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The Fierce Urgency of Now: How $880 Billion in Cuts to Medicaid Could Hurt Us All

If you have protection against future catastrophic out-of-pocket costs for basic life functions, consider yourself lucky. The vast majority of people in the United States don’t.

Yet the reality is that there’s a 52 percent chance that someone turning 65 today might develop a severe disability requiring long-term services and supports (LTSS)—that is, help with such functions as eating, bathing, dressing and toileting.

For more extensive care, the cost can surpass $250,000 for those over the age of 65 — a figure that could easily decimate even some middle-class families, never mind lower-income earners. As a result, many people deplete their resources, become impoverished and wind up needing relief from Medicaid as a last resort. Thus, millions of Americans, many of whom you might never have guessed would need Medicaid, find themselves having to turn to the half-century-old program for this vital support. But at least that safety net is there.

However, if some in Congress get their way, that safety net may disappear, a position AARP firmly opposes. Provisions in the most recent House health reform proposal threaten to roll back the federal promise of coverage and services for millions of Americans, including at least 17 million children and adults with disabilities and low-income older adults who rely on Medicaid. Meanwhile, the proposal would instead shift more costs to states and their taxpayers. In short, hanging in the balance of a debate raging in Washington is $880 billion in federal funding for crucial health care and LTSS.

Responsive Medicaid would turn rigid

For more than 50 years, Medicaid has served as a critical safety net for millions of people with limited income and resources. Current law guarantees access to health care and LTSS to all eligible individuals. States and the federal government share the risk, responsibility and cost of financing Medicaid. The federal government guarantees states financial support, based on the relative wealth of the state, of between 50 and 75 percent of the program’s cost, even if cost goes up.

The program responds to changes in the economy, public health emergencies, natural disasters and medical cost growth. During the Great Recession when millions lost their jobs — and their employer-based health insurance — Medicaid served as a critical safety net. And as the Zika virus spread in parts of the U.S. recently, Medicaid responded with the necessary funding.

In its current form, the House health legislation would fundamentally alter the program by changing the financing structure to a per capita cap. Under such a system, the federal government would set a maximum limit on how much to reimburse states on a per-enrollee basis for children, adults, individuals with disabilities, and seniors. While payments to states would reflect changes in enrollment, the cap would shift the risk to states for higher-than-expected cost growth due to epidemics, blockbuster drugs and natural disasters. In addition, the cap would not account for the changing mix of an aging population. As we get older the needs for LTSS will go up, but budgets would not. Setting the caps at a time when per-beneficiary spending for low-income seniors is much lower would result in an underfunded safety net for this population.

Just in the event this was not drastic enough, House leaders are now willing to modify the health legislation and provide states with the option to accept Medicaid block grants — which is a fixed amount of Medicaid funding annually, regardless of actual need or program costs. Under a block grant, people are not guaranteed coverage for services, and funding would not necessarily keep up with health care costs, nor would it be adjusted based on the number of persons served.

The real face of any savings: State taxpayers and America’s most vulnerable

While block grants and per capita caps on the surface appear to be a mere change in how funds are allocated for Medicaid, thereby saving federal dollars and allowing greater state flexibility in program implementation, such a shift would result in a program that would be in many ways unrecognizable, both philosophically as well as on the ground, where Americans rely on the program every day.

Analysis from the Congressional Budget Office estimates federal spending in Medicaid would decrease by $880 billion by 2026. These cuts could have major implications for state budgets and the ability of states to provide adequate health care and LTSS for low-income seniors and people with disabilities. States and their taxpayers would either have to fill this gap themselves, or fewer people would receive less support for services like LTSS.

Faced with some difficult choices, states might limit optional benefits like home- and community-based services (HCBS), which are generally more cost-effective than long-term care facilities.

The bottom line: Members of Congress will vote on the health legislation this week.

The Medicaid piece of the new health legislation means that access to services for some of the most vulnerable populations in our society, guaranteed for over a half-century, would be in jeopardy. It would also shift costs to taxpayers at the state level, which is one reason some governors feel the need to oppose it, regardless of their political affiliation. Now is the time to act and voice your concerns. There is just too much at stake.


Debra Whitman is AARP’s chief public policy officer and leads policy development, analysis and research, as well as global thought leadership that supports and advances the interests of individuals age 50-plus and their families. Follow Deb on Twitter: @policydeb


Jean Accius is a nationally recognized expert on aging policy, livable communities and long-term services and supports (LTSS). He serves as the vice president of the long-term services and supports and livable communities group within the AARP Public Policy Institute. Follow Jean on Twitter: @JeanAccius 


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