The government is currently operating under legislation that provides funding until Jan. 15 and suspends the borrowing limit until Feb. 7. CBO Director Douglas Elmendorf testified at the panel and said the report could help lawmakers during their budget deliberations.
The option to cap federal Medicaid contributions to the states comes as federal spending on the program has risen at an average rate of about 6% a year for the last two decades because of general growth in healthcare costs, mandatory and optional expansions of program eligibility and covered services and states' efforts to increase federal payments for the program.
Last year, the federal government sent $251 billion in Medicaid funding to the states, according to the CBO. The annual rate of spending growth is expected to increase to 8% per year as states expand Medicaid coverage to adults with incomes up to 138% of the federal poverty level as part of the Patient Protection and Affordable Care Act.
The CBO report offers several approaches for capping federal contributions. One is to give states fixed block grants that generally would not increase if states' costs rose or decrease if states' costs fell.
Another is to base caps on average federal spending per enrollee for each of the four principal categories of those eligible for Medicaid: the elderly, the blind or disabled, children and poor nonelderly, nondisabled adults. The government could determine the spending limit for each category by counting the number of enrollees in a category and multiplying it by the specified per-enrollee spending amount for that category.
A Medicaid spending cap could save $280 billion to $610 billion between 2016 and 2023, depending on various implementation factors, according to the CBO. The risk is that states would have to make up the shortfall if their Medicaid programs experienced cost growth beyond the spending cap, or else they would have to cut eligibility, benefits, or provider payments, the CBO said.
For Medicare, Congress could consider bundling payments to healthcare providers. This would mean one payment for all or most of the services that patients receive from various providers related to a particular disease or incident.
The CBO estimated that Medicare spent more than $170 billion in fiscal 2013 on services provided during a hospital stay or within 90 days of discharge. That's half of all nondrug spending in Medicare's fee-for-service program.
The CBO acknowledged that it's difficult to predict how bundling would affect providers. But it presented the possibility of hospitals and physicians collaborating to reduce costs by consolidating purchases of medical devices or other equipment and seeking volume discounts from their manufacturers. Or they could reduce the quantity and intensity of post-acute care that their patients received and economize on the use of physicians' services during a hospital stay.
Raising the Medicare eligibility age from 65 to 67 would reduce the federal budget deficit by a total of $19 billion between 2016 and 2023—far less in savings than previously projected by the CBO due to the slowdown in Medicare spending growth. The CBO acknowledged that raising the eligibility age would shift costs from Medicare to beneficiaries, employers and Medicaid, and could leave many people in that age group uninsured.
Follow Virgil Dickson on Twitter: @MHvdickson
