During the State of the Union Address, President Biden took the opportunity to address the debt ceiling negotiations, noting that there had been proposals to make cuts to Medicare and Social Security spending. Republicans vehemently and loudly denied such plans, and in one of the few bipartisan moments of the night, both parties seemed to agree that these programs would remain untouched.
If Republicans are still seeking significant spending reductions in exchange for raising the debt limit, and Medicare and Social Security have been declared exempt from such cuts, what programs are likely to be next on the chopping block? Medicaid and the Supplemental Nutrition Assistance Program (SNAP) have become potential targets at this time. Republicans have signaled that they would like to see additional work requirements for both programs, though SNAP already has stringent work requirements.
Talk on the Hill has also centered on Medicaid per capita caps, essentially amounting to reducing Medicaid to a block grant. Under per capita caps, various populations are divided out such as the elderly, people with disabilities, children and more general populations. Then states are awarded an annual allocation based on a fixed per capita cost for each of those populations. Many times, the per capita caps are adjusted by an inflation factor that may under-calculate true health care cost increases. States would absorb the overruns in health care costs, and it is not clear how the current mandates or entitlements to health care coverage for certain populations such as pregnant women and poor children would be affected. If a state has to absorb such cuts, children tend to lose out since there tends to be less political will to fight for funding for this population, although under a per capita cap, all people in need of health care would lose out as costs are shifted to the states.
The Center on Budget and Policy Priorities released an updated paper that explains how a per capita cap would reduce federal spending on Medicaid and shift health care costs to states over time. A 2019 report by Avalere found that a per capita cap would have particularly negative consequences for children, with significant cuts in children’s health care over a ten year period.
This is not the first time that Congress has considered per capita caps for Medicaid, and CWLA opposed the proposal in the 2017-2018 Congress amid debates about the repeal of the Affordable Care Act. Medicaid has expanded since that time, particularly during the Public Health Emergency. It is a huge payer of mental health and safety net hospitals, as well as children’s health care.
Other mandatory spending programs could be on the table for cuts, as well as discretionary programs that received big increases in the last few years, such as Head Start and the Child Care and Development Block Grant (CCDBG). Although initially Speaker of the House Kevin McCarthy called for a return to FY 2022 funding levels, he and his Republican leaders are now signaling that they’d like to take steps toward a balanced budget, comments that are vague and possibly less severe.