Urban Institute Analysis Says WI Would Lose Almost $28 Billion over Next 10 Years

There has never been any question that the House budget plan authored by Rep. Ryan would result in a very significant cut in Medicaid spending. However, there have been many questions about how the House version of the budget would affect states and how many people would be likely to lose their coverage.

A study released Tuesday by the Urban Institute, a respected national think tank, sheds light on those questions. It estimates the anticipated effects nationally and in each state – including the dollars cut and the number of people who could lose their coverage under a couple of different scenarios

The new analysis concludes that the House GOP plan to repeal the health care reform law and turn Medicaid into a block grant would cut federal Medicaid spending by $1.7 trillion, or 38%, over the next ten years (2013 through 2022). As the following chart from the report illustrates, repealing the Affordable Care Act (ACA) would cut federal Medicaid spending by an estimated $932 billion over the next ten years, and turning Medicaid into a block grant would save the federal government $810 billion.

The Urban Institute considered two different scenarios regarding the effects of those cuts on Medicaid enrollment: 1) that states are able to bring the cost increases down to the rate of GDP growth; and 2) that Medicaid costs per person continue to increase each year at the projected rate of gross domestic product (GDP) plus 1.6%. Under the first scenario, they expect enrollment to drop by about 31.3 million people nationally, and under the second scenario it would drop by about 37.5 million, or 50%.

According to the Urban Institute analysis, Wisconsin would be affected in the following ways:

• Repealing the ACA would reduce federal Medicaid funding in our state by $12.6 billion (16%) over ten years, and would reduce enrollment by 239,000 (19%) in 2022.
• The block grant proposal would cut federal Medicaid funding in WI by an additional $15 billion over 10 years (24%), and it would reduce Medicaid enrollment in 2022 by 253,000 (under scenario 1, above) to 355,000 (scenario 2).
• By 2022, the combined effects of both changes would cut federal Medicaid spending by 45% in Wisconsin, and would reduce enrollment (relative to the current law baseline estimate) by 492,000 to 593,000 for the two scenarios they modeled.
• Most of the cost in Wisconsin of block-granting Medicaid would be felt by hospitals and nursing homes, whose ten-year losses in our state would be about $6.6 and $3.4 billion, respectively (assuming the cost-cutting is spread evenly across all Medicaid categories).

Of course states wouldn’t have to spread the Medicaid cost-cutting evenly, and I doubt that they would.  I think political factors make it likely that Wisconsin and other states would try to mitigate the effects for nursing homes, hospitals and community based care for the elderly, which could reduce some of the cuts that the Urban Institute estimated.  However, that would shift more of the cutting to coverage of kids and families, and since their costs per enrollee are far lower, such a shift would increase rather than decrease the number of people who could potentially lose coverage.

Some might argue that states would diminish the magnitude of cuts by using the proposed flexibility to restrict Medicaid services and increase cost-sharing.  Although I think that’s an important consideration, keep in mind that those sorts of cuts can significantly reduce program participation, as we have seen in Wisconsin since implementation of the BadgerCare cuts began in July.  Also, much of that sort of cost-cutting affecting low-income families and individuals is simply going to increase the amount of uncompensated care, which not only hurts hospitals, but also shifts costs to people with insurance.

In conclusion, one might quibble with the specificity of the state-by-state estimates in the report, but there’s no question that enactment of the House budget plan would cause deep cuts in Medicaid spending and the number of people enrolled.

Jon Peacock