CBO Report Suggests Federal Caps to Medicaid
December 4, 2013 09:12 AM
Earlier this month, the Congressional Budget Office (CBO) released a report entitled Options for Reducing the Deficit, 2014 to 2023 (the Report). Among various other options, CBO analyzed what effect a federal cap to Medicaid would have on the federal budget, proposing this as an option to reduce the deficit.
Report Implicitly Targets Long Term Care: In its analysis, CBO broke down the main drivers of Medicaid spending. At $71 billion, CBO listed long term care as the second largest expenditure in 2012 after acute care (at $152 billion). While CBO suggested that a carve-out for caps on the elderly and disabled was possible, doing so “would save far less” given that this group currently is responsible for 65 % of Medicaid spending. For details, see page 188-189, here.
Both General and Per-Enrollee Cap Would Generate Savings: To calculate savings, CBO used 2013 spending data as the “base rate” and modeled the spending caps to be effective in October 2015. CBO projected that an overall federal spending cap on Medicaid would generate $450 billion in savings from 2014 to 2023 via a cap based on the CPI-U growth factor, and $105 million via a cap based on the NHE growth factor. CPI-U stands for the Consumer Price Index for all Urban Consumers, reflecting a general rate of inflation, while NHE stands for National Health Expenditures, and reflects per capita growth in national health expenditures consistent with an increase in per capita GDP. Percentage points were added to the growth factors of the overall federal spending cap to reflect increased enrollment due to the ACA expansion.
A per-enrollee spending cap (alternatively known as a “per-capita cap”) would bring $606 billion in savings during the same time frame via a cap based on the CPI-U growth factor, and $282 million via a cap based on the NHE growth factor.
For full explanations of the growth factors and their augmentation, see page 189 and 191-192, here. For a chart modeling the various cap scenarios, see page 186, here.
CBO stated that normally, a general cap should generate more savings. However, given, among other things, CBO’s present projections of a decline in Medicaid enrollment in the non-expansion population due to a forecasted recovery in the economy, CBO estimated that there would be more savings through a per-enrollee cap. For details, see page 192, here.
Flexibility for States May Generate Federal Savings: CBO recognized that generally, increasing flexibility for states to structure their Medicaid programs can either increase or decrease the federal budget. However, increasing state flexibility would generate federal savings in Medicaid if: ”states had enough flexibility to scale back their programs to the point where federal spending was less than the caps; federal funding remained linked to the level of state funding, as under current law; and some states chose to do such scaling back.” See page 190, here.
For the Report’s full analysis of Medicaid caps, see pages 186-194, here.
The National Council on Medicaid Home Care – a NAHC affiliate - opposes caps on federal Medicaid payments. Specifically, the Council calls on Congress to abandon proposals for such caps, and instead increase the federal Medicaid match (FMAP) so that states can focus more on providing home and community-based services (HCBS). For details of this policy position, see pages 18-19 of the Council’s Legislative Blueprint, here.
The Council also continues to advocate for preserving Medicaid payments to home care providers by supporting the establishment of Medicaid home care as a mandatory benefit and appropriate Medicaid rates for home care and hospice. For details, see pages 16-17, and 20-21 of the Council’s Legislative Blueprint, here.
The Council strongly supports re-balancing long-term care expenditures towards HCBS without caps. To this end, the federal government and states should embrace federal programs such as Community First Choice (CFC), Balancing Incentives Payment Program (BIPP), and 1915(i) State Plan options and less on waivers, as the latter allows for state caps on HCBS. While states may be hesitant to place less emphasis on waivers, the Council believes that further leveraging the federal programs instead would bring HCBS to a greater number of enrollees. This would increase the chances of enhanced rebalancing, which would reduce costs to states by avoiding more costly institutionalizations.
Home care providers are encouraged to keep abreast of Medicaid funding and HCBS developments in their states, and nationally, and to contact the Council with any questions or concerns.