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Thursday, November 18, 2010

Playing Politics with Medicaid

Ron Pollack

Executive Director

Immediately after the 2010 elections, with an eye towards a possible run for president, Texas Governor Rick Perry suggested that his state should consider dropping the Medicaid program. While this suggestion may endear him to conservative activists in his party, implementing this idea would cause huge problems for Texas and its many citizens who rely on Medicaid for their health lifeline. The same would be true in any other state that dropped the program.

Medicaid provides essential and affordable health care coverage for 25.8 million low-income children throughout the nation (2.2 million in Texas), and it is the primary source of long-term care coverage for the elderly and people with disabilities. Without the program, many millions of children would join the ranks of the uninsured, and seniors and people with disabilities in nursing homes—and those seeking home- and community-based services—would lose care or quickly file for bankruptcy. 

The Affordable Care Act, which is the target of Governor Perry’s rant, makes some long over-due improvements to the program, especially for adults. The law sets the eligibility standard for all adults in Medicaid at 133 percent of the federal poverty level—$14,400 per year for a single person, $24,350 for a family of three.

This fills a gaping hole that has prevented adults in most states from getting coverage benefits even if they have very low incomes. Indeed, in Governor Perry’s own state, in order to qualify for Medicaid today, parents must have incomes below 26 percent of the federal poverty level ($4,670 per year for a family of three). Adults without dependent children in Texas (and 42 other states) are ineligible even if they have no income at all.

Those, like Governor Perry, who may want to drop Medicaid because they dislike these changes, base their proposals on a number of mistaken assumptions. Here are some of the most important ones:

  • They incorrectly assume that people dropped from Medicaid will be able to get federal tax credits to buy private coverage: The Affordable Care Act, however, is indisputably clear that people with incomes less that the poverty level are ineligible for premium-related tax credits. To change this would require new federal legislation, which, according to the Congressional Budget Office, is more expensive than coverage through Medicaid.
  • They incorrectly assume that dropping Medicaid and taking full responsibility for the costs of long-term care would benefit state budgets: Proposals like Governor Perry’s put funding for long-term care for seniors and people with disabilities at risk. Without Medicaid (which pays for most of our nation’s long-term care coverage), states would be forced to pay for these services with their own funds, or cut them. But costs for long-term care are the largest portion of Medicaid’s budgets, and they are growing with each passing year as the baby boom generation ages. Hence, such a proposal would ultimately do great damage to state budgets and to those who need long-term care.
  • They incorrectly assume that states will experience large costs for the new Medicaid improvements: Under the Affordable Care Act, however, the federal government will pick up all of the costs of newly eligible people in the first three years (2014-2016). From 2017 to 2020, it will incrementally phase down to 90 percent of costs, and it remains steady at that level.
  • They incorrectly assume that transferring low-income children and families out of Medicaid to private coverage will not cause harm to those low-income people: In recognition of the unique financial circumstances of low-income families, the Medicaid program provides unique benefits and out-of-pocket cost protections so that health coverage and care are affordable. Those protections do not presently exist in the private market.  

Governors seeking to drop Medicaid will clearly hurt their state economies. Medicaid is, by far, the largest source of federal funding for states, and it won’t make sense to state constituents that their federal tax dollars—and the economic benefits of those dollars—are going to other states, but not the state in which they live.

But, of course, the biggest losers will be the people who depend on Medicaid for their health care. With 50.7 million people uninsured in 2009 and many additional millions underinsured, and as employer-based health coverage shrinks with each passing year, it would be a huge mistake to exacerbate this problem by dropping Medicaid. The Affordable Care Act helps to fix the health coverage problem, and it behooves responsible public officials to implement the legislation as effectively as possible.