By Edwin Park, Center on Budget and Policy Priorities

House Budget Committee Chairman Paul Ryan’s new budget again proposes to radically restructure Medicaid by converting it into a block grant, and it would cut federal Medicaid funding steeply, by $732 billion over the next decade.  It would also repeal health reform’s Medicaid expansion.  The combined total cut to Medicaid would exceed more than $1.5 trillion over ten years, relative to current law.  All told, it would add tens of millions of Americans to the ranks of the uninsured and underinsured.

Repealing the Affordable Care Act’s Medicaid expansion means that 13 million people would lose their new coverage or no longer gain coverage in the future; 13 million is the Congressional Budget Office’s (CBO) current estimate of the number of people who would eventually gain coverage under the Medicaid expansion, though the number could rise as high as 17 million if all states adopt the expansion.  In addition, the large and growing cut in federal Medicaid funding from the block grant would almost certainly force states to sharply scale back or eliminate Medicaid coverage for millions of low-income people who rely on it today.  (More than 40 million people would likely become uninsured as a result of the Ryan budget overall after also taking into account the repeal of health reform’s exchange subsidies.)

Under the Ryan plan, the federal government would no longer pay a fixed share of states’ Medicaid costs starting in 2016.  Instead, states would get a fixed dollar amount that would rise annually only with inflation and population growth.

• The block grant funding would fall further and further behind state needs each year.  The annual increase in the block grant would average about 3.5 percentage points less than Medicaid’s currently projected growth rate over the next ten years, which accounts for factors like rising health care costs and the aging of the population.  Federal Medicaid and Children’s Health Insurance Program (CHIP) spending in 2024 would be $124 billion less — or 26 percent less — than what states would receive under current law, according to the Ryan budget (see chart).  And the cuts would keep growing after that.
• Altogether, the block grant would cut federal Medicaid spending by $732 billion from 2015-2024, according to the Ryan budget plan.  (It is conceivable that a small share of these cuts could come from CHIP, which the Ryan budget would merge into its new Medicaid block grant.)  This would be an estimated cut to federal Medicaid and CHIP funding of more than 19 percent over the ten years as a whole, compared to current law — and doesn’t count the loss of the large additional funding that states would receive to expand Medicaid under health reform.
• The loss of federal funding would be even greater in years when enrollment or per-beneficiary health care costs rose faster than expected, such as during a recession or after the introduction of a new, breakthrough health care technology or treatment that improved patients’ health but increased cost.  Currently, the federal government and the states share in those unanticipated costs; under the Ryan plan, states alone would bear them.

As CBO concluded when analyzing the similar Medicaid block grant proposal from the Ryan budget plan from two years ago, “the magnitude of the reduction in spending . . . means that states would need to increase their spending on these programs, make considerable cutbacks in them, or both.  Cutbacks might involve reduced eligibility . . . coverage of fewer services, lower payments to providers, or increased cost-sharing by beneficiaries — all of which would reduce access to care.”

In making these cuts, states would likely use the expansive additional flexibility that the Ryan plan would give them.  For example, the plan would likely let states cap Medicaid enrollment and turn eligible people away from the program; under current law, states must accept all eligible individuals who apply.  It also would likely let states drop certain benefits that people with disabilities or other special health problems need.

The Urban Institute estimated that Chairman Ryan’s similar block grant proposal in 2012 would lead states to drop between 14.3 million and 20.5 million people from Medicaid by the tenth year (outside of the effects of repealing health reform’s Medicaid expansion).  That would result in a reduction in enrollment of between 25 percent and 35 percent.  The Urban Institute also estimated that the block grant likely would have resulted in cuts in reimbursements to health care providers of more than 30 percent by the tenth year.  This year’s proposal likely would result in cuts that are similarly draconian.