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As Predicted, Medicaid On Chopping Block in Debt Limit Deal

Well, here we go. The debt limit deal is rounding around to entitlement cuts, and to the surprise of absolutely no one, Medicaid has become the target.

The Medicaid program for the poor is facing significant cuts in an emerging bipartisan budget deal as Republicans seek to shrink entitlements and Democrats protect other priorities […]

Officials familiar with the talks in both parties say they expect Medicaid to be the biggest source of cuts in federal entitlement programs in whatever compromise emerges. Social Security, the government’s largest entitlement, is not expected to be cut at all and Democrats’ top priority in the budget talks has been to limit cuts to Medicare, the program that provides health care for seniors.

Republicans have proposed turning the Medicaid program into a block grant to states, with few strings attached. That idea is seen as a non-starter in the face of opposition from the White House, which is fighting cuts to Medicaid rolls.

There are signs of bipartisan support among lawmakers for less drastic changes, such as legislation to give states more flexibility to cut the number of people who can use the program.

What could happen is a loosening of “maintenance of effort” requirements. States have certain obligations on enrollment and benefits that they have to maintain or they risk losing federal funding, and under these new laws, those requirements will be removed, allowing states “flexibility,” which is a euphemism for throwing people off Medicaid. When 41 Senate Democrats vowed never to block grant Medicaid by capping federal expenditures, they pointedly did not talk about maintenance of effort. Any flim-flam about how block granting is unacceptable but MOE is fine should not be considered credible.

This would be brutal for the poor, particularly in Republican states, but even in blue ones. Governors are champing at the bit to cut enrollment and increase cost sharing. State budgets are still strained, and Medicaid is among the highest expenditures. Much of Medicaid spending goes to keep poor seniors in nursing homes, so a lot of the cuts would get targeted there. Which means that you can call this the “Force Your Mother-in-Law to Move In With You Act.”

Keep in mind that fully half of all the coverage expansions in the Affordable Care Act come from a Medicaid expansion. A removal of MOE would basically undercut that; even though the federal government would pick up all the costs of the Medicaid expansion, states want to reduce their current level, and so the coverage expansion will just unravel. Or, the feds will put the burden on the states, and the states will just opt out of it. You’re talking about millions and millions of beneficiaries losing their coverage.

I think that Medicaid polls well because people really don’t know the difference between it and Medicare. In reality, there’s less of an organized constituency for health care for the poor, unlike with health care or retirement security for seniors. It was obvious that, when the White House and Congress entered deficit reduction talks, and Medicare came off the table, and revenues came off the table, that Medicaid would be the big target. Roughly $400 billion is spent on Medicaid at a federal level annually, and there’s no other pot of money left to look at.

When Gene Sperling said last month that the nation should avoid “asking those who are most unfortunate or those with the least economic and political power to take the overwhelming bulk of this sacrifice,” there was hope that Medicaid wouldn’t be as targeted. That’s looking more like just rhetoric.

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David Dayen

David Dayen