Medicaid is the primary federal means-tested program financing medical care for low-income elderly individuals, families, children, pregnant women, and people with disabilities. In FY 2011, Medicaid financed services to more than 69 million people1 at a combined federal and state cost of $434 billion.2 The $274 billion federal share3 is predicted to grow to $423 billion by FY2017.4 Medicaid, not Medicare, finances most long-term (nursing home) care for America’s elderly.
Each state designs and administers its own Medicaid program, but must comply with federal rules which set minimum eligibility standards; mandate coverage for specific health conditions; and prohibit requiring co-payments from beneficiaries as well as prohibiting the use of federal funds to pay private insurance premiums for beneficiaries without a federal waiver. Like the old Aid for Families with Dependent Children (AFDC) Cash Assistance program, Medicaid spending is open-ended. The federal government reimburses states from 50% to 80% of the amount each spends on their Medicaid program5 (Federal spending is based on state per capita income with poorer states reimbursed at a higher rate.)6
The so-called Stimulus Bill (the American Recovery and Reinvestment Act of 2009) increased federal Medicaid spending by almost $34 billion that year (14 percent) and by a total of almost $90 billion from 2009 to 2013 — primarily by increasing federal reimbursement rates to the states.7
If ObamaCare (the Patient Protection and Affordable Care Act — PPACA) remains in effect, in FY 2014 states will be required to extend Medicaid coverage to able-bodied, childless adults as well as families with much higher incomes than those who currently qualify for benefits.8 This would add an additional 16 million non-elderly individuals to the Medicaid rolls — a nearly 50 percent increase in such beneficiaries above the 35 million non-elderly recipients that had already been expected to be served under previous law.9 In addition, if ObamaCare becomes fully operative, the federal government will force states to enlarge their Medicaid rolls, with the federal government covering 100% of the cost of any new enrollees during the new law’s initial three-year implementation period beginning in FY2014, and the states picking up their normal share of the costs going forward after the three-year implementation period.10
Ronald Reagan understood that resources — be they federal, state, or one’s own — are, by definition limited. And, he believed that it was a fiscal and moral imperative that limited government resources be targeted to those individuals most in need.
President-elect Reagan, as part of the transition process from the Carter administration, approved the following recommendation regarding the federal Medicaid program for the poor:
“The federal Medicaid regulations and statutory mandates, other than cost control mandates, be repealed.”
Medicaid was enacted in 1965 to finance medical care for welfare recipients. Since then, the number of individuals made eligible for the program under the law has frequently been expanded. ObamaCare, however, represents the most significant growth in the Medicaid program since its establishment and includes the single largest eligibility expansion since the program’s inception.
ObamaCare’s unprecedented expansion of the Medicaid program will threaten the fiscal sustainability of the well-intentioned medical safety net for the needy by shifting and increasing Medicaid costs to cash-strapped states. It requires states to expand Medicaid to certain individuals under age 65 including all childless adults with income up to 138% of the federal poverty level (FPL) — $30,500 for a family of four or $15,000 for a childless adult.11 States may cover — and be reimbursed by the federal government for their costs — pregnant women and infants up to 185 percent of FPL ($41,000 for a family of 4), children with disabilities with family income up to 300 percent of FPL ($66,150 for a family of four), and all non-elderly, non-pregnant individuals including young, able bodied men with modified adjusted gross income above 133 percent of the FPL ($15,000) — which of course means that there is no income limit on those who may be covered even if they are able-bodied adults.12 The new law also prohibits states from making their Medicaid eligibility standards more restrictive than they were on the date ObamaCare was enacted.13
Of the ten largest federal programs that provide benefits for low-income individuals, Medicaid far exceeds the next largest program (Food Stamps/SNAP) — $297 billion to $71.8 billion in FY2011.