Substantial Revisions Proposed to Medicare and Medicaid in FY 2012 House Budget — Debate Focuses on Fiscal Structures
The Federal budget is divided into two principle sections: discretionary and mandatory spending. Discretionary spending describes a federal program’s scope of responsibility as defined by its budget. The Medicare and Medicare programs fall under the mandatory component of the budget. Congress determines the scope of the Medicare and Medicaid programs by defining eligiblity for the programs. Funding allocated to the programs' budgets are based on the number of eligible people. The budget released by U.S. House of Representatives Budget Committee Chairman Paul Ryan (R-WI) dramatically changes the rules for which Medicare and Medicaid would operate by changing the scope and rules of the program.
Under the Ryan plan, the federal government would make contributions to private health insurance coverage premiums for Americas who are currently under 55 years old. Under the traditional Medicare program, the federal government directly reimburses physicians and providers. Under this proposal, physicians and providers will receive compensation for services rendered from private insurance companies. The non-partisan Congressional Budget Office (CBO) concluded that both administrative costs for insurers (including profits) and payment rates to providers are higher for private plans than for Medicare, leading to doubled out-of-pocket costs for beneficiaries.
Medicaid is also a mandatory-spending program, in which health care services are available to low-income individuals and families who meet eligibility criteria. While federal law may define who is eligible for Medicaid, it is a state-administered program and each state establishes rules for eligibility and services. The health care reform law expands the Medicaid program to provide health insurance coverage to more Americans.
Under the Ryan plan, Medicaid would change from a mandatory-spending program to a discretionary-spending program. The Federal government would not guarantee matching funds based on the number of enrollees in a state. Rather, the Federal government would provide a block grant of funding; each state's budget would not be defined by the number of enrollees. According to the CBO, the block grants would be indexed for inflation, and would not keep up with the overall growth in national health care spending. The limited Medicaid funds would reduce compensation to physicians who care for Medicaid beneficiaries.
Representative Ryan's budget resolution is set to come to the House floor the week of April 12-15, 2011, when the debate will focus on the restructuring of Medicare and Medicaid. The Society will continue to monitor this proposal.
