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Could Medicaid Benefits Get Pushed off the Fiscal Cliff?

The views expressed are those of the author and are not necessarily those of Scientific American.


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Image courtesy of iStockphoto/kroach

Medicaid provides benefits to more than 60 million Americans, including millions of children, who might not otherwise be able to afford medical care. This sizable government program has been sheltered from large federal cuts but is now vulnerable because of the ongoing talks in Washington to close the budget gap and avoid the fiscal cliff.

Sharp cuts to Medicaid would hobble health care reform and hamper efforts to reduce overall health care spending, argues Sara Rosenbuam, a professor of health law and policy at the George Washington University School of Public Health and Health Services in Washington, DC, in an essay published online December 5 in the New England Journal of Medicine.

Medicaid is relatively protected from automatic budget cuts by the Budget Control Act. The program is insulated from the across-the-board spending reduction known as sequestration which is set to take effect if Congress and the president fail to reach a compromise by the end of the year.

However, there are still many ways Medicaid—and with it, some of the Affordable Care Act’s promised health care reform changes—could lose ground during the budgetary negotiations. Medicaid is a tempting target: a massive federal program that is only set to grow. Initially, the Affordable Care Act extended its coverage to some 20 million people as states expand eligibility to those who had not previously qualified but who have trouble obtaining private insurance. But in June, the U.S. Supreme Court undercut this provision, ruling that states were not required to extend additional eligibility.

Rosenbaum argues that reducing coverage would mean that many millions will continue to go without medical coverage, continuing the shift of expenses on to insurers and other patients. The Congressional Budget Office has estimated that insuring people through Medicaid costs 50 percent less per person than subsidizing private insurance from a state-run health insurance exchange. “The problem is that Medicaid’s cost is driven by high enrollment, not excessive per capita spending,” Rosenbaum notes. “As a result, there’s very little money to wring out of Medicaid without shaking its structure in ways that reduce basic coverage.”

Medicaid is an effective and efficient investment in health care for large numbers of people, she writes. For example, “much of the health care that Medicaid beneficiaries receive is furnished through safety-net providers such as community health centers, which are highly efficient and accustomed to operating on tight budgets.”

One proposal to help trim the federal budget, as outlined by the House Budget Committee, run by Paul Ryan, would remove all of the Affordable Care Act’s Medicaid expansions in states and instead give out set grants for states to provide coverage for some qualifying residents. This option is estimated to save some $2 trillion in the next 10 years, but, Rosenbaum argues, it is based on “an arbitrary limit” rather than actual, changing needs. “Recent and ongoing demographic shifts…and recent tragedies, such as Hurricane Sandy, underscore the way in which uncontrollable events can cause unexpected surges in the need for government assistance,” she writes.

“Such blunt force strategies would leave many poor and disabled Americans without the basic services they need to stay healthy,” Rosenbaum said in a prepared statement. Instead, she suggests redoubling efforts to increase the program’s efficiency, looking to reduce costs of caring for the most expensive patients, such as those that require long-term institutional care and use both Medicaid and Medicare.

Other proposals limit states’ abilities to generate funds for Medicaid by levying taxes on hospitals or pharmacies. They also seek to reduce states’ abilities to use Medicaid funds to invest in public hospitals and other centers that care for beneficiaries. “Changing the rules would destabilize these institutions at the very time when expanded insurance coverage is creating greater demand for care,” Rosenbaum writes.

But Medicaid is a plump and tempting budgetary target. And unlike Medicare, which provides coverage for seniors, Medicaid does not enjoy the same level of vocal (and financial) support. As Rosenbaum notes, often “Medicaid beneficiaries lack political clout.”

Katherine Harmon Courage About the Author: Katherine Harmon Courage is a freelance writer and contributing editor for Scientific American. Her book Octopus! The Most Mysterious Creature In the Sea is out now from Penguin/Current. Follow on Twitter @KHCourage.

The views expressed are those of the author and are not necessarily those of Scientific American.





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  1. 1. outsidethebox 11:58 am 12/7/2012

    There is something called “compassion fatigue”. Those in the middle class who are actually contributing to society and also paying taxes are not doing all that well themselves. After a while they do get tired of those who not only don’t contribute but can’t even take care of themselves. Enough already!

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  2. 2. Postman1 11:58 pm 12/8/2012

    outsidethebox And when you are Right, You are Very, Very, Right.

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  3. 3. Wayne Williamson 5:16 pm 12/11/2012

    Being one of the compassionate ones…I to am feeling the fatigue and am actually looking forward to seeing what happens when the “fiscal cliff” arrives. It will be interesting to see everybody running around saying the sky is falling and it doesn’t.

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  4. 4. Knyaz 3:10 am 12/12/2012

    Fed не организация тупых людей,наоборот они считают других людей глупее чем они.То,что они говорят об экономии только прикрытие плана Fed.Политика Fed по увеличению долларовой массы в мировой финансовой системе показывает,что Fed стремится снизить курс доллара.Возможно во время пикирования доллара Fed откажется от зелёного доллара(доллары другого цвета останутся).Выпуск новых одно долларовых и сто долларовых денег подтверждает намерение Fed отказаться от зелёного доллара.Отказ от зелёного доллара уменьшит долларовые запасы всех стран это создаст дефицит доллара в мировой фигнансовой системе,что автоматически повысит курс доллара.Так USA оплатит свой государственный долг за счёт мировой экономики.Если это произойдёт то этот план будет оправдан тем,что в мировой финансовой системе находится огромное количество фальшивых долларов зелёного цвета и тем,что зелёные доллары можно легко подделать с помощью современных технологий.Весь мир конечно будет в шоке но доллары печатает Fed поэтому она хочет печатает не хочет не печатает и ни кто не может ей,что то запретить или как то руководить печатанием долларов.

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