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Kaiser Study Says House Budget Medicaid Plan Chops $1.7 Trillion

By CQ Staff

October 23, 2012 -- Projected federal spending on Medicaid would fall by $1.7 trillion from 2013 to 2022 under the plan the House Budget Committee approved earlier this year, says an analysis released last week by the Kaiser Family Foundation.

The plan could leave 31 million to 38 million fewer people with Medicaid coverage in 2022, said the analysis, prepared for the foundation by the Urban Institute.

The Budget Committee plan, approved by that panel March 21, would repeal the 2010 health care law and convert Medicaid into a block grant program. The full House approved the plan March 29.

Of the $1.7 trillion—a 38 percent decline compared to current projected spending—$932 billion would come from repealing federal funding of the Medicaid expansion under the health care overhaul (PL 111-148, PL 111-152), and $810 billion would come from converting Medicaid into a block grant program. The cuts related to the block grant would become increasingly steep over time, said the report.

Seventeen million fewer people would be covered by Medicaid because of the repeal of the health care law, and 14 million to 21 million fewer would be enrolled because of block grants, the study said.

Medicaid payments to hospitals could drop by as much as $363.8 billion and those to nursing homes by $222 billion, a 22 percent cut. The study is an updated analysis of a study prepared by the Urban Institute in May 2011.

The states that would be hardest hit by the switch to a block grant alone are: Alaska, Hawaii, Montana, North Dakota, South Dakota, Wisconsin, and Wyoming. All would face a 24 to 25 percent reduction in expected spending, compared to the national average of 22 percent lower spending.

The states that would face the sharpest declines due to a combination of both the change to a block grant and repeal of the 2010 health care law are: Florida, North Dakota, Arizona, Georgia Texas, Colorado, and Nevada. That assumes that those states would have chosen to expand their Medicaid programs, although not all are expected to do so.

This year, Medicaid provides health and long-term care coverage to about 55 million low-income Americans in an average month. That number is expected to grow substantially starting in 2014 when states have the option of expanding their programs.

Under the idea of a block grant, federal spending would be capped each year and sent to each state based on a formula that would rise annually to account for population growth and inflation. That type of formula is expected to grow much more slowly than historical spending trends in Medicaid. Republicans have said that their plan would give states additional flexibility, but have not spelled out how that would work. State officials currently have the flexibility to ratchet back optional benefits, including prescription drugs, but must meet basic federal coverage requirements.

State by State data (pdf) | Chart Book (pdf) | Report (pdf)

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