a growing population of people receiving Social Security benefits and new retirees typically collecting higher benefits than earlier retirees (due to higher average wages), and an inflation adjustment for those already receiving Social Security, benefit payments rise each year.
By standard budgetary practice, if the Republicans were to reduce the benefit schedule or not give the annual cost of living adjustment, it would be called a “cut” in benefits even if total Social Security payments stayed the same or rose somewhat. It is a cut because people would be getting less than is promised under the current law.
In the case of Medicaid, the Congressional Budget Office (CBO) uses the best information available to project the eligible population and also the cost of providing services to this population. This is the baseline that the Republicans are working from with their health care plan. They are proposing to spend roughly $800 billion less over the 10-year budget horizon than the baseline spending level projected by CBO. This is equal to approximately 17.0 percent of projected spending over this period and 25.6 percent of spending in 2026, the last year for which CBO made projections for the Republican plan. (The reduction from baseline is even larger after the end of the 10-year horizon.)
This means that unless the Republicans have some way to reduce the cost of services that they have not told anyone about (e.g. paying drug companies and medical equipment companies less for their products or doctors less for their services), Medicaid will not be able to provide the services offered under current law. Given the size of the reductions relative to the baseline, by year 10 this will likely mean hugely reducing the number of people getting coverage and quite likely throwing people out of nursing homes.
This is the meaning of “cuts.” This is, in fact, a rather simple point and not a question of semantics. The Republicans do not have a plan for Medicaid to provide the level of services promised under current law, they are proposing to radically reduce the level of services. This is not ambiguous, just like it is not ambiguous that President Obama was not born in Kenya.
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