All this came amid high-pitched squabbling between congressional Republicans, Democrats and the White House over attempts to finally pass a budget for the current fiscal year, already more than half elapsed. While the war of words over this year's budget has been heated, it's really the fight over the 2012 spending plan that has the potential to go thermonuclear. Here we're no longer talking about tens of billions of dollars, but rather multiple trillions.
And healthcare spending is where the action is. Or where the GOP wants the bulk of the burden to be. The budget blueprint that House Budget Committee Chairman Paul Ryan (R-Wis.) unveiled would turn Medicaid upside down, transforming it into a block-grant program and claiming more than $730 billion in cuts over 10 years compared with Obama's proposed budget. Under this approach, states would be given lump-sum payments and be given greater flexibility to cover their beneficiaries. Which also means they might see greater perverse incentives to dump people from the Medicaid rolls.
Medicare also would be revamped under the Ryan plan, morphing from a pure entitlement program to what's called a “premium-support system” effective in 2022. Seniors would choose from a variety of health plans using subsidized premiums paid by the government. The theory here is that competition among health plans would help contain healthcare costs better than the current system. Of course, we've all witnessed how well health-plan competition has tamped down healthcare inflation during the past few decades. The thinking must be that it's certain to be different this time around.
Everybody agrees that our nation's entitlement programs need to be tweaked. States from coast to coast have encountered surging Medicaid costs, mainly because of the slow-to-recede unemployment numbers. But as this page has stated before, we're talking about “safety net” programs of last resort for truly needy people. Making the program more progressive in cost-sharing and introducing managed-care principles might make sense. Dumping eligible beneficiaries should never be an option.
The block-grant approach also brings the usual shell-game risk. Unless the money comes with some strong strings attached, state legislators looking to plug budgetary holes could tap their Medicaid treasure chest to fund expenditures they deem a higher priority. And what happens when the next downturn comes along? Heaven forbid it's worse than the one we're slowly recovering from. What happens when the block grant won't cover everyone in need, especially since federal aid—now typically assailed as a “bailout”—is a nonstarter?
There certainly are other sectors of the federal budget that demand a closer look, with the prime target being bloated Pentagon spending. And even the bipartisan debt commission acknowledged that some of the pain will have to be borne through increases on the revenue side.
Let the negotiations begin.