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The Road Ahead - Q & A on Medicaid

What is The Arc’s Top Policy Priority this Year?

Medicaid will be our number one priority this year while the federal deficit takes center stage on Capitol Hill. Federal and state Medicaid pays for the vast majority - 78% - of long term services and supports for people with intellectual and or developmental disabilities (I/DD). Along with our work on Medicaid and the deficit we will also focus on Social Security, Medicare, and Supplemental Security Income, which are at risk in many deficit reduction plans.

Why is Medicaid Such a Target in Congress?

We have a nearly $14.3 trillion debt and health care spending is becoming an ever larger share of our federal budget. Members of Congress are looking for ways to get our fiscal house in order and reduce our long term debt. Some are focusing on the growth of federal spending in the Medicaid program and know that block granting Medicaid could save federal dollars. In the simplest terms, a block grant would mean Medicaid would no longer be a guaranteed benefit, and federal funding for Medicaid would not grow when more people need health and long term services. Instead, the challenge of providing health care without any additional federal money to people who are poor, elderly, or have disabilities would fall to the states.

What is Happening Right Now in Congress?

Right now Congress is still dealing with setting a budget for Fiscal Year (FY) 2012, debating raising the debt ceiling and proposing many legislative ideas to address the deficit and reform the budget process. As advocates for people with intellectual and developmental disabilities, our voices must be heard in these debates. Each of these areas can dramatically harm the Medicaid program and the people it serves, even if Medicaid is not specifically mentioned in the specific proposals.

  1. FY 2012 Budget Resolution. The Budget Resolution is a blueprint for federal spending. It sets spending limits for the Appropriations Committees and targets for spending or savings for other committees. For example, the Budget Resolution can either assume a Medicaid block grant or call for one directly but separate legislation would still be needed to pass and be signed by the President before it would be block granted.

    The House of Representatives passed a FY 2012 Budget Resolution, H.R. 34, in April (often called the Ryan Plan). The resolution called on Congress to block grant Medicaid, to cap federal spending for the program, to turn Medicare into a voucher program for younger beneficiaries, and to repeal the health care reform law. Medicaid was targeted to be cut by $770 billion over 10 years. And the Ryan plan contained the most radical cuts to discretionary spending in history. Though the amounts were only for general categories of spending, they are certain to apply to disability programs such as supportive housing, job training, special education, transit programs, and much, much more. At the same time, tax cuts for the wealthiest Americans were preserved and very little deficit reduction was achieved. The Arc’s position is that the budget cannot be balanced on spending cuts alone—raising revenues must be part of the solution.

    The Senate Budget Committee has not yet released a proposed FY 2012 Budget Resolution. Budget Committee Chairman Kent Conrad (D-ND) may introduce a Senate Budget Resolution or may wait to see if a bipartisan agreement can be reached by the so-called “Gang of Six” Senators – Senators Durbin (D-IL), Conrad (D-ND), Warner (D-VA), Coburn (R-OK), Chambliss (R-GA), and Crapo (R-ID). The Gang of Six proposal is expected to build from the recommendations by the National Commission on Fiscal Responsibility and Reform. Chairman Conrad was a member of the National Commission as well and will likely recommend a budget resolution that includes some of those recommendations. It is unclear whether the bipartisan negotiators can reach an agreement, and recently, the “Gang of Six” was reduced to five, as Senator Coburn dropped out of the talks.

  2. Debt Ceiling. In mid-May, the federal government technically reached its debt limit of $14.3 trillion. However, the Treasury Secretary can delay reaching the debt ceiling until about early August by temporarily suspending the issuance of certain Treasury securities and due to stronger than expected tax receipts. If the debt ceiling is not increased by early August, the U.S. begins to default on its obligations, and financial markets here and around the world would be impacted. In addition, according to the Department of Treasury, a broad range of government payments would have to be stopped, limited or delayed, including military salaries, Social Security and Medicare payments, interest on debt, unemployment benefits and tax refunds. The U.S. has never defaulted on its debt and, if this happened, it would create a catastrophic international economic crisis.

    Congress will vote on raising the debt ceiling. Some House Members, particularly the Republican freshmen, who campaigned strongly against increasing the debt, are signaling that they may vote against it. Some have stated that they will vote for raising the debt ceiling ONLY IF major cuts in federal spending are included. We expect deep cuts to Medicaid and block granting Medicaid to be at the top of their lists. They are also likely to call for an overall cap on federal spending. This type of cap would likely require draconian cuts in order to be met (see below for examples). Opposition to turning Medicare into a voucher program may protect Medicare from deep cuts. This puts an even bigger target on cutting Medicaid to reduce the deficit. Vice President Joseph R. Biden Jr. is leading a bipartisan effort to produce a budget deal. President Obama called on Congressional leaders to establish a group to try and reach agreement before the vote on raising the debt ceiling. Vice President Biden and Senators Max Baucus (D-MT), John Kyl (R-AZ), Daniel K. Inouye (D-HI), and Representatives Eric Cantor (R-VA), James E. Clyburn (D-SC), and Chris Van Hollen (D-MD) continue to meet to try and find common ground.

  3. Legislative proposals. There are various bipartisan proposals to balance the budget and to cap spending. What they have in common is that spending would need to be dramatically cut usually in a short period of time. Some proposals place an overall cap on federal spending which would force deep and swift cuts in Medicaid, Medicare, Social Security, education, job training, transportation, and other spending.

    Many of the legislative proposals include an automatic enforcement mechanism. This means that if Congress spends more than the agreed upon amount, cuts would happen without Congress voting on them. This piece of the deficit reduction debate could have disastrous consequences for the I/DD community, depending on how the proposal is crafted. For instance, some proposals include the specific details of the cuts. Others include ways to raise revenue as part of the enforcement. Most worrisome are those that achieve more deficit reduction from health programs such as Medicaid and Medicare than defense spending or other spending by the federal government. And finally, there are proposals that follow current law and exempt low income programs such as Medicaid and CHIP from automatic cuts and other enforcement mechanism. While automatic enforcement mechanisms may be a difficult concept to explain, it is incredibly important for the I/DD community to advocate that Medicaid and other low income programs be protected from these automatic cuts. If they are not, the consequences of this policy could be disastrous. Now is the time for Members of Congress to hear from the people they represent about preserving Medicaid for people with I/DD.

What are The Arc’s Views on Deficit Reduction?

  • The budget cannot be balanced on the backs of people with intellectual and developmental disabilities.
  • The budget cannot be balanced on spending cuts alone—raising revenues must be part of the solution.
  • Deep cuts in Medicaid cannot be tolerated.
  • Medicaid and other low income programs need to be exempt from any automatic enforcement provisions.
  • Deficit reduction must be fair and balanced.

What is the Problem with Block Granting or Capping Medicaid?

One major problem is that the costs do not go away, they would just shift to the states. Cutting the Medicaid and Medicare programs at a time when the baby boomers are aging and creating greater demand for these programs is a recipe for disaster. A Medicaid block grant would be a fixed amount of money from the federal government to the states to spend on health care and long term supports for people who are elderly, have disabilities, children and low income people. It would likely have few rules and states would be free to change eligibility, cut services and manage their programs with very little federal oversight. While we can’t predict now what states would do, we believe that block grants could force bad choices and cause real conflict as groups with diverse needs compete for scarce dollars. There will be no more guarantees of health care services and waiting lists will grow even longer.

What “Bad Choices” Might States Make?

Since the services to people with disabilities and the elderly are significantly more costly than health care coverage for children, states could decide to serve fewer costly seniors and people with disabilities and focus scarce health care dollars on less costly children. Here are some possible choices states might make:

  • Individuals may lose coverage of home and community-based services (HCBS) and supports. Most people who need long term services prefer to receive them at home. Over 650,000 people with I/DD receive long-term services paid for by Medicaid. States could decide to stop providing these services or limit the number of people who could get them. There already are over 1 million people with I/DD on waiting lists for Medicaid home and community-based services. There are 730,000 people with I/DD living with aging caregivers who are approaching the time when they no longer will be able to care for their adult children with I/DD at home. If states stopped providing long-term services for people with I/DD, the waiting lists would grow and the situation for older caregivers would become more dire.
  • More people might have to move to institutions. Under a block grant, rules for providing quality care could be more flexible and conditions in institutions could return to the way they were in the past. With fewer requirements, it may be cheaper for states to care for people with I/DD in large facilities. Some states have already shown interest in building residences on the grounds of old institutions.
  • Eligibility might be tightened making it more difficult for individuals to meet financial or other criteria. To be eligible for Medicaid, people have to be poor. States could restrict health care services to only the very, very poor.
  • Individuals and family members may face increased the costs. In order to get health care, people might have to pay more out of their own pockets. Since people using Medicaid are poor to start with, requiring them to pay for their medical care or long term services and supports could be an insurmountable barrier.
  • The availability of critical services such as personal care, prescription drugs, rehabilitative services, or home and community based waiver programs may be reduced or eliminated. All of these services are “optional” under Medicaid, meaning that states may choose to provide them under their Medicaid plans or not. If funds become scarcer, states may decide to stop providing these optional services.
  • Doctors and other providers may go out of business because reimbursement rates are lowered. It is already very difficult for people using Medicaid to find doctors and other health care providers willing to accept the low payment rates. Finding a dentist or a specialist, such as a neurologist, is impossible in some communities. If states cut the amount they pay doctors and other providers, those professionals may quit serving people under Medicaid making the problem even worse. Community based providers of long term services and supports cannot afford deep cuts in reimbursement and still provide services.

What Might People with I/DD Lose if Medicaid is Block Granted?

Basically, anything that state Medicaid programs provide could be eliminated or substantially reduced. Unless states decide to spend a lot more money, people with I/DD stand to lose home and community-based services and supports they need to stay in their homes and communities and out of institutions. These supports include help getting dressed, taking medications, preparing meals, managing money and other services. They could lose critical health services such as prescription drugs, physician services, and physical therapy. The list is very long and these are but a few examples. This is a critical moment for people with I/DD, their families, and caregivers to get involved and help The Arc to stop these proposals from becoming law.

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