Friday, January 28, 2011

Is anyone looking at the ripple effect of Medicaid spending or cuts?

In times of economic trouble, the gut reaction is always to cut. Governor Cuomo’s proposal to cut billions of dollars in Medicaid spending fails to consider the ripple effect of universal cuts to the safety net. Before we act, let’s think about what we lose:

Loss of federal funds
Medicaid is a match program with the Federal government. A cut of $1 of Medicaid means a minimum cut of $1 federal funds. So, the proposal to cut $4 billion from the Medicaid budget translates into reduced state spending of $2 billion and losing another $2 billion in federal funds. Think of this as purposefully not using a 50% off coupon on healthcare for our most vulnerable community members.

Loss of employment for low wage workers
Much of the Medicaid program is centered around people providing care. Personal care and direct service work is low wage work – often barely above minimum wage. Cuts being suggested will have an enormous effect on the livelihood of tens of thousands of low income wage earners, many of whom are single mothers. These lost wages will result in an increase in unemployment claims and applications for Medicaid which will increase our overall state costs immediately.

Loss of government efficiency
Cross the board cuts in the entire Medicaid program will make it more difficult to finance the areas demonstrated to be the most economically efficient as well as preferred by real people. These home and community based services let people stay in or find a place in our communities to live. That means more support from friends or family, a happier life, and a chance to spend money at small businesses and to contribute locally. These programs are some of the least expensive programs funded by Medicaid in “long term care” which serves many parents, grandparents and people with significant disabilities. This will have the unintended consequence of pushing more elderly and individuals with disabilities into higher cost placements – hospitals, nursing homes, detention centers, and psychiatric hospitals.

The combination of these factors means that for every dollar lost wages, increased costs, reduction in Federal matches, more unemployment, and less income tax results significantly reduces the proposed savings.

Cuts are not synonymous with reform. The latter has the potential for improving services, increasing consumer choice and realizing savings. Hopefully, this process will result in intelligent reform and not thoughtless cuts.

- Burt