In an effort to make enough budget cuts so that Republicans would allow the debt ceiling to be raised, President Obama is proposing cutting $100 billion from Medicaid over the next 10 years.
According to the Center on Budget and Policy Priorities, these cuts would change how the federal government pays states for Medicaid and would result in reduced benefits to retirees, children, and the disabled. Currently, there are different rates of funding for different populations like seniors vs. children. That is because some groups are more expensive to cover than others. Obama’s plan, however, calls for a “blended rate,” in which states would receive the same rate for all their Medicaid recipients.
As a result, the states would have to bear a large part of the Medicaid costs because the federal contribution would be significantly lower than before. Further, the Center on Budget and Policy also states that it would be virtually impossible for a state to be able to calculate a fair “blended rate.”
This blended-rate approach would result in cutting billions from state Medicaid budgets. The ripple effect from this would likely be that states reduce Medicaid benefits, reduce Medicaid payments to hospitals and nursing homes, cut people from receiving benefits. According to the Congressional Budget Office, even though only 23 percent of Medicaid enrollees in 2010 were disabled or seniors, they accounted for approximately 64 percent of Medicaid spending. Therefore, they would be the group hurt most by the blended rate because they receive most of the Medicaid money that is currently being spent.
For more information on Medicaid, please download our free Massachusetts Elder Guide on Medicaid and Nursing Home Planning. To learn firsthand about how to protect your home and other assets from nursing home and increasing medical costs, register online for one of our Trust, Estate & Asset Protection workshops.