Medicaid is the Real Vulnerability

by Reihan Salam

Sandhya Somashekhar of the Washington Post has an article on the politics of Medicaid that is well worth reading:

Ryan has proposed scaling back the nation’s four-decade-old insurance program for the poor and disabled — bringing down the cost by $810 billion over 10 years. The measure is part of a budget he has said aims to avert “an epic collapse of our health and retirement programs that would devastate our nation’s most vulnerable citizens.”

Ryan, who chairs the House Budget Committee, also wants to give states their Medicaid contributions in “block grants,” or set amounts, each year. States would get more flexibility, with the expectation that they would be able to use the money more efficiently and creatively.

But experts say the cutbacks are so dramatic that it would be impossible for states to innovate their way out of massive cuts to a program that in 2010 served some 54 million Americans, roughly 6 million more than Medicare.

Over a sufficiently long period of time, I imagine that innovation could make a significant difference. But over a decade, during which time we could experience business cycle fluctuations, it is hard to imagine governors, Democratic or Republican, acquiescing to such deep cuts. This isn’t to say that block grants aren’t a very good idea. Rather, the block grants will have to account for the business cycle and a more reasonable assessment of medical cost growth, which will yield far smaller savings.