Earlier this month, Matt Yglesias criticized Paul Ryan for characterizing the sharp Medicaid cuts in his budget plan as “welfare reform.” Yglesias notes that while a majority of Medicaid beneficiaries are low-income adults and children, a majority of expenditures are for long-term care of elderly and disabled people. (Even if you are old enough to be eligible for Medicare, nursing home expenses are still paid by Medicaid.)
I have previously criticized Ryan’s proposed Medicaid cuts as too steep, and I also agree that Medicaid’s long term care beneficiaries don’t fit the welfare reform model—it’s unlikely that the availability of government-funded nursing care is what’s keeping them out of the workforce. But this doesn’t mean that the nursing care component of Medicaid should be off the table, or that we shouldn’t hope to obtain significant savings from reforming it.
Medicaid’s long term care benefit is already supposed to be means-tested—so, yes, it is a welfare program of sorts. If you are wealthy, the expectation is that you will spend down your own assets on nursing care before the state steps in to pick up the tab. But in practice, some individuals can use creative strategies to shelter assets and qualify for Medicaid before they are truly poor. In New York, “spousal refusal” is a particular problem, where a husband or wife refuses to pay for a spouse’s nursing care needs, keeping marital assets while Medicaid pays nursing home bills.
Yglesias notes that even if you’re not getting long term care benefits from Medicaid, “you very likely have a parent or grandparent who does and whose financial needs will simply tend to fall on you if the program is cut.” Depending on what family we are talking about, is that necessarily so bad? Shouldn’t affluent families pay for their own long term care needs (or carry long term care insurance) instead of expecting the government to do so? Tightening eligibility rules so that the burden of long term care falls more on families that can afford it and less on the government seems like an appropriate move to me.
It’s also important to note that while Medicaid reimbursement rates for medical services tend to be low, this is not necessarily the case with long term care. In New York, a Citizens’ Budget Commission study in 2007 found that the state was paying Medicaid rates to nursing home operators 29 percent above the national average. Eliminating that disparity would save the state $735 million a year, and the federal government over $900 million. Indeed, when E.J. McMahon and I made recommendations in 2010 on trimming New York’s budget, nearly all the Medicaid savings we proposed came from the long term care side of the program.
The availability of such savings are another good reason to block-grant Medicaid; currently, states make decisions about plan structure and enforce plan rules, but when they cut reimbursement rates or reduce fraud they only get to keep part of the savings. Block granting would provide states better incentives to manage Medicaid finances well. That applies to Medicaid both as a low-income health insurance program and as a long term care program.