Cutting Medicare and Medicaid to Fund Regressive Tax Cuts: Haven't We Heard This Before?

Are you baffled by Team McCain's behavior in recent weeks? I certainly am. I'm not talking about the candidate himself. His irresponsible selection of Governor Palin and his bailout grandstanding reduced the prospects for surprise. I mean the adults around him, people I had presumed might know better. What's the deal with them?

One moment, a key advisor is telling reporters -- telling reporters! -- "We are looking forward to turning a page on this financial crisis and getting back to discussing Mr. Obama's aggressively liberal record and how he will be too risky for Americans." Another says -- on the record -- "If we keep talking about the economic crisis, we're going to lose." As the stock market drops another 500 points, this seems pretty likely.

Then in yesterday's Wall Street Journal, the McCain folks pivot from Herbert Hoover to Newt Gingrich. Top economic advisor Douglas Holz-Eakin says that McCain would cut $1.3 trillion from Medicare and Medicaid over the next decade to keep McCain's health plan "budget neutral."

Does that figure, $1.3 trillion, sound familiar? It should. That's almost exactly the nonpartisan Tax Policy Center's estimate of the McCain tax plan's contribution, over and above Obama's, to the federal debt over the same period. This $1.3 trillion flows directly from continued and further tax cuts for people with annual incomes over $250,000. Financing regressive tax cuts by cutting Medicare and Medicaid: Do they pledge to shut down the government, too?

At one level, such comments highlight the folly of critiquing McCain's healthcare plan. I guess he needed window dressing called a healthcare plan. It's increasingly clear that this plan will never come to pass.

Its main pillar -- taxing employer-based health coverage -- is politically radioactive. Unions hate this idea. The Congress hates this idea. This morning's New York Times tells us that even Republican-leaning business groups are cool to this idea and don't want further erosion in employer-based coverage. Maybe the accountants will favor this, since they would assess a whole bunch of complicated health benefits for tax purposes that are now off the table.

Now we have these latest astonishing comments by Holz-Eakin. What makes anyone think year-2008 American voters want to cut Medicare and Medicaid to finance Bush-era tax cuts? Holtz-Eakin didn't specify what the cuts would be. According to the Journal, "He said the savings would come from eliminating Medicare fraud and by reforming payment policies to lower the overall cost of care." If any expert believes $1.3 trillion is waiting to be painlessly trimmed, I've never met her.

Leave aside the self-immolating political implications of the proposed Medicare cuts in Florida, Ohio, and western Pennsylvania. Given my day job, I'm more focused on Medicaid. There are only four ways to cut this program -- none of which makes acceptable social policy.

1. Medicaid can reduce payments to doctors and hospitals.
Medicaid already pays below-market reimbursement rates. All over the country, thousands of doctors and many of the best hospitals turn Medicaid recipients away. Try finding a dentist or an orthopedic surgeon who takes Medicaid. One of my recent postings notes that 94% of long-term care facilities are being cited for violations of federal health and safety rules. Low Medicaid reimbursement rates are key drivers of these problems, leading to overworked, underpaid staff who cannot provide the care we all know they should. These cuts are especially insidious because they are largely invisible to the public.

2. Medicaid can cover fewer people
States can establish waiting lists for low-income children who need SCHIP, tighten eligibility requirements, or hassle families with paperwork to bring down the rolls. The Bush administration moved to tighten Medicaid asset verification requirements, and to limit the home equity families could transfer to a disabled child who receives Medicaid. They've tried to clamp down on Medicaid eligibility in long-term-care. Such moves save money, but they undermine Medicaid's basic mission and increase the ranks of the uninsured.

3. Medicaid can cover fewer services
The Bush administration has tussled with states over educational services for children with special health needs. President Bush's 2008 budget proposed to cut Medicaid funding of school-based medical and social services by $3.6 billion. It also proposed to cut $2.3 billion in community-based rehabilitation services. No doubt, Sarah Palin will protect children with special health care needs from facing these cuts. Somehow I feel safer knowing that such proposals are dead on arrival in Congress.

4. The federal government can shift burdens onto states and localities that can't carry this load
This is already happening. Safety-net providers are financially bleeding, as they face the twin burden of caring for millions of uninsured people and facing below-market Medicaid reimbursement rates. Right now, urban hospitals and emergency departments are closing. More will follow if Medicaid imposes further cuts. In large part due to Medicaid, dozens of states face budgetary shortfalls. Many lack the tax capacity, and in some cases the legal authority to raise needed revenue. Forced by law or politics to run a balanced budget, many sates cut vital services during recessions, precisely when these services, along with fiscal stimulus, are most essential.

Holz-Eakin's comments reflect the widely-shared but misguided belief that Medicaid spending must be curbed. I disagree. Sure, Medicaid has long-term financial problems that must be addressed. These reflect three things outside of the program's purview: general medical inflation, the rising numbers of uninsured, and a rickety state-federal partnership that was fine in 1965 but that doesn't work anymore, now that healthcare consumes 17 percent of GDP.

Medicaid is the safety valve we use to address every failure in our healthcare system. Medicaid spending is rapidly growing because the rest of our healthcare system is failing to carry the load. Cutting Medicaid without addressing these underlying issues will only exacerbate the glaring health access and public health problems we face.

These issues are especially important as the economy heads into serious recession, and as we assume new burdens due to the bailout. Should Senator Obama win, many people will whisper: this is the wrong time to curb tax giveaways to the wealthy; this is not the time to push ambitious health reforms; this is a time to reign in federal healthcare expenditure.

I disagree on all counts. The fiscal impact of the bailout is less burdensome than some make out. Moreover, as we pivot to address heightened social needs, we can kill regressive Bush-era tax giveaways to stay out of fiscal trouble. Recession will lead millions of people to lose health coverage. It will reduce state and local tax receipts precisely when millions of additional people will turn to states and localities for help. Recession will also concentrate the minds of officials in Washington, raising the political prospects for movement towards universal coverage.

Sometimes in life, a headwind helps you get where you need to go.

Comments

[fuzzywuzzy6]

Thank you for a very important article.

Why aren't more democrats and economists addressing the issue of how much money better health care will save the country? It doesn't just affect the health care industry, it has a bleed over effect.

[chad413]

A commission to look at Medicare? HAHA A non-answer.

Right back to Obama raising taxes. I dont think this is the performance Republicans were looking for from McCain.

[Linda Bergthold - Huffpost Blogger]

Excellent points! Very few people know what Medicaid really covers. They think it's just a program for poor people. But half ot he Medicaid budgets in most states goes to pay for nursing home services for the elderly who have had to spend all their savings to be eligible for Medicaid. And Medicaid, as Harold points out, also supports families if children with special health care needs -- families like the Palins, with a child who has Down Syndrome. These families need lots of help and regular insurance does not come close to covering what they need. And Medicaid covers services for pregnant women and children. So when McCain says he will slash the funding for Medicaid, we should all stand up and say "NO MORE"!!

[DeSwiss]

"Very few people know what Medicaid really covers. They think it's just a program for poor people. But half ot he Medicaid budgets in most states goes to pay for nursing home services for the elderly who have had to spend all their savings to be eligible for Medicaid."
=========================================================

You're so correct! Both my parents were in nursing homes before they passed away. And both needed Medicaid to cover those costs. They didn't have benefits, such as those utilized by elected officals like John McCain, and who may take advantage of them at taxpayer expense. Even though he's a millionaire with more houses than he can remember where they are.

And I also didn't have the luxury of charging the state government per diems for every member of my family for 365 days per year for the extra "un-taxed" cash either. Like some poeple.....

:-|

[DeSwiss]

As Rep. Debbie Wasserman-Schultz (D-FL) reported yesterday on the Rachel Maddox show, Florida has the 2nd highest population of retirees in the country. The issue of entitlement programs -- with Medicare and Social Security in particular -- as any politician paying attention should know, is the THIRD RAIL of American politics. You don't touch it because the results can be the instaneous death of your political career. And it is probably one of the main reasons that Obama now leads in this state in at least two polls.

With this one decision, McCain has very likely pushed FL over to the Dems. That's 27 electoral votes to keep elderly Medicare eligibility from being raised, or its services reduced. In my 57 years, I would have to say that McCain is the stupidest politician I've ever seen. And I've seen a lot of stupid ones. But this boy takes the cake.

[DestinationsUnknown]

I think John McCain has a point regarding the fraud within the medicare/medicaid system. However, similar to the financial meltdown, our healtchare systemhas beeninameltdownfor manymany years.Much of which fraud can be accounted for.
Perfect example, the ongoing trial in Columbus Ohio forNational Century Financial Enterprises, Inc. This case has been noted by federal prosecutors as 'larger than Enron, yet no one has heard of'.
Why is this? If any good investigative reporter would find, this case is HUGE! The NCFE trial , bigger then Enron would connect 'big players and insiders' (Bush and an ex-partner) to both the financial and healthcare system in our country. If only someone was paying attention!