Common wisdom is that Medicaid will suffer the deepest cuts of the major entitlement programs in the debt-ceiling negotiations, and its funding will remain in jeopardy as the fight over reducing federal and state deficits continues. Lawmakers and everyone who cares about high-quality affordable health care for all Americans should look behind the proposed spending cuts and consider whether the cost of these cuts exceeds the savings they deliver.
The cost of Medicaid cuts falls into three categories: the impact on the deficit; on Medicaid beneficiaries; and on the economy and the common good.
The impact on the deficit will be small. Reducing Medicaid payments eliminates services, but not by lowering the cost of delivering health care, even though everyone agrees that is necessary to reduce the federal deficit over time. Cutting services without cutting the cost of delivering them doesn't make our health care system any more rational or efficient - it just means patients go without care.
Studies show that Medicaid is one of our most cost-effective public programs and delivers care at a lower cost than care paid by private insurers. Five percent of Medicaid enrollees create more than half of its costs. These people have serious chronic health conditions and disabilities, typically have no other source of care and are the most expensive population to treat. Costs could be lowered in this area not through arbitrary cuts but by a more thoughtful plan to increase efficiency through coordination of care.
Further pressure on Medicaid spending has come from the millions who have enrolled during the economic downturn, which has cost so many people both their jobs and their health care. Medicaid enrollment in states increases as more and more look to the program in tough times. The best ways to reduce Medicaid costs are to expand the economy and tax revenues, increase job creation and speed up reforms requiring states to implement care coordination programs that will help providers care for the chronically ill more effectively and efficiently.
The impact of cuts on Medicaid's beneficiaries will be significant. Medicaid currently provides critical health care and long-term services to more than 1 million North Carolinians, and 90 percent of our Medicaid spending goes to children, people with disabilities and senior citizens. For these recipients, Medicaid makes nursing home care, hospital treatment, doctor visits and disability services possible.
Seniors and their families will be most deeply affected. Medicaid acts as the primary payer for 64 percent of nursing home residents. Big cuts will drain the savings of middle-class families who help their elderly parents shoulder nursing home costs. In this economy, many of these families struggle to get by and to save for college tuition and retirement. The average annual cost of nursing home care in the U.S. is $74,800, while the median household income is only about $52,000.
The impact on the economy and the well-being of communities will also be widely felt. Republican proposals to turn Medicaid into a block grant program and the Obama administration's proposal to create a "blended rate" reimbursement system to the states will both substantially reduce Medicaid reimbursement from the federal government to the states, shift costs to families who simply cannot afford to pay more and reduce the already-low rates paid to providers.
Much of our state's economic activity and job creation come from health care providers. Medicaid spending stimulates business activity in local communities. Families USA recently reported that a one-third cut in Medicaid would eliminate $6 billion in business activity and 60,000 jobs from our state, harming hospitals, doctors, nursing homes and other providers. Given our tenuous state economy and high unemployment, this is not the time to be reducing economic activity and jobs.
Medicaid is a lifeline that not only helps more than 1 million deserving North Carolinians now, but also will help millions more of us when we need it. Those of us who vote, and policy makers who insist that we cannot raise tax revenues on millionaires, on billionaires and on corporations that are paying little or nothing in income taxes now, need to re-examine our national priorities. Should our decisions be based solely on what most benefits the super-rich and wealthy corporations?
Our answer reflects our moral values as individuals and as a nation. Let's make sure we answer right.
Pat McCoy is executive director of Action N.C., and Lynice Williams is executive director of North Carolina Fair Share.
