Different Deficit Reduction Efforts, Same Result for Medicaid?

All Roads in Congress May Lead to Block Granting Medicaid

Congress is considering a number of different mechanisms that may result in cuts so large that the only option would be to block grant Medicaid. Under a block grant, Congress would give states a reduced, fixed amount of money and eliminate many of the requirements (such as who to cover and what services to provide). Block granting is the worst option for people with intellectual and developmental disabilities (I/DD) as it would fundamentally change the structure of the program, not just cut funding for it. The individual entitlement to health care and long term services and supports would be lost and the states’ entitlement to reimbursement for actual costs would be lost. This is why it is so important to hold Members of Congress accountable for their positions on each of the mechanisms described below.

What are Spending Caps?

One approach to deficit reduction that is being seriously considered is to impose spending caps or limits. These caps limit government spending, usually limiting it to a certain percentage of Gross Domestic Product (GDP). There is one proposal that would limit federal spending to 20.6% of GDP (spending is currently 24% of GDP). This figure is the average amount of federal spending compared to all goods and services produced by the country (or GDP) in the last 40 years (before spending on aging baby boomers, national security, and interest on the debt was significant). Congress is currently considering three types of caps:

  • A global spending cap (for all federal spending);
  • An entitlement spending cap (for Medicare, Medicaid, and Social Security spending); and
  • A global health spending cap (for Medicaid, Medicare, and Affordable Care Act spending).

What happens if federal spending exceeds the spending caps?

There would be an enforcement mechanism of automatic, across‐the‐board spending cuts (called “sequestration”) if the spending limits or targets were expected to be missed. Low income programs, such as Medicaid and Social Security, would not be exempted. To bring federal spending back in line with the proposed spending caps or targets, Congress would be forced to make drastic cuts in entitlement programs. Those cuts would most likely have to include block grants for the Medicaid program.

What Legislation is Congress considering that might include spending caps?

There a currently two main efforts in Congress that are expected to involve spending caps. The first, a measure to increase the debt ceiling, is by far the most serious threat, as the U.S. is close to reaching a point of default on its financial obligations. The second, a balanced budget amendment, may or may not advance.

  1. Raising the Debt Ceiling. The U.S. debt reached the limit of $14.3 trillion allowed by law in mid‐May. However, the Treasury Secretary is able to manage accounts without defaulting until about August 2. If federal borrowing authority is not increased by August 2, the U.S. will begin defaulting on its debt, triggering a catastrophic global financial crisis. Some Members of Congress have stated that they will vote to raise the debt ceiling ONLY IF major cuts in federal spending are included. While no specific programs and amounts have yet been made public, Medicaid is widely expected to be a major target.
  2. Balanced Budget Amendment. Unlike the constitutions of most states, the U.S. Constitution does not actually require the Congress to pass a balanced budget. Some Members of Congress are looking to add a balanced budget amendment to ensure that the federal government does not spend more than it takes in, including no borrowing authority. If this were to happen, most federal spending would be radically reduced, including Medicaid.

Questions and Answers on Potential Medicaid Cuts

Q. What is happening in Washington?

A. There are many proposals being discussed in Washington to balance the budget. What these proposals have in common is that Medicaid spending would be dramatically cut in a short period of time. These proposals are:

  • Block Granting Medicaid, which would give states a fixed amount of money for health care and long term services and would likely remove requirements (such as eligibility and service minimums and quality measures) for how the states spend the money.
  • Spending Caps, with automatic enforcement, would set a limit on federal spending that is well below current spending and would likely result in a Medicaid block grant. Automatic enforcement mechanisms mean that, if a spending target is not met, cuts are made automatically without the need for further Congressional action.

In addition, Vice President Biden is leading a small group of six Members of Congress who are trying to find a way to cut the deficit. This group is working behind the scenes, and very little information about their negotiations is being made public. They are expected to reach an agreement allowing Congress to raise the debt ceiling by August 2.

What we do know is that cuts to Medicaid are on the table in all of these proposals, and that harsh fact alone requires us to act! Time is short.

Q. What happens if any of these proposals become law?

A. The cuts under any of the proposals for spending caps and automatic enforcement would be so drastic that a block grant would be the result for the Medicaid program (even if Congress does not immediately consider a straightforward proposal to block grant the program itself).

Q. What is the problem with block granting Medicaid?

A. One major problem is that the costs do not go away, but would be shifted to already cash-strapped states. If states do not make up for the federal cuts (the federal government pays 50 percent or more of the costs of every state’s Medicaid program), the costs would shift again, to individuals and their families, to health care providers, to other federal programs or to local governments.

  • There would be no more guarantees of health care services and waiting lists would grow even longer.
  • The block grant would likely have few rules and states would be free to change eligibility, cut services, and manage their programs with very little federal oversight.
  • We believe that block grants would force bad choices and cause real conflict as groups with diverse needs compete for scarce dollars.

Q. What “bad choices” might states make?

A. Since the services to people with disabilities and the elderly are significantly more costly than health care coverage for children, states could decide to serve fewer seniors and people with disabilities and focus scarce health care dollars on children. Here are some possible choices states might be forced to make:

  • Loss of home and community-based services (HCBS) and supports. Nearly 600,000 people with intellectual and/or developmental disabilities (I/DD) receive long term services paid for by Medicaid, and most receive them at home. States could decide to stop providing these services or limit the number of people who could get them, increasing waiting lists.
  • Move people back to institutions. With fewer requirements, people with I/DD may be forced back into institutions rather than community living. Under a block grant, rules for providing quality care could be more flexible and conditions in institutions could return to the way they were in the past.
  • Tightening of eligibility for services. To be eligible for Medicaid, people have to fall under certain income levels. States could restrict health care services to only the very, very poor.
  • More out of pocket costs for individuals and families. In order to get health care, people might have to pay more out of their own pockets. Since people using Medicaid have limited income resources to start with, requiring them to pay for their medical care or long term services and supports could be a significant barrier to care.
  • Reduction or elimination of critical services. If funds become scarcer, states may decide to reduce or stop providing basic services, such as personal care, prescription drugs, rehabilitative services, or home and community based waiver programs.
  • Less availability of doctors and providers for care. It is already very difficult for people using Medicaid to find doctors and other health care providers willing to accept the low payment rates, particularly specialists. If states cut the amount they pay doctors and other providers, those professionals may quit serving people under Medicaid, making access to care even more difficult to secure.

Tell Your Members of Congress – Don’t Cut Our Lifeline!

If we don’t speak up now, Medicaid and other programs critical to people with intellectual and/or developmental disabilities (I/DD) may take the brunt of the cuts. Members of Congress are very reluctant to cut Medicare, as the elderly community is a very reliable voting constituency and they are very vocal advocates. Historically, Social Security is considered the “third rail” in politics, and as such, not to be touched. That leaves Medicaid on the table as a prime target for cuts.

How can we make Congress understand why Medicaid is so important?
We have to personalize the importance of protecting Medicaid for people with I/DD. Advocates need to do the following:

1) Call your Senators or Member of the House of Representatives
Call the Capitol Switchboard to reach your Members of Congress: 202-224-3121. Also, be sure to sign up for our Action Alerts, and act quickly when we send them!

2) Make an Appointment with your Elected Officials
Call your elected officials for an appointment to discuss what Medicaid means to you. Find out when your Member of the House of Representatives will be home from Washington, and call his or her district office to make an appointment. Stress with the scheduler that you know that budget cuts could come up for a vote this summer, and you want your voice to be heard!

3) Attend a Town Hall Meeting
When Members of Congress are back in their districts, they often hold town hall meetings. Call their district offices to find out when the next meeting is so that you can attend and share your story directly with your Representative.

4) Invite your Senators and Representative to your local chapter of The Arc.
Invite them to join you at places or events where they will be able to meet with people with disabilities who depend heavily on Medicaid. For example, invite them to a supported housing setting or apartment supported by your chapter(s). Seeing firsthand the people who depend on Medicaid-funded long-term services and supports can have a powerful effect on Members of Congress and can help to dispel many of the unfortunate misperceptions about the program (for example, that it serves people who don’t really need it). If possible, invite them to a chapter event that’s happening during the recess where they may meet and talk with people who depend on Medicaid for services.

5) Write a Letter to the Editor
Local newspapers will print letters from local residents on timely topics. Sharing your personal story about how Medicaid is your lifeline to health care and long term services and supports will help people understand why we must maintain the program.

6) Use Social Media to Spread the Word
Facebook and Twitter are often the first source of news for your friends and family. Use your online network to ask them to get involved in this fight!