Straight Talk for Seniors®: Medicaid
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If you’re not sure what Medicaid is or who it covers, you’re not alone. Many Americans think the program provides health care just for poor working-age adults or children.
In fact, Medicaid also helps millions of older Americans stay healthy and economically secure every day.
More than 1 in 7 low-income seniors with Medicare (or 6.9 million people aged 65+) rely on Medicaid for their health and long-term care. For these seniors, Medicaid:
- Pays for long-term services and supports at home, in the community, and in nursing homes
- Helps pay their Medicare premiums, deductibles, and co-pays
- Often pays for health services not covered by Medicare, such as vision, hearing, and dental care
Without Medicaid, these low-income seniors would be unable to afford their health and long-term care costs, even with Medicare.
How Medicaid works today
Medicaid is jointly funded by the federal government and the states. The federal government pays states for a specific percentage of program costs.
The federal match varies by state based on factors like each state’s per capita income. But at the end of the day, all states are guaranteed to receive federal matching funds that cover a percentage of their actual Medicaid costs. This keeps Medicaid affordable for states.
States structure and run their own Medicaid programs according to federal guidelines. All states must cover a certain set of mandatory benefits, but they can choose to add optional benefits, as well. While nursing home services are mandatory, home and community-based services are optional, and states currently have a lot of flexibility in how they offer those.
How a current proposal would change Medicaid
Congress is considering changing the way Medicaid is structured as part of the Affordable Care Act (ACA) replacement proposal, even though these financing changes are unrelated to the ACA.
On Feb. 16, House Republican leaders released an ACA repeal and replacement plan that would limit how much the federal government gives states for Medicaid by setting a fixed amount per person. The plan is most likely to set “per capita caps” that would be based on a preset formula and would no longer cover a percentage of states’ actual Medicaid expenses.
What are the pros and cons of this approach?
On the one side, the caps would reduce government spending, give states more flexibility, and make federal funding for Medicaid more predictable. Since funding would be capped per person, if costs rise more than expected, the federal government would not have to pay more.
But advocates for low-income seniors see many downsides to this approach. These include:
- Less funding overall for Medicaid: Since federal contributions would no longer be based on a percentage of actual costs, caps would shift the risk of rising health costs onto states, which are already hard-pressed to cover their residents. Last year, the House budget proposal capped federal spending and cut Medicaid by $913 billion over 10 years. To make up for this funding loss, it’s likely that states would have to make unprecedented cuts in eligibility, services, and already low payments to health care providers.
- Even fewer dollars as the population ages: A key concern is how fixed caps would be set and grow to cover the different health needs of different populations over time. Previous per capita cap proposals did not adjust for a rapidly aging population. An increasing number of seniors reaching their 80s and 90s are much more likely to need expensive nursing home care. Over time, this longevity boom could be devastating to state budgets because federal contributions will no longer keep pace with greater needs.
- Reduced consumer protections and innovation: Proponents of caps say they would give states greater flexibility. But advocates fear they could undermine current federal consumer protection provisions. For example, although details are not yet available, states may be allowed to impose unaffordable cost sharing on low-income beneficiaries, reduce nursing home quality standards, or require children of nursing home residents to help pay for care. Federal caps also could make it more difficult for states to make up-front investments to achieve long-term savings, such as developing innovative delivery system reforms or strengthening public health and prevention.
- Uneven funding for states: Because health care costs vary across the country, individual states would get very different federal contributions under a per capita cap. Some states could lose out, such as those that are locked into a low per capita rate at the start. For example, current federal per capita spending for aged and disabled beneficiaries is $40,757 in the District of Columbia, $23,100 in New York, $4,520 in Nevada, and $4,696 in New Hampshire. Each state also experiences different rates of spending growth, which a fixed cap likely would not address. For example, average per capita spending for aged beneficiaries from 2000-2011 grew by +13.3% in Tennessee, +10.8% in Mississippi, -1.4% in Washington, and -0.7% in Illinois.
What questions do you have about Medicaid? Please ask them in the comments section below.