New HHS Report Shows How Health Law Threatens State & Federal Budgets, Sustainability of Medicaid Program

March 27, 2012

An overdue U.S. Department of Health and Human Services report on the fiscal status of the Medicaid program, requested by House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Senate Finance Committee Ranking Member Orrin Hatch (R-Utah), demonstrates the significant burden the expansion of this program will have on federal and state budgets. The U.S. Supreme Court will hear arguments on the constitutionality of the partisan health law's Medicaid expansion - the largest since its inception more than 45 years ago - on Wednesday.

Below are some of the report's key findings:

  • The health spending law drives up federal Medicaid costs by $619 billion through 2020.  "The Affordable Care Act is projected to increase Medicaid expenditures by a total of $619 billion for 2011 through 2020" (Page iv)
  • The health spending law will make nearly 26 million more Americans dependent on Medicaid.  "This expansion, together with greater participation by individuals eligible under current rules, is projected to add 25.9 million people by 2020 - 44 percent compared to pre-Affordable Care Act estimates."  (Page iv)
  • Medicaid expansion brings total burden on state budgets to $2.3 trillion through 2020, crowding out other local priorities such as education and law enforcement.  Total state spending on Medicaid through 2020 is expected to total $2.3 trillion. (Page 19)
  • Medicaid's mission has been compromised.  While Medicaid was originally designed as a safety net, serving just 4 million people in 1966, by 2020 there will be 85 million Americans, meaning at least 1 in 4 Americans will be dependent on the government program Medicaid. (Page 19)
  • Medicaid consumes the largest health-related share of FEDERAL revenues. "For the Federal government, Medicaid is the largest source of general revenue-based spending on health services. Notably, Medicaid is a larger source of such Federal expenditures than Medicare." (Page 25)
  • Medicaid consumes the largest health-related share of STATE budgets. "For State governments, as with the Federal government, Medicaid is the largest source of general revenue-based spending on health services" (Page 25)
  • There are now more individuals dependent on Medicaid than Medicare.  "Medicaid is also larger than Medicare in terms of the number of people covered. In FY 2010, Medicaid was estimated to have covered 53.9 million PYE, and 67.7 million people were enrolled in the program at some point during the year. In comparison, Medicare covered an average of 47.5 million people during CY 2010." (Page 25)

This Congress, Hatch and Upton, whose committees have jurisdiction over the Medicaid program, have championed efforts in Washington to overhaul the broken entitlement program, including the State Flexibility Act to repeal the onerous Maintenance of Effort (MOE) requirements that were included in the new health law. They have consistently said the highly successful, bipartisan welfare reform of 1996 - where states led the way to provide the best solutions for a broken program - should be the model to modernize Medicaid.

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