The Republican Budget Hits Poor, Elderly, and Children Hardest

April 14, 2011 4:37 pm ET

Last week Rep. Paul Ryan (R-WI) released the GOP's first 2012 budget plan, entitled "The Path to Prosperity," which proposes to cut over $4 trillion from the deficit by slashing discretionary spending and reforming entitlements. To do so, the plan would block grant Medicaid and SNAP (food stamps), turn Medicare into a voucher system, and eliminate the Affordable Care Act, leaving millions uninsured. The proposal would also disrupt American's ability to get housing assistance. The only budget document the new GOP House majority has produced thus far puts the onus of paying down the debt on those most in need: America's poor, children, and the elderly.

"Path" To "Secure The Medicaid Benefit" Would Kick Poor Families Off Support

"The Path To Prosperity" Creates A Block Grant Program For Medicaid. From "The Path to Prosperity":

Secure the Medicaid benefit by converting the federal share of Medicaid spending into a block grant tailored to meet each state's needs, indexed for inflation and population growth. This reform ends the misguided one-size-fits-all approach that has tied the hands of so many state governments. States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations. [The Path To Prosperity, 4/5/11]

"The Path To Prosperity" Repeals The Affordable Care Act. From "The Path to Prosperity":

The country needs to move away from this centralized system, not towards it. This budget starts by repealing the costly new government-run health care law, saving roughly $725 billion over ten years by repealing the new exchange subsidies and making sure that not a penny goes toward implementing the new law [PPACA]. [The Path To Prosperity, 4/5/11]

Repealing Affordable Care Act And Implementing Block Grants "Would Push Tens Of Millions Of Americans Into The Ranks For The Uninsured." According to the Center on Budget and Policy Priorities:

In health care, the Ryan plan's changes would push tens of millions of Americans into the ranks for the uninsured and underinsured - and create more of a two-tier health care system in which health care is increasingly rationed by income. The plan repeals the provisions of health reform that CBO expects will extend coverage to 34 million Americans who otherwise would be uninsured. It then cuts another $771 billion out of Medicaid over the coming decade for a total of $1.4 trillion in Medicaid cuts.

Ryan claims that converting Medicaid to a block grant will enable states to do more with fewer resources, but the claim does not withstand scrutiny. Medicaid costs significantly less per beneficiary than private-sector care, and its costs per beneficiary have been rising more slowly than private-sector health costs. Most states already make heavy use of managed care in their Medicaid programs and already enjoy considerable flexibility under federal law. The notion that policymakers can cut $771 billion from the program without sharply reducing both the number of low-income Americans who are insured and the coverage that Medicaid beneficiaries receive is at odds with reality. Low-income children, seniors, and people with disabilities would be hit the hardest, since they constitute the bulk of the program's beneficiaries. [, 4/6/11, emphasis added]

Leading Children's Advocacy Group: Medicaid And CHIP Cuts "Jeopardiz[e] Health Coverage For Up To One-Third Of Our Nation's Children." According to the children's advocacy group First Focus:

The Ryan budget imposes draconian cuts to both Medicaid and the Children's Health Insurance Program (CHIP), jeopardizing health coverage for up to one-third of our nation's children who rely on either Medicaid or CHIP for their health care. Specifically, Chairman Ryan proposes to slash $771 billion out of current Medicaid and another $627 billion out of Medicaid as part of health care reform for a total of $1.4 trillion in federal Medicaid cuts. [...]

As a result, Medicaid and CHIP would see a total combined loss in federal and state funding of more than $2 trillion over the course of the next ten years - an amount that clearly jeopardizes the health and well-being of the more than 30 million children in this country who rely on Medicaid or CHIP for their health coverage. [, 4/7/11, emphasis added]

Federation Of American Hospitals: By Rescinding Coverage Expansions And Maintaining Cuts, GOP Plan "Threatens The Care That Communities Depend On." According to The Hill:

The coverage expansions are rescinded, but the cuts remain," American Hospital Association President and CEO Rich Umbendstock told The Hill. "The two were coupled in healthcare reform... It's unacceptable if just the cuts stand.

The combined effect of dropping the new coverage and maintaining the cuts threatens the care that communities depend on," [Federation of American Hospitals] President and CEO Chip Kahn said in a statement, "and will place harsh limits on the very health care providers who are frequently the most significant job creators in their local communities. [The Hill, 4/5/11]

CBO: Block Grants Could Limit Medicaid Programs To The Point That "Providers Might Be Less Willing To Treat Medicaid Enrollees." In its analysis of "The Path To Prosperity," the Congressional Budget Office wrote: "If states reduced spending for their Medicaid programs, there would be a number of potential implications for both providers and beneficiaries. Given that payment rates for providers under Medicaid are already generally lower than they are under Medicare and private insurance, if states lowered payment rates even further, providers might be less willing to treat Medicaid enrollees. As a result, Medicaid enrollees could face more limited access to care." [CBO, 4/5/11]

  • If States Have To Reduce Medicaid Benefits Or Eligiblity, Low-Income Patients Will Have To Pay More Out-Of-Pocket And Providers Could Lose Money. In its analysis of "The Path To Prosperity," the Congressional Budget Office wrote: "If states reduced benefits or eligibility levels, beneficiaries could face higher out-of-pocket costs, and providers could face more uncompensated care as beneficiaries lost coverage for certain benefits or lost coverage altogether." [CBO, 4/5/11]

Cutting Federal Medicaid Funding Forces States To Come Up With The Money Elsewhere — Or Cut Medicaid Spending, Reduce Eligibility, Or Cut Benefits. In its analysis of "The Path To Prosperity," the Congressional Budget Office wrote: "If the costs of medical services for Medicaid enrollees continued to rise faster than the growth in the block grant amounts, states would have to decide how to respond. Under the proposal, states would have additional flexibility to design and manage their programs to achieve greater efficiencies in the delivery of care. Because of the magnitude of the reduction in federal Medicaid spending under the proposal, however, states would face significant challenges in achieving sufficient cost savings through efficiencies to mitigate the loss of federal funding. To maintain current service levels in the Medicaid program, states would probably need to consider additional changes, such as reducing their spending on other programs or raising additional revenues. Alternatively, states could reduce the size of their Medicaid programs by cutting payment rates for doctors, hospitals, or nursing homes; reducing the scope of benefits covered; or limiting eligibility. To some extent, under CBO's long-run projections, the rise in health care costs under current law would cause states to implement such changes anyway. However, given the size of the reduction in federal spending under the proposal, the magnitude of the changes would probably have to be greater." [CBO, 4/5/11, emphasis added]

Proposal's Block Grants For Medicaid "Would Lead To Greater Uncertainty For States As To Whether The Federal Contribution Would Be Sufficient During Periods Of Economic Weakness." In its analysis of "The Path To Prosperity," the Congressional Budget Office wrote: "Under the proposal, the annual block grant amounts would grow on the basis of general population and price growth-factors that would not be expected to vary much with economic conditions (other than inflation). Medicaid spending would not automatically increase during economic downturns, as it does now under current law. By design, the approach would make funding for Medicaid more predictable from a federal perspective, but it would lead to greater uncertainty for states as to whether the federal contribution would be sufficient during periods of economic weakness." [CBO, 4/5/11]

Previous Attempts To Institute Medicaid Block Grants Prove They Would Have Devastating Effects

1995 Plan Would Have "Been Reduced On A Prorated Basis To Ensure That That The Total Of All States' Allotments Would Meet An Annual Aggregated Cap On Federal Medicaid Spending..." According to a 2005 study of previous Medicaid block grant proposals by George Washington University Professor Jeanne M. Lambrew, who now heads the Office of Health Reform at the Department of Health and Human Services: "In 2003, President Bush proposed converting Medicaid from an entitlement to a block grant program. Similar ideas from President Reagan in 1981 and Congress in 1995 were introduced by not enacted. [...The 1995 plan] would have based the federal funding caps on a complicated formula intended to measure each state's need. Specifically, each state's annual cap would have begun with its historical spending and would have, through growth rate adjustments, determined the amount based on the national spending for poor  residents, adjusted for the state's input costs (e.g., local wages), case mix (e.g., the level of sickness of enrollees), and number of poor people. Despite efforts to link the caps to the concept of need, the actual amount of each state's allotment would have been reduced on a prorated basis to ensure that the total of all states' allotments would meet an annual aggregate cap on federal Medicaid spending, which was specified in the law. The policy would also have changed the states' contribution to Medicaid, thereby lowering it for many. This policy, with modifications, was passed in both the Republican-dominated House and the Senate as part of a larger effort to balance the budget." ["Making Medicaid a Block Grant Program," 1/26/05 via]

If Implemented, 1995 Block Grant Proposal Could Have Caused Over 6 Million People To Lose Medicaid Coverage. According to a 2005 study of previous Medicaid block grant proposals by George Washington University Professor Jeanne M. Lambrew, who now heads the Office of Health Reform at the Department of Health and Human Services: "Even though it would have lowered federal spending less than expected, the 1995 block grant would have had a significant programmatic impact on Medicaid. After subtracting the estimated $7.5 billion in UPL spending (conservatively assuming that these payments did not fund services in 2002), federal Medicaid funding in 2002 would have been $15.8 billion less than it was under current law. To put this into perspective, the one-year reduction in federal funding under the block grant would have exceeded federal Medicaid spending on prescription drugs or home- and community-based services and would have equaled half of all Medicaid spending on nursing homes. If this loss of federal funding had been absorbed through eligibility restrictions, then more than 6 million people would have lost Medicaid coverage in 2002, using actual spending and enrollment data and assuming proportionate cuts across beneficiary groups. The states could have responded to these reductions in federal funding by increasing their own spending in order to maintain services for their Medicaid enrollees. However, the amount required to do so would have been equivalent to a 40 percent increase in the $40 billion shortfall that was estimated for 2002, prior to the states' actions to close this gap. It is important to note that this analysis does not take into account the amount of the states' share of spending that would have been reduced under this proposal. Had this been included, the reductions just described would have been larger in some states. ["Making Medicaid a Block Grant Program," 1/26/05, internal citations removed for clarity, via]

Previous Proposals Indicate Federal Budget Certainty Fostered By Block Grants Comes At The Price Of Covering Low-Income People. According to a 2005 study of previous Medicaid block grant proposals by George Washington University Professor Jeanne M. Lambrew, who now heads the Office of Health Reform at the Department of Health and Human Services: "Moreover, as this article shows, it is unlikely that the current level of Medicaid enrollment could be sustained under most block grant policies. Since individuals losing Medicaid probably have few affordable alternatives, block grants could result in raising the number of the uninsured, making Medicaid part of the problem rather than part of the solution to the coverage gaps in the United States. As such, the future debates over Medicaid block grants should focus on whether federal budget certainty is more important than covering low-income and vulnerable populations, since this is ultimately what is at stake." ["Making Medicaid a Block Grant Program," 1/26/05, emphasis added, via]

Changes To The SNAP Food Aid Program Would Hurt The Poor And Weaken The Economy

"The Path To Prosperity" Puts Two Social Safety Net Programs Into A Block Grant. From "The Path to Prosperity":

Convert the Supplemental Nutrition Assistance Program (SNAP) into a block grant tailored for each state's low-income population, indexed for inflation and eligibility beginning in 2015 - after employment has recovered. Make aid contingent on work or job training. [The Path To Prosperity, 4/5/11]

Debt Commission Chairmen: Ryan's Budget Cuts To "Safety Net Programs" Would "Disproportionately" Affect "Disadvantaged Populations." In a statement calling "The Path To Prosperity" "a positive step," the leaders of the president's National Commission on Fiscal Responsibility and Reform — former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles — wrote: "The plan largely exempts defense spending from reductions and would not apply any of the savings from eliminating or reducing tax expenditures as part of tax reform to deficit reduction. As a result, the Chairman's plan relies on much larger reductions in domestic discretionary spending than does the Commission proposal, while also calling for savings in some safety net programs - cuts which would place a disproportionately adverse effect on certain disadvantaged populations." [Simpson-Bowles Statement, 4/5/11 via The Hill]

CBPP: Ryan Budget's Food Stamps Block Grant Proposal Would "Eliminate" Program's "Ability To Respond To Rising Need ... During Recessions." According to the Center on Budget and Policy Priorities: "Chairman Ryan's proposal to convert SNAP [Supplemental Nutrition Assistance Program, formerly called food stamps] into a block grant beginning in 2015 would seriously damage the program and cause harm to the millions of low-income Americans who rely on it. Although the chairman's proposal does not include details on how deeply the block grant would cut the program, a capped funding structure of the kind he proposes would largely eliminate SNAP's ability to respond to rising need, such as during recessions. In such times, states would be forced to cut benefits to some households or create waiting lists for needy families." [, 4/5/11]

  • Block Grants Would Allow States To Deplete Food Aid Funds When Faced With Budget Shortfalls. According to the Center on Budget and Policy Priorities: "States would likely be able to shift funds away from food assistance to other purposes, which they would be tempted to do when they face large budget shortfalls (as they do today)." [, 4/5/11]

CBPP: Converting SNAP And Medicaid To Block Grants "Would Not Only Increase Hardship And Destitution In Recessions, But Also Would Further Weaken A Slumping Economy And Lead To The Loss Of Many More Jobs." According to the Center on Budget and Policy Priorities:

The plan justifies its large food stamp cuts by claiming that the trend in food stamp costs "is one of relentless and unsustainable growth." The claim is false. Food stamp costs have risen sharply in the past few years due mainly to the recession and a temporary food stamp benefit increase of the 2009 Recovery Act. As the economy recovers, food stamp costs will drop and, by the end of the decade, will return to about 2005 levels as a share of Gross Domestic Product (GDP), according to the Congressional Budget Office (CBO)

Finally, the impact of the Ryan plan would be harshest during recessions. Currently, Medicaid as well as SNAP (formerly known as food stamps) respond automatically to assist more people when, during recessions, more people lose their jobs, income, and health insurance. This automatic response both lessens hardship and keeps the economy from plunging deeper into recession, by adding more purchasing power to the economy that replaces part of the loss of demand from consumers and businesses. The Ryan plan would convert both Medicaid and SNAP to block grants, however, which means they would no longer respond automatically to increased need during recessions. That would not only increase hardship and destitution in recessions, but also would further weaken a slumping economy and lead to the loss of many more jobs.

[, 4/6/11]

Pres. George W. Bush's Plan To Block Grant Food Stamps Would Have Most Harmed Low-Income Families With Children. According to the Urban Institute:

The proposed block grants would have particularly significant effects on low-income families with children. Seven of the 10 proposals would affect existing social welfare programs that serve the nation's most dependent populations. Replacing Medicaid and Food Stamps with block grants would eliminate two important means-tested entitlement programs.

Experience with block grants offers lessons involving program design and implementation. Researchers have found that over time, the real value of block grant funding gradually declines, and state flexibility erodes as Congress responds to patterns of state implementation. Given these patterns, the risks for future erosion in funding and flexibility are particularly high for the Justice Assistance block grant, which has initial funding below current funding, and for the Food Assistance block grant, which, as proposed, already bars assistance to certain legal immigrants.

[, 4/21/04]

Block Grant Proposals In The 90s Show That Over Time Congress Tends To Reduce Funding Or Flexibility For Block Grants. According to the Brookings Institution: "What have we learned from these block grants? States and localities appreciate the opportunity to appropriate federal dollars in ways that meet local needs. But whatever else happens, turning federally managed funding into a block grant seems to lead to fewer dollars and services. Over time, Congress loses interest in funding that some other level of government controls. Or members retain interest by adding new strings and requirements to block grants, effectively limiting the flexibility that was the sweetener in the first place. Often Congress cuts funding and reduces local control at the same time." [, 7/28/03]

Ryan Budget Makes Food And Housing Aid Contingent On Enrollment In Job Training Programs Republicans Want To Cut

"The Path To Prosperity" Makes SNAP Program And Housing Assistance Contingent On Job Training. From "The Path to Prosperity":

Convert the Supplemental Nutrition Assistance Program (SNAP) into a block grant tailored for each state's low-income population, indexed for inflation and eligibility beginning in 2015 -after employment has recovered. Make aid contingent on work or job training. ... Encourage recipients of federal housing aid to lead lives of increased self-sufficiency by decreasing disparities between assisted and unassisted renters and by making aid contingent on work or job training. [The Path To Prosperity, 4/5/11]

In H.R. 1 Republicans Voted To Cut $3.8 Billion From Job Training Programs. According to a letter from 45 social justice, educational, and employment organizations: "We are writing to oppose in the strongest possible terms, the draconian cuts to employment and training funding that were included in H.R. 1, the House-passed FY 2011 Continuing Resolution (CR). The CR includes more than $3.8 billion in cuts to Department of Labor administered employment and job training programs, including the complete elimination of all funding for the Adult, Dislocated Worker, and Youth programs under the Workforce Investment Act (WIA) in Program Year (PY) 2011. Other programs targeted for deep cuts or outright elimination include the Perkins Career and Technical Education program, YouthBuild, Job Corps, green jobs training, reintegration of ex-offenders, and the Community Service Employment for Older Americans (CSEOA) program." [, 2/25/11, emphasis original]

The Republican Budget Will Turn Medicare Into An Expensive And Inadequate Voucher Program, Increasing Burden On Elderly

"The Path To Prosperity" Turns Medicare Into A Voucher System. From "The Path to Prosperity":

Save Medicare for current and future generations while making no changes for those in and near retirement. For younger workers, when they reach eligibility, Medicare will provide a Medicare payment and a list of guaranteed coverage options from which recipients can choose a plan that best suits their needs. These future Medicare beneficiaries will be able to choose a plan the same way members of Congress do. Medicare will provide additional assistance for lower-income beneficiaries and those with greater health risks. [The Path To Prosperity, 4/5/11]

CBO: Under The Ryan Budget, "Most Elderly People Would Pay More For Their Health Care Than They Would Pay Under The Current Medicare System." According to the Congressional Budget Office: "Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system. For a typical 65-year-old with average health spending enrolled in a plan with benefits similar to those currently provided by Medicare, CBO estimated the beneficiary's spending on premiums and out-of-pocket expenditures as a share of a benchmark: what total health care spending would be if a private insurer covered the beneficiary. By 2030, the beneficiary's spending would be 68 percent of that benchmark under the proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario." [, 4/5/11]

CEPR: The Republican Budget Would Leave "Seniors With A Bill Of $20,700." According Dean Baker, the co-director of the Center for Economic and Policy Research:

According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit (Figure 1). This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)

According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65.

[, 4/6/11]

In 2022, A Typical 65-Year-Old Would Be Paying Approximately Double Compared To Current Levels. The Center on Budget and Policy Priorities prepared a graphic comparing health care spending for a typical 65-year-old under the current system to the same spending under the Republican budget:

[, 4/7/11]

Ryan Budget Would Raise The Retirement Age To 67, Possibly Pricing Some Seniors Out Of The Market Or Raising Health Care Prices For All Americans. According Time magazine's Swampland blog:

Even more vexing, however, is how 65- and 66-year-olds would get coverage. Although Ryan doesn't say so in the Path to Prosperity document, which was released on Tuesday, his plan would raise the Medicare eligibility age from 65 to 67 by 2033. This would save the federal government money, but if these people shop for coverage on the open market, one of two things will happen: insurers will either price them out, or drive up prices for everyone. Again, this depends on what Ryan would propose to do with the health care law's new insurance regulations.

[Time¸ 4/6/11]

If Medical Costs Continued To Increase Faster Than Voucher Values, "The Average Retiree Would Be More Than $50,000 In The Hole." According to an op-ed in the Huffington Post  by R.J. Eskow, Senior Fellow with The Campaign For America's Future:

Even if the voucher is given full Medicare value in Year One (which we question), things start to get really bad after that. If medical costs continued to increase at 9% each year, which isn't at all impossible, and the voucher's value continued to increase at 5%, here's what would happen 10 years later using my figures:

By 2031, the cost of Medicare-equivalent coverage would be $73,000, and the voucher would be worth $18,000. By my calculation, the average retiree would be more than $50,000 in the hole. [Eskow Op-Ed, 4/6/11 via Huffington Post, emphasis original]

Ryan's Budget "Would Effectively Result In More Rationing On The Basis Of Income." According to the Center on Budget and Policy Priorities:

Many future Medicare beneficiaries with modest incomes, such as elderly widows who must live on $15,000 or $20,000 a year, also would likely be hit by the plan's Medicare provisions; the Medicare voucher (or defined contribution) they would receive would fall farther and farther behind health care costs - and purchase less and less coverage - with each passing year. Aggravating this problem, Ryan has said that his plan calls for repeal of a key measure of the health reform law that is designed to moderate Medicare costs - the Independent Payment Advisory Board. In other words, his plan would scrap mechanisms to slow growth in the costs of health care services that Medicare beneficiaries need, even as it cuts back the portion of those costs that Medicare would cover.

Affluent Medicare beneficiaries surely would respond to shrinking Medicare coverage over time by buying more supplemental coverage. Those who could not afford to do so, however, would get less health care. This is another way that the Ryan health care changes would make ours more of a two-tier health care system and would effectively result in more rationing on the basis of income.

[, 4/6/11]

Politico: GOP Budget "Will Control Costs By Requiring Seniors To Ration Themselves." From Politico Pulse: "The Ryan plan to privatize Medicare will control costs by requiring seniors to ration themselves, said Michael Tanner with the Cato Institute. 'Rationing is going to go on within the Medicare system. It's a fact of life' given financial constraints, he said. 'The question's going to be, is that decision going to be made by government and imposed top down under the current system? Ryan wants to shift that responsibility to individuals and from the bottom up.'" [Politico, 4/7/11]

Centrist Think-Tank: Despite Ryan's Claim, "Current Beneficiaries Are Not Protected In The Ryan Budget." According to a report from Third Way by David B. Kendall, Senior Fellow for Health and Fiscal Policy and Ryan McConaghy, Director of the Economic Program:

Despite promises to the contrary, current beneficiaries are not protected in the Ryan budget. Under the Republican proposal, traditional Medicare would quickly become second-class medicine. It would "wither on the vine," as then-House Speaker Newt Gingrich described a similar GOP effort in 1995.

The traditional Medicare plan, which covers three-fourths of today's beneficiaries, relies on its huge size to keep costs down. Doctors and hospitals are not required to participate in it, but they have little choice if they wish to treat any seniors, who are the nation's biggest health care consumers.

Fewer doctors would participate in the traditional Medicare plan if there were an alternative. The traditional plan pays physicians about 20% less than private health insurance plans. Today, that is essentially a discount for the large volume of Medicare patients. Under the Ryan budget, it would become a reason for doctors to leave the traditional plan.

By 2030, only 55% of Medicare beneficiaries would still be eligible for traditional Medicare according CBO. Actual enrollment would be less than half of Medicare beneficiaries because many seniors would continue to enroll in private health care coverage under Medicare Advantage. By 2040, traditional Medicare would have only about 20% of Medicare beneficiaries.

[, 4/14/11, internal citations removed for clarity]