Medicaid appears off-limits to talk of budget cuts


WASHINGTON — Healthcare for the nation’s poor, once viewed as especially vulnerable in this era of budget cutting, has emerged as a surprisingly secure government entitlement with as much political clout as the Medicare and Social Security retirement programs.

Even as President Obama and congressional Republicans gear up for a new budget battle, Medicaid and the Children’s Health Insurance Program, which together provide coverage to more than 1 in 5 Americans and almost 1 in 3 Californians over the course of a year, appear off-limits despite their huge price tag.

The president protected Medicaid in 2011 when Congress and the White House slashed $1.2 trillion in federal spending, including on Medicare — the healthcare plan for seniors and disabled people — as part of a deal to raise the nation’s debt limit.


Medicaid was spared again last month in the budget compromise that raised tax rates on high-income households — a deal that included even more Medicare cuts.

Now, with Obama banking on a dramatic Medicaid expansion next year under his landmark healthcare law, the White House is drawing another bright line around the program. The president explicitly defended Medicaid in his inaugural address, and top aides have amplified his words since.

“Medicaid cuts, from this president, from this administration, are not on the table,” Gene Sperling, the head of the National Economic Council at the White House, declared in a speech Thursday to a healthcare conference, explicitly ruling out even cuts that the administration previously had considered.

“We’ve made a tough choice” to wall off Medicaid from cuts, he said, making the budgetary trade-off explicit: “It means we will have to look harder for Medicare savings.”

A major reason for the White House position is the key role that Medicaid plays in Obama’s health reform effort. The president’s law is slated to provide nearly $1 trillion in new federal aid to states over the next decade to help them open Medicaid to all low-income Americans for the first time starting in 2014. That is central to the law’s program for expanding insurance coverage to an estimated 30 million people by 2022.

Preserving Medicaid funding became even more crucial to the Obama administration after the Supreme Court ruled last summer that states were not required to expand their Medicaid coverage. Administration officials are working hard to convince states to expand and do not want any federal funding cuts that could discourage governors from implementing the law.


“There is a big irony,” said Ron Pollack, executive director of Washington-based Families USA, a leading Medicaid advocate. “The fact that the Supreme Court undermined the Medicaid expansion is now resulting in greater support and a deeper commitment to making sure the program is not cut back.”

Paying for Medicaid remains a major challenge for states. The program has been jointly funded by states and the federal government since it was created. And many states, including California, Illinois and New York, have had to make painful cutbacks in recent years to balance their budgets by reducing physician fees and paring benefits, such as dental care.

At the same time, Republicans are working to slash Medicaid spending to balance the federal budget. They advocate turning the program into a block grant to states, which they say would be more efficient and also put a limit on future federal spending.

Cutting Medicaid was a centerpiece of budget plans pushed by Rep. Paul D. Ryan (R-Wis.), the House Budget Committee chairman. Ryan’s running mate on the GOP presidential ticket, Mitt Romney, advocated similar cuts.

House Republicans are gearing up for another run at trimming Medicaid as they prepare a budget blueprint that they say would balance the budget in 10 years without raising taxes, a goal that would likely require trillions of dollars in new cuts.

“The need for reform is that much more urgent,” said Rep. Todd Rokita (R-Ind.), who sponsored legislation last year backed by 48 GOP lawmakers to cap federal Medicaid spending, which would have effectively cut approximately $2 trillion over the next decade. “It is a matter of saving these things for future generations.”


But congressional Republicans, who tried unsuccessfully in the 1990s to scale back Medicaid, will likely have an even harder time now.

Enrollment in Medicaid and the Children’s Health Insurance Program, which was created in 1997 to expand government-subsidized coverage for children, has surged by more than 70% since 2000 as states expanded their safety nets after businesses laid off workers or eliminated health benefits.

That has meant Medicaid, a program established in 1965 to help Americans on welfare, is increasingly essential to millions of working families who cannot afford health insurance and to elderly and disabled Americans in need of long-term care. Medicaid is the single largest payer for nursing homes in the country.

“This is now a middle-class entitlement that touches far more Americans than many people realize,” said Colleen M. Grogan, a Medicaid authority at the University of Chicago. Half of all Americans in 2011 either received Medicaid or had a friend or family member who received it, according to a national survey by the nonprofit Kaiser Family Foundation.

Romney and other conservatives criticized this as a debilitating dependency during the 2012 presidential campaign. But many state leaders — Republican and Democratic — have come to rely on Medicaid, despite its flaws, to protect their most vulnerable residents.

Medicaid also draws important support from influential hospital and physician groups, which have rallied behind the program even as many criticize it for paying too little. Without Medicaid, many medical providers would have to care for even more patients unable to pay their bills.


Just last month, a coalition of medical societies, including several from conservative states, helped defeat an attempt by congressional Republicans to cut federal aid intended to increase Medicaid fees paid to primary care physicians.

Similar lobbying in state capitals has also convinced several Republican governors to drop opposition to expanding Medicaid under the healthcare law. Most recently, Arizona Gov. Jan Brewer announced last month that she would take the assistance, after an intense lobbying effort by hospitals and businesses, which argued that without the additional aid healthcare providers would be swamped by uninsured patients.

Medicaid’s political clout will only increase in the coming years as close to 20 million more Americans come to depend on the program under the Affordable Care Act, Grogan predicted. In some states, as much as a quarter of the population could soon be on Medicaid.

Federal spending on the program, which topped $262 billion last year, is expected to surpass $581 billion by 2021, according to estimates by independent actuaries at the federal Centers for Medicare and Medicaid Services.

Obama’s healthcare law is creating other challenges for many states, which are scrambling to get ready for the historic Medicaid expansion while also trying to ensure their programs pay for healthcare more efficiently.

“We’re a long way from seeing many of these issues resolved,” said Diana Dooley, California’s health and human services secretary, who oversees one of the most cash-strapped Medicaid programs in the country. “But I’m encouraged that there seems to be a recognition of the importance of the Medicaid program. The conversations are going in the right direction.”