By Joe Touschner

Some think that a good way to address federal deficits is to establish a cap on federal spending.  A cap is needed, they say, to preserve the prosperity of future generations (i.e. today’s children).  And a cap sounds like a simple and effective way to address the nation’s deficit.  While politicians seem to be easily enamored with any solution that fits on a bumper sticker, most of us recognize that such a simplistic solution won’t work for such a complicated issue.  An arbitrary cap is unlikely to work for the budget of the world’s largest and most diversified and dynamic economic power.  Those proposing caps may have a good sound bite, but once the American people take a closer look at the impact this proposal would have on families, communities and children, they are unlikely to take the bait.

Here at CCF, we’ve taken a look at how this proposal would impact the health care coverage of children and families.  Our analysis indicates that a spending cap would have a similar effect as a block grant for Medicaid:  deep cuts to the Medicaid and CHIP coverage that the next generation–today’s children–is depending upon to grow up healthy.

We’ve written a brief memo on the topic, but here’s the reasoning on why spending caps are all but certain to lead to steep cuts in public coverage for kids: 

First, the proposals cap federal spending as a percent of GDP at around where it’s been for the last few decades. A cap at these historic levels, though, doesn’t take into account the aging of America’s population, growing rates of disability, or the high inflation that still impacts our health system generally.

So as health costs rise, they will get squeezed under a cap–our colleagues at the Center on Budget and Policy Priorities estimate that Medicaid would experience a cut of about 19% after 10 years.

Second, children make up just about half of Medicaid enrollees, so major cuts to its funding will inevitably affect them. With significantly less federal funding in a capped environment, states will have to decide where to make very large cuts in their Medicaid programs – setting up no-win battles between vulnerable populations.  One analysis of the House block grant plan found that if states decide to protect the elderly and disabled, states would need to reduce the expected number of kids and families Medicaid serves by 71%.

Overall spending caps are poorly designed for a large nation with changing needs and would limit our country’s ability to respond to a recession or other emergency, like Hurricane Katrina.  And they are not a balanced way to respond to federal deficits–the spending cap makes no changes to the revenue side of the federal government’s balance sheet, nor does it affect tax expenditures that provide government benefits but don’t show up as spending. So oil and gas companies with large profit margins continue to receive tax breaks while children’s health is put at risk by an arbitrary cap.  Assuring kids have a prosperous future starts with making sure their childhood health needs are met.  Medicaid and CHIP help do that for millions today and any budget plan should keep them strong and available for kids.