CBO Analysis Shows Medicaid Cuts Would Terminate Coverage for Millions, Including People with Medicare

This week, the non-partisan Congressional Budget Office (CBO), a Congressional agency that conducts independent analyses of economic and budget issues, estimated costs and projected state actions related to five Medicaid policy proposals. CBO did this work at the request of Senator Ron Wyden (D-OR) and Congressman Frank Pallone (D-NJ).

CBO’s Projections

The policy options CBO evaluated have all been floated as avenues to cut Medicaid funding. Importantly, while Congressional Republicans have argued that they are not out to harm people with Medicaid coverage, each of the options would take health coverage and access from millions.

• Option 1 would reduce the federal government’s share of responsibility (also called the “FMAP”) for the Medicaid expansion population: 5.5 million people being kicked out of Medicaid, and 2.4 million people going uninsured.
• Option 2 would limit provider taxes that states use to cover portions of their Medicaid funding: 8.6 million people being kicked out of Medicaid, and 3.9 million going uninsured.
• Option 3 would establish limits or caps on federal spending for all people in the state who have health insurance through Medicaid: 5.8 million people being kicked out of Medicaid, and 2.9 million going uninsured.
• Option 4 would establish limits or caps on federal spending for the Medicaid expansion population: 3.3 million people being kicked out of Medicaid, and 1.5 million going uninsured.
• Option 5 would repeal the Medicaid and Medicare Savings Program (MSP) enrollment streamlining rules that reduced barriers to enrolling in the programs: 2.3 million people being kicked out of Medicaid, and 0.6 million going uninsured.

Cuts are Cuts

The CBO’s summary of the first four options is clear: “federal contributions to the Medicaid program would be smaller, reducing federal budget deficits.” They projected that states would respond by taking one or more of the following actions:

• Spend more themselves on Medicaid, mainly using a mix of revenue increases and reduced spending
• Reduce payment rates to health care providers
• Limit the scope or amount of optional benefits (which could include Home- and Community-Based Services (HCBS))
• Reduce enrollment in Medicaid

CBO’s projection is also clear: “Under each of those options, Medicaid enrollment would decrease and the number of people without health insurance would increase.”  This aspect of the CBO’s analysis has been widely reported on and has even garnered a response from Congressional Republicans indicating that at least some of these proposals are no longer being considered.

Repeal of the Streamlining Rule Would Hit Medicare Beneficiaries in Particular

The analysis of Option 5 has, however, captured fewer headlines despite projecting that it would cause 2.3 million people to lose coverage. CBO estimates that Option 5 would reduce the deficit by $162 billion over the 10-year period.

Importantly, this option would save money solely by keeping eligible people from enrolling in the programs. The streamlining rules targeted by Option 5 did not expand eligibility or increase benefits for Medicaid or the MSP.  Instead, they helped people get and stay enrolled. Repealing them would save money by making it harder, more expensive, more time consuming, and more complicated for people who qualify for Medicaid to get and keep that coverage.

CBO notes that “roughly 60 percent of the people who would lose Medicaid coverage would be dual-benefit enrollees who would retain their Medicare coverage.”

The Medicare population would be especially hard hit. CBO notes that “roughly 60 percent of the people who would lose Medicaid coverage would be dual-benefit enrollees who would retain their Medicare coverage.” These Medicare enrollees who would no longer be receiving cost-sharing assistance because of administrative hurdles “would face increased out-of-pocket costs (for Medicare premiums and copayments, for example), leading to a reduction in use of Medicare’s services and thus to lower Medicare spending” netting another $11 billion in projected savings by making care too expensive for people to use. CBO does not note that denying people needed care usually leads to higher expenses down the road as hospitalizations or nursing home stays can increase as a result of poorly managed chronic conditions.

All Medicaid Cuts Take Away Health Insurance Coverage

Medicaid cannot be cut without kicking people out of their coverage and reducing benefits. This includes people with Medicare.

At Medicare Rights, we oppose cuts to Medicaid. Making it harder for people with limited resources to access coverage they qualify for is still a cut. Any “savings” from driving up the cost of care may save dollars temporarily, but it will ultimately lead to higher spending as they need more expensive care later. Even more importantly, it also harms the health and well-being of people who go without needed care.

Any “savings” from driving up the cost of care may save dollars temporarily, but it will ultimately lead to higher spending as they need more expensive care later.

We urge all policymakers to abandon these short-sighted and damaging ideas and work to help everyone access high-quality, affordable care and coverage.

Further Reading

Read the CBO letter.

Read more about how cuts to Medicaid affect people with Medicare.

Read more about how Medicaid is financed.