Medicaid Cuts Won’t Save Money, Will Worsen Health Care

Ascension Columbia St. Mary’s Hospital in Milwaukee. Coburn Dukehart/Wisconsin Watch

If Congress cuts Medicaid, recipients will suffer and everyone’s health care will probably get more expensive, according to the Wisconsin Department of Health Services (DHS).

Congress is moving closer to an $880 billion federal tax cut. The magnitude of the tax cut will necessitate cuts to programs like Medicaid, which provides health insurance to low-income individuals, families, seniors and persons with disabilities. In Wisconsin, the potential cuts could end up costing residents billions over the next decade, according to DHS.

It’s unclear what form the cuts will take, but DHS is assessing what information currently exists about the potential cuts and sounding the alarm. The state health agency recently released a report breaking down what officials see as the impacts here in Wisconsin. If federal funding is cut, Medicaid recipients will be affected most acutely, but state and local government budgets will also take a hit, as will health systems that bill Medicaid, potentially driving up the cost of care overall.

The federal government shares the costs of Medicaid with the states, but the programs are administered by state governments. In Wisconsin, the Medicaid program, BadgerCare, covers approximately 20% of the state population, 38% of children and 60% of seniors, according to DHS.

The state only has four ways to respond to a reduction in federal support for Medicaid, said Bill Hanna, Wisconsin Medicaid Director, during a media briefing Monday. The state would need to find more tax revenue to make up the difference; or place greater restrictions on who is eligible for the program to reduce enrollment, increasing the uninsured population; or reduce the variety of health care services provided; or simply reduce the rate at which it reimburses health care providers, leading to increased healthcare costs that must somehow be absorbed. Or some combination of these.

States are guaranteed federal support for Medicaid at a certain percentage. The federal government may change that and provide states a per-person dollar amount, leaving them unable to adjust to rising health care costs without cuts to health care benefits and payments to health care providers, according to DHS.

If a per-person cap is established, DHS estimates the state could lose approximately $16.8 billion in Medicaid funding over the next 10 years.

There is the possibility, according to DHS, that the funding cuts could be accompanied with new work requirements for recipients. The requirements would likely reduce enrollment as more residents are no longer eligible, or fail to properly document their work hours or earnings.

Booting people off of Medicaid with work requirements doesn’t eliminate the cost of their healthcare, it only shifts it elsewhere, Hanna said.

“It’s not like these people disappear,” Hanna said. “They still need care, now, they just don’t have the insurance. Meaning hospitals, again, will be picking up additional costs, which is passed on to all health care consumers.”

States currently share the cost of administering their Medicaid programs with the federal government at a rate of approximately 50%. Funding cuts would likely hit the areas of the program where administration is funded at a higher level, like staff time and infrastructure costs for claims and eligibility systems. This would make it more difficult for DHS to process Medicaid claims and prevent fraud. Such a change could cost the state an estimated $93 million a year.

“This includes functions like determining eligibility for members, staffing to review claims and pay providers, preventing fraud, and investing in information technology systems,” according to DHS.

In short, as DHS warns, cuts to Medicaid will shrink state health care programs, make healthcare more expensive to everyone and less accessible for the poorest people in society, for seniors and for persons with disabilities.

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