May 31, 2017

Is Trump Really Proposing Cuts to Medicaid?

Not even close. Only in Washington, DC, could a budget increase of $146 billion dollars be considered a cut.

Ronald Reagan famously said, “Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other.” The truthfulness of that statement may be nowhere more obvious than America’s entitlement programs.

How else to explain progressive Democrats’ collective hysteria over the non-existent “cuts” to Medicare and Medicaid in Donald Trump’s first budget proposal?

For anyone possessing a third-grade comprehension of math, the idea that the Trump budget “cuts” these programs is utterly ludicrous. Only in Washington, DC, could a budget increase of $146 billion dollars be considered a cut. Yet that is exactly what Democrats would have us believe, claiming the budget “slashes spending,” leaving millions without health care.

As noted by editorialist A. Barton Hinkle, “The baseline spending curve for Medicaid points upward. In 2017, the program is expected to cost roughly $378 billion. A decade from now, the baseline spending for Medicaid rises to $688 billion — an 82 percent increase in nominal dollars. … Under [the Trump] budget proposal, Medicaid spending would rise from $378 billion this year to $524 billion in 2027. That’s a 38 percent nominal increase.” To Democrats, a 38% increase is a “cut.”

What’s actually occurring in the Trump budget is baby steps toward desperately needed reform. Medicaid was created as a safety net to ensure the poor receive medical care; primarily poor women and children, those with physical disabilities, and the low-income elderly. As noted previously, Medicaid was passed in 1965 with a projected cost of $238 million its first year, but clocked in at more than $1 billion, rising to $6.5 billion barely five years later. Today, Medicaid spending is well over $400 billion. That’s not a safety net; that’s a three-foot thick goose-down mattress.

The reality is that the current trajectory for Medicaid, Medicare and Social Security is simply unsustainable. The U.S. is spending just under a trillion dollars per year for Medicare and Medicaid alone. In the not-too-distant future, without serious reforms, entitlement spending and payments on debt interest will take up every penny currently collected from taxpayers. Far from being draconian cuts, the Trump budget begins to implement the gentlest of reforms.

Medicaid is an “open-ended” entitlement, which means it’s formula-driven with essentially no limitations on spending. The Congressional Budget Office explains, “All federal reimbursement for [Medicaid/Medicare] services is open-ended, meaning that if a state spends more because enrollment increases or costs per enrollee rise, additional federal payments are automatically generated.”

There has been bipartisan acknowledgment that the deficits driven by these entitlements put America on shaky fiscal footing. Unfortunately, for “progressives,” fearmongering as a means of securing votes has been a higher priority than reforming the programs in order to stabilize them over the long run.

For example, in 2008, a broad coalition of top analysts and economists from both left and the right — including top minds from The Heritage Foundation, American Enterprise Institute, Brookings Institution, Progressive Policy Institute, New America Foundation, and Urban Institute — drafted a policy paper addressing this issue. In it they stated:

> The first step toward establishing budget responsibility is to reform the budget decision process so that the major drivers of escalating deficits — Social Security, Medicare, and Medicaid — are no longer on autopilot…

> Congress and the president enact explicit long-term budgets for Medicare, Medicaid, and Social Security that are sustainable, set limits on automatic spending growth, and reduce the relatively favorable budgetary treatment of these programs compared with other types of expenditures.“

We know that the Trump budget doesn’t cut Medicaid spending, so what does it actually do?

It begins spending reform on entitlements by limiting the annual spending growth. America households have limited budgets and must prioritize spending, and so must government, especially since American taxpayers must pay the bill for government spending. Even taking into account inflation, year-over-year spending increases on Medicaid have been astronomical.

The second thing the Trump budget does is begin to address the structural flaws in the program through mechanisms such as block grants to the states, allowing for greater flexibility and accountability.

The program as currently instituted is the worst of both worlds — high cost and poor service. In fact, as Shikha Dalmia, senior policy analyst with the Reason Foundation, recently pointed out, "Medicaid is arguably the civilized world’s worst health insurance program.” Patients “have less access to care, longer hospital stays, and higher mortality rates.”

It’s clear something must be done, starting with a new mindset; one which says the program should be used only for the neediest, rather than as a bloated, poorly performing, fraud-ridden program geared more to getting votes than healing bodies.

Mick Mulvaney, President Trump’s Director of the Office of Management and Budget, recently proved that he gets it. In his opening statement at a press briefing on the Trump budget, Mulvaney stated, “Compassion needs to be on both sides of that equation. Yes, you have to have compassion for folks who are receiving the federal funds, but also you have to have compassion for the folks who are paying it.” At a hearing of the House Budget Committee, Mulvaney expounded on this line of thought, explaining, “We no longer want to measure compassion by the number of programs that we have, or the number of people that are on those programs. We want to measure compassion, true compassion, by the number of people we help to get off those programs.”


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