How Medicaid Funding Caps Would Hurt Older Adults

Medicaid is a lifeline for older adults and our communities. As a state-federal partnership, Medicaid ensures federal monetary help to each state to supply important well being and long-term care to older adults and different individuals with restricted earnings and financial savings. Because the variety of older adults who want long-term care grows and state Medicaid prices enhance, the federal authorities helps meet these rising prices by matching a share of every greenback the state spends.

Congress is contemplating proposals to limit or cap federal Medicaid funding to states. As an alternative of guaranteeing federal monetary help for vital medical help for older adults and different individuals with restricted earnings and financial savings, these proposals would set limits on the federal share of prices, shifting prices and monetary dangers to states. Because of this, states can be pressured to chop providers and enrollment. This challenge temporary discusses how Medicaid funding caps, together with block grants and per capita caps, would hurt the tens of millions of older adults who depend on this system.

Medicaid Offers Important Lengthy-Time period Care and Medicare Value-Sharing Help for Older Adults

The Medicaid program gives medically vital well being and long-term care that low-income older adults in any other case can’t afford. Over seven million People age 65 and older and almost eleven million from ages 50 to 64 depend on Medicaid yearly.^[1] Medicaid protection is especially vital for older adults who want providers not coated—or not adequately coated—by Medicare. Particularly, Medicaid is significant for older adults who want help with every day actions reminiscent of consuming, bathing, dressing, and getting out and in of mattress. The long-term help that they want, whether or not offered at residence or in a nursing residence, is often paid for by Medicaid, and never Medicare. The truth is, greater than 6 in 10 nursing residence residents depend on Medicaid.^[2]

Medicaid additionally helps over 12 million older adults and folks with disabilities pay their Medicare premiums and out of pocket prices.^[3] Dually eligible Medicaid and Medicare beneficiaries stay on restricted fastened incomes with few property. They’d not be capable to afford Medicare with out Medicaid help.^[4]

Medicaid packages mix federal and state funding, with the federal authorities paying for 68% of complete Medicaid bills.^[5] Federal Medicaid legislation requires states to cowl sure obligatory advantages—reminiscent of inpatient and outpatient hospital providers, doctor providers, rural well being clinic providers, emergency and non-emergency medical transportation, Medicare cost-sharing, and nursing residence providers. States have discretion so as to add further providers, reminiscent of Residence- and Group- Primarily based Companies (HCBS), dental, imaginative and prescient, and listening to. These providers should not coated by Medicare, making Medicaid the one protection choice for a lot of low-income older adults.

A Capped Funding System Will Hurt State Medicaid Applications and Enrollees

Varieties of Mounted Funding Ranges

“Block grants” and “per capita caps” are two associated however totally different mechanisms for reducing Medicaid by limiting federal funding at a sure stage.

Below a block grant, a state would obtain a lump sum with nice discretion on find out how to spend it. Most block grant proposals would base every state’s fee of federal funds on the state’s previous Medicaid expenditures, with some kind of inflation adjustment for subsequent years. Crucially, funding wouldn’t sustain with well being care prices, or with the variety of individuals needing help. Due to the chance that funding can be inadequate to take care of earlier protection ranges, a state can be given large discretion to find out which individuals to cowl, which providers to supply, and which eligibility requirements to observe.^[6] Consequently, states would probably lower protection for explicit forms of enrollees and/or providers in response to insufficient funding ranges.

A per capita cap is analogous, besides that the set quantity can be paid on a per-beneficiary foundation. Some annual enhance can be assessed, however probably at a price decrease than the well being care inflation price.^[7] Below many per capita cap proposals, federal funds would distinguish between forms of Medicaid enrollees. For instance, the federal authorities would pay the state a specific amount for every little one eligible for Medicaid, and a distinct quantity for every eligible senior. Nevertheless, the funding ranges beneath per capita caps would nonetheless be structured to lower federal funding general and would fail to contemplate vital will increase and changes to state Medicaid spending, resulting from components reminiscent of modifications in demographics, well being care wants, and supply methods. As well as, beneath a per capita cap construction, the state receives no profit from spending beneath the cap, however nonetheless is penalized when spending over the cap.^[8] In brief, per capita caps shift prices to states and put strain on state budgets. Since states should stability their budgets yearly, taking over further prices would incentivize–and ultimately power–states to restrict or eradicate enrollment and providers.

Unfairness of a Capped Funding System

A capped or restricted funding system would unfairly cut back a state’s Medicaid funding, which in flip would deprive low-income seniors of wanted well being care. Furthermore, quite a few federal protections would evaporate as a result of simultaneous elimination of vital federal Medicaid requirements for providers and repair supply. Older adults can be harmed by misplaced eligibility and providers, unaffordable monetary obligations, and a decreased high quality of care. Listed below are 3 ways arbitrarily capping the federal funding ranges can be unfair.

1. Protection would now not be based mostly on medical necessity. Like Medicare and different medical health insurance packages, Medicaid covers well being care wants based mostly on medical necessity. Nevertheless, beneath a set funding stage system, medical necessity would typically be outmoded by exterior monetary concerns, because the capped federal reimbursement would require states to impose important cuts on eligibility, protection, or each. Federal Medicaid funding can be inadequate to fulfill enrollees’ wants, which might lead to states denying protection for medically vital providers and very important packages reminiscent of Medicaid HCBS. ^[9]
2. State Medicaid packages can be prevented from making vital enhancements. By utilizing earlier years’ Medicaid bills as a base for the cap, there’s an implicit assumption that the state’s bills throughout these years had been within the correct proportions. This assumption, nevertheless, could be incorrect. If earlier years bills had been insufficient to fulfill want, elevated funds now might merely point out a state’s efforts to convey its Medicaid program as much as vital requirements. If, for instance, a per capita cap had been in place from 2019 to 2022, 35 out of 41 states would have exceeded their cap and been pressured to cowl considerably increased prices.^[10] Even with the next progress price for enrollees age 65+, 28 states would have exceeded the cap for older adults inside three years. An extra eight states (36 complete) would have exceeded the upper progress price cap for individuals with disabilities.^[11]
3. Federal funding gained’t sustain with rising well being care wants of an growing older inhabitants. A cap system additionally fails to account for growing older of the inhabitants. Contemplate a state’s “aged” eligibility class, composed of individuals age 65 or older. If extra older people enroll in protection, or the common age of enrollees will increase, the well being care wants of the Medicaid inhabitants would enhance. Caps on funding, nevertheless, wouldn’t take the modified beneficiary inhabitants into consideration. Equally, the Medicaid inhabitants may enhance resulting from pure catastrophe, recession, a public well being emergency, or different components. In these circumstances, a state can be financially penalized and sure lower providers to account for the decreased funding.^[12]

Cuts to State Medicaid Applications Would Hurt Older Adults

After all, the best hurt of a capped system will finally fall on low-income individuals, together with seniors, who depend on Medicaid for well being care. A capped construction will assure that prices will shift to states and states may have inadequate funding to fulfill these prices. States virtually definitely will react to inadequate funding by reducing their Medicaid packages. Older adults and folks with disabilities particularly ought to count on to have their Medicaid protection decreased, since these teams are likely to have increased wants.

• Cuts in Non-obligatory Eligibility and Companies. Federal Medicaid legislation distinguishes between obligatory and elective eligibility teams, and obligatory and elective providers. A major quantity of Medicaid spending is “elective” beneath the legislation—both as a result of it’s offered to an individual in an elective protection group, or is an elective service, or each.^[13] HCBS, dental, imaginative and prescient, and listening to, for instance, are elective providers whereas nursing facility providers are obligatory.
  • When it comes to eligibility, federal legislation requires obligatory protection for adults age 65+ and folks with disabilities receiving Supplemental Safety Revenue (SSI). Nevertheless, most states have expanded eligibility for nursing residence protection and HCBS utilizing elective pathways.^[14] Notably, the overwhelming majority of nursing residence residents and HCBS recipients are coated by means of an elective eligibility group. A number of states have additionally opted to develop Medicaid for older adults as much as or above 100% of the federal poverty stage and expanded eligibility for the Medicare Financial savings Applications (MSPs) for individuals dually enrolled in Medicaid and Medicare.^[15] Capping Medicaid’s funding on the federal stage would power states to chop these elective packages, limiting not solely healthcare, however eliminating entry to long-term care and assist with Medicare prices for tens of millions of older adults.
• Limiting Residence and Group-Primarily based Companies. As talked about, HCBS are elective providers. Medicaid legislation authorizes states to restrict HCBS to sure areas of the state, or to cap enrollment at a set stage.^[16] Roughly 34% of Medicaid spending goes to long-term providers and helps (LTSS), a class that features nursing residence providers and HCBS.^[17] As a result of nursing facility providers are a compulsory profit, a state trying to shed Medicaid LTSS bills is prone to lower HCBS first, leading to elimination of packages, geographic limitations, and/or ready lists. With out HCBS, older adults would both be pressured to obtain care in institutional settings, pay hundreds of {dollars} for personal care, or depend on unpaid household caregivers.
• Decreased Entry to Well being Care Suppliers. In an effort to lower bills, state Medicaid packages are also prone to cut back reimbursement charges paid to well being care suppliers. As a result of Medicaid charges already are low compared to different reimbursement sources^[18], these reductions will drive some suppliers from the Medicaid program, and trigger others to just accept fewer Medicaid enrollees. Consequently, many older adults won’t have entry to providers, or will confront an especially restricted selection of suppliers, creating further obstacles to well being care entry. This may additional exacerbate the direct care workforce disaster for older adults in residence and institutional settings, resulting in longer waitlists and delayed entry to care.^[19]

Conclusion

The Medicaid program is 60 years previous. Its present construction displays many years of modifications, and a comparatively nuanced balancing of shopper and supplier wants, together with federal and state budgetary realities. Efforts to cap federal Medicaid funding may erase many, if not all, current Medicaid protections and change them with a lax course of that provides the states insufficient funding, and duties them with the requirement of creating new, state-specific Medicaid methods from scratch.

As defined above, Medicaid funding caps would trigger important hurt to low-income older People. Proposed efforts depend on important cuts to the Medicaid program to attain federal financial savings. The touted “flexibility” of those proposals probably can be used to not innovate, however to eradicate vital safeguards. Below these proposals, older adults and folks with disabilities would lose providers, be saddled with unaffordable monetary obligations, and obtain a decrease high quality of care.

Endnotes

1. Seniors & Medicare and Medicaid Enrollees, (Medicaid); James McSpadden et al., Medicaid in Midlife: A Profile of Enrollees Ages 50 to 64, (American Affiliation of Retired Individuals 2023). ↑

2. Charlene Harrington et al., Nursing Services, Staffing, Residents and Facility Deficiencies, 2009 By means of 2016, at 2, (Kaiser Fam. Discovered. 2018). ↑

3. Maria T. Peña et al., A Profile of Medicare-Medicaid Enrollees (Twin Eligibles), (Kaiser Fam. Discovered. 2023). ↑

4. Medicare Half B (which covers doctor visits and different outpatient providers) imposes a regular month-to-month premium of $185, an annual deductible of $183, and a 20% copayment. Medicare Half A (protecting inpatient care) imposes a $1,676 deductible for every profit interval. 2025 Medicare Elements A & B Premiums and Deductibles, (Facilities for Medicare and Medicaid Companies 2024). ↑

5. See Federal and State Share of Medicaid Spending, tbl. FY 2023, (Kaiser Fam. Discovered.). ↑

6. Edwin Park, Medicaid Block Grant Would Slash Federal Funding, Shift Prices to States, and Go away Hundreds of thousands Extra Uninsured, at 2, (Heart on Price range and Coverage Priorities 2016). ↑

7. States will even be penalized even when the cap’s inflation price is an identical to the precise nationwide price of well being care inflation. As a result of well being care inflation charges differ from state to state, some states’ well being care bills will enhance quicker than the nationwide price of inflation, whereas different states’ bills will enhance at a slower price. Below a per capita cap mechanism, the higher-inflation states will endure a monetary penalty, whereas the lower-inflation states will obtain no profit for spending beneath the cap. Gideon Lukens and Elizabeth Zhang, Medicaid Per Capita Cap Would Hurt Hundreds of thousands of Folks by Forcing Deep Cuts and Shifting Prices to States, (Heart on Price range and Coverage Priorities 2025). ↑

8. Gideon Lukens and Allison Orris, Altering Medicaid’s Funding Construction to a Per Capita Cap Would Shift Prices to States, Drive Deep Cuts, and Go away Hundreds of thousands Uninsured, (Heart on Price range and Coverage Priorities 2023). ↑

9. Garrett Corridor and Tory Cross, Congressional Proposals to Reduce Medicaid Would Hurt Hardworking Households Counting on Key Companies and Put Disabled Folks in Explicit at Threat, at 3-6, (Households USA 2023). ↑

10. Gideon Lukens and Elizabeth Zhang, Medicaid Per Capita Cap Would Hurt Hundreds of thousands of Folks by Forcing Deep Cuts and Shifting Prices to States, (Heart on Price range and Coverage Priorities 2025). ↑

11. Id. ↑

12. Mara Youdelman, What Is a Block Grant and How Would It Affect Medicaid?, (Nat’l Well being Regulation Program 2024). ↑

13. Martha Heberlein, Evaluation of Necessary and Non-obligatory Populations and Advantages, at 12, (Medicaid and CHIP Cost and Entry Fee 2017). ↑

14. 42 states have adopted the particular earnings rule. Alice Burns et al., What Are the Main Medicaid Eligibility Pathways for Twin-Eligible People? (Kaiser Fam. Discovered. 2024). ↑

15. Alice Burns et al., What Are the Main Medicaid Eligibility Pathways for Twin-Eligible People? (Kaiser Fam. Discovered. 2024). ↑

16. 42 U.S.C. § 1396n(c)(3). ↑

17. See How A lot Does Medicaid Spending Differ Throughout Enrollee Teams and States, fig. 13, 15, (Kaiser Fam. Discovered.). ↑

18. Gideon Lukens and Elizabeth Zhang, Medicaid Per Capita Cap Would Hurt Hundreds of thousands of Folks by Forcing Deep Cuts and Shifting Prices to States, (Heart on Price range and Coverage Priorities 2025). ↑

19. Alice Burns et al., A Take a look at Ready Lists for Medicaid Residence- and Group-Primarily based Companies from 2016 to 2024, (Kaiser Fam. Discovered. 2024). ↑