More to Medicaid than Meets the Eye

Authored by January Angeles, Senior Policy Analyst, Center on Budget & Policy Priorities

About 6 million of Medicaid’s beneficiaries are seniors.  Almost all of them are also eligible for Medicare, but Medicaid is critical to filling the gaps in Medicare coverage that these seniors could not afford to pay for on their own.

Medicaid pays for certain health and long-term care services that Medicare either does not cover or covers to a more limited extent.  For example, the overwhelming majority of Medicare beneficiaries who live in nursing homes rely on Medicaid for their nursing home coverage.  Medicaid also provides more comprehensive coverage than Medicare for home health care, mental health services, durable medical equipment, and other health care items and services.

Medicaid also pays the Medicare premiums and other out-of-pocket costs for seniors with low incomes, who would have a hard time affording these expenses on their own.  Medicare Part B premiums alone cost $1,157 per year, and beneficiaries have a co-payment of 20 percent for many outpatient services.  In 2011, Medicare deductibles are $162 for physician services and $1,132 for hospitalizations. 

As policymakers look for ways to reduce the federal budget deficit, Medicaid is increasingly on the chopping block.  For example, the House-passed budget plan would convert Medicaid into a block grant and cuts its funding severely.  If this sort of proposal became law, low-income seniors would lose access to important supplemental benefits that Medicaid provides and go without needed health care and long-term services and supports.

Here’s why.  Currently, the federal government pays a fixed percentage of a state’s Medicaid costs; under a block grant, it would pay only a fixed dollar amount each year and states would be responsible for all costs above that amount.  Moreover, to reduce federal spending, the House budget would provide states with much less Medicaid funding than they would receive under the current system — 35 percent less by 2022 and a staggering 49 percent less by 2030, according to the Congressional Budget Office.

To make up for these deep reductions, states would have to greatly increase their own Medicaid spending or, as is more likely, sharply scale back eligibility, cap enrollment, and/or cut benefits.  This would make it much harder for millions of low-income seniors — among the most vulnerable Medicaid beneficiaries — to get the care they need.

Rather than radically restructure Medicaid in ways that would simply shift costs on to states and vulnerable people, Congress should focus on ways to make the program more sustainable over the long term, such as by helping states provide more cost-efficient care without sacrificing quality.  Last year’s health reform law, the Affordable Care Act (ACA), includes several measures to slow health costs by restructuring the way we deliver care. 

For example, the ACA establishes a center within the Centers for Medicare and Medicaid Services dedicated to improving the quality and continuity of care for seniors and people with disabilities who receive both Medicaid and Medicare — a high-needs group that accounts for 15 percent of Medicaid’s beneficiaries but 39 percent of its spending.  The ACA also sets up a number of demonstration projects that would change the way we pay providers to encourage them to deliver better, more coordinated care.

We need to give these measures a chance to succeed.  Initiatives like these, not radical block-granting experiments, will enable us to better control health care costs and ensure that Medicaid is always there for our most vulnerable seniors.