The Medicare Phase-Out proposal is dead and gone. The Republican leadership doesn’t see the President or the Democrats budging on it, so they’re moving on. The Ways and Means Committee won’t even take it up.

So does this mean that Republicans are suddenly committed to the welfare state? No. It means that they want to protect their voters, who are old, while still moving forward on cutting back entitlements. And there’s a perfect vehicle for them to do that – Medicaid. Specifically, Republicans want to repeal the “Maintenance of Effort” provisions in the program.

Republicans in both houses introduced bills on Tuesday that would eliminate federal regulations that prevent states from trimming their Medicaid rolls or erecting new barriers to enrollment.

In February, Mother Jones broke the news that Republicans planned to target these so-called Maintenance of Effort (MOE) requirements, which the federal government put in place after giving states a new injection of Medicaid money in 2009. Now they’ve made good on their promise. The State Flexibility Act—sponsored by Sen. Orrin Hatch (R-Utah) in the Senate and Reps. Phil Gingrey (R-Ga.) and Cathy McMorris Rodgers (D-Wash.) in the House—would give states significantly more leeway in kicking beneficiaries to the curb, reducing payment to nursing homes, and making other reductions to shrink budget gaps.

“Take the handcuffs off the governors,” Gingrey (R-Ga.) said at the bill’s unveiling on Tuesday, arguing that current law prevents the states from “ferreting out waste, fraud, and abuse, finding out if someone’s falsified information on income…maybe even if they’re illegal immigrants.” The Congressional Budget Office has estimated that the bill would save $2.8 billion over five years.

This has lots of appeal for Republicans. First of all, they can say they merely want to unshackle governors. They don’t have to cut the programs themselves, they can just leave it to the states. Second, while Republican voters are old, they aren’t poor. So they can happily slash programs for low-income Americans without electoral blowback. Now, someone might mention to them that a lot of elderly Americans get their nursing home coverage through Medicaid, and that the elderly and disabled cost 70 cents out of every Medicaid dollar. The angry seniors at town halls over the Medicare privatization may be joined by angry middle-class suburbanites who would have to foot the bill for their parents’ nursing home or (gasp!) have the parent move in with them. But for the moment, Medicaid has less political blowback. So that’s what Republicans are going after.

Their hubris on voting for a budget to end Medicare, when that had no chance of becoming law, was a really awful unforced error. But there’s a certain logic to unshackling the states that may appeal to deficit peacocks who want to look fiscally responsible.

The right policy is actually the opposite of this. We should federalize Medicaid. Instead of saving money by simply throwing poor people off the rolls, we could save money by widening the pool for Medicaid and forcing providers to cut their prices for a piece of the action. In addition, this gives a predictable standard of care to the poor, rather than the haphazard treatment that varies by state today. The way it works now, when recessions hit, states cut back on Medicaid because it’s the biggest expenditure they have to balance budgets, at precisely the time when demand for Medicaid increases. The federal government could simply run a higher deficit for Medicaid during a recession, helping the economy while keeping a basic level of care.

So keep an eye on the “State Flexibility Act” as the next frontier for budget-cutters. Half of the increases in coverage in the Affordable Care Act come from Medicaid expansion. Allowing states to cut the rolls would totally undermine that.

David Dayen

David Dayen

1 Comment