Price says Med­i­caid spend­ing will grow ‘ev­ery sin­gle year,’ de­spite bil­lions in cuts

The Washington Post Sunday - - POLITICS & THE NATION - GLENN KESSLER glenn.kessler@wash­post.com

“The fact of the mat­ter is that Med­i­caid spend­ing un­der the pro­posal and un­der the bud­get goes up ev­ery sin­gle year.”

— Health and Hu­man Ser­vices Sec­re­tary Tom Price, in­ter­view on CNN’s “State of the Union,” May 7, 2017

Price de­fended the Amer­i­can Health Care Act, the House GOP plan to over­haul the health-care sys­tem, in an in­ter­view with CNN. But his claim about the Med­i­caid bud­get was rather mis­lead­ing. Let’s take a look.

The Facts

When chal­lenged by CNN’s Jake Tap­per over re­duc­tions in Med­i­caid spend­ing — $839 bil­lion over 10 years, ac­cord­ing to a Con­gres­sional Bud­get Of­fice es­ti­mate in late March — Price re­sponded with some Wash­ing­ton dou­ble-talk about fund­ing for the health­care pro­gram for the poor. (An ear­lier CBO es­ti­mate had pegged the re­duc­tion at $880 bil­lion, which is the num­ber Tap­per used in the in­ter­view.)

“Well, re­mem­ber what the $880 bil­lion is off of. It’s off what is called a base­line, which is what the fed­eral gov­ern­ment, what the Con­gres­sional Bud­get Of­fice says we would spend if we just con­tin­ued cur­rent law,” Price said. “The fact of the mat­ter is that Med­i­caid spend­ing un­der the pro­posal and un­der the bud­get goes up ev­ery sin­gle year. And it goes up by a fac­tor that is great — that is equal to the cost of med­i­cal care.”

De­bates over a base­line are an old Wash­ing­ton tra­di­tion. The CBO cal­cu­lates what would be nec­es­sary to main­tain cur­rent ser­vices over a 10-year pe­riod, ac­count­ing for in­fla­tion, pop­u­la­tion growth and so forth. One dol­lar in 2026 will not go as far as a dol­lar in 2016.

Here’s our fa­vorite ex­am­ple of this phe­nom­e­non: De­fense spend­ing tech­ni­cally re­mained con­stant from 1987 to 1994 — $282 bil­lion a year. But look what hap­pened to the mil­i­tary dur­ing those seven years: The num­ber of troops fell from 2.2 mil­lion to 1.6 mil­lion, the num­ber of Army di­vi­sions was re­duced from 28 to 20, Air Force fighter wings dropped from 36 to 22, and Navy fight­ing ships de­clined from 568 to 387. That’s be­cause, over time, in­fla­tion ate away at the value of those dol­lars. By most mea­sures, de­fense spend­ing was trimmed in that pe­riod, although in the­ory, not a penny was cut.

Price, hav­ing been chair­man of the House Bud­get Com­mit­tee, cer­tainly un­der­stands this con­cept. Yet he de­clared that “there are no cuts to the Med­i­caid pro­gram. There are in­creases in spend­ing.”

The pro­posed changes to the Med­i­caid bud­get would re­duce spend­ing by nearly 25 per­cent over 10 years and cover 14 mil­lion fewer peo­ple than an­tic­i­pated by 2026. Price is also wrong to claim that “Med­i­caid spend­ing un­der the pro­posal and un­der the bud­get goes up ev­ery sin­gle year.”

The CBO did not pub­lish these fig­ures, but when you ad­just the CBO’s March 2016 base­line for the re­duc­tions in out­lays in its most re­cent es­ti­mate of the leg­is­la­tion, here’s what hap­pens to an­nual Med­i­caid spend­ing: 2017: $390 bil­lion 2018: $395 bil­lion 2019: $409 bil­lion 2020: $395 bil­lion 2021: $396 bil­lion 2022: $405 bil­lion 2023: $419 bil­lion 2024: $436 bil­lion 2025: $455 bil­lion 2026: $475 bil­lion No­tice that when the ma­jor part of the Med­i­caid changes take ef­fect in fis­cal 2020, ac­tual spend­ing de­creases year over year. In fact, not un­til 2023 does spend­ing get back above the level of 2019. So never mind “the base­line” — spend­ing year over year de­clines in 2020. (HHS did not dis­pute our cal­cu­la­tions.)

What hap­pens in 2020? Cur­rently, the fed­eral gov­ern­ment pays for a por­tion of the cost of Med­i­caid, at least $1 in match­ing money for ev­ery $1 a state spends on Med­i­caid, with 90 per­cent of the costs if a state ex­panded Med­i­caid un­der Pres­i­dent Barack Obama’s Af­ford­able Care Act.

But, un­der the Amer­i­can Health Care Act, fi­nanc­ing would be set per en­rollee in a state, us­ing 2016 as a base year. Then, in­creases in spend­ing in each sub­se­quent year would be lim­ited to the med­i­cal care com­po­nent of the con­sumer price in­dex for all ur­ban con­sumers, with a higher rate set for the el­derly, the blind and the oth­er­wise dis­abled start­ing in 2020. (In other words, the base rate is locked in for four years even for the el­derly, the blind and the dis­abled, so that lower base­line would be per­ma­nently baked into fu­ture cal­cu­la­tions even for a group re­quir­ing ex­tra re­sources.)

Price said that spend­ing would in­crease “equal to the cost of med­i­cal care,” but the CBO pro­jected that Med­i­caid spend­ing per en­rollee would grow faster than the med­i­cal in­fla­tion rate, so it’s clear that less money ev­ery year would be avail­able to serve this pop­u­la­tion. In any case, it’s all but im­pos­si­ble to pre­dict how much pres­sure the aging of the baby-boom gen­er­a­tion would place on Med­i­caid. (About 25 per­cent of Med­i­caid spend­ing goes to nurs­ing home and longterm care.)

At one point, Price as­sured Tap­per that it was “ab­so­lutely not” true that peo­ple would lose Med­i­caid as a re­sult of the spend­ing re­duc­tions. This is a mis­lead­ing talk­ing point that we have dis­sected be­fore, but sim­ple math ex­plains why this is false. Peo­ple cy­cle on and off Med­i­caid on a reg­u­lar ba­sis. If they try to re­turn to the pro­gram once the Amer­i­can Health Care Act takes ef­fect, they will have lost their grand­fa­thered sta­tus.

“The Wash­ing­ton habit of mea­sur­ing the suc­cess of a pro­gram by how much money is spent is one of the rea­sons the Med­i­caid pro­gram is in dire need of re­form,” said Alleigh Marré, HHS na­tional spokes­woman. “The plain text of the AHCA is clear — spend­ing on Med­i­caid goes up ev­ery year by at least the same rate as av­er­age med­i­cal ex­penses. The AHCA is fo­cused on out­comes, who’s ac­tu­ally get­ting ac­cess to qual­ity care, and how can states have the flex­i­bil­ity to tai­lor their pro­grams to meet the unique needs of the vul­ner­a­ble pop­u­la­tions that Med­i­caid was cre­ated to help.”

The Pinoc­chio Test

Price flatly stated that Med­i­caid spend­ing will go up year af­ter year in the bud­get, but that’s false. It ac­tu­ally de­clines in raw dol­lars af­ter the switch in fund­ing is im­ple­mented. Although HHS sug­gests he was say­ing that spend­ing would go up by the rate set in the law, that’s still mis­lead­ing. That’s a fixed amount un­teth­ered to the ac­tual ex­penses of pa­tients, so if the money falls short, states will ei­ther have to make up the dif­fer­ence or cut ex­penses by lim­it­ing en­roll­ment or re­im­burse­ments.

When you are re­duc­ing spend­ing by more than $800 bil­lion over 10 years, you can’t pre­tend you are boost­ing spend­ing “ev­ery sin­gle year.” Price earns Four Pinoc­chios.

JABIN BOTSFORD/THE WASH­ING­TON POST

Health and Hu­man Ser­vices Sec­re­tary Tom Price, cen­ter, told CNN that Med­i­caid spend­ing would rise ev­ery year, de­spite re­duc­tions in spend­ing of more than $800 bil­lion over 10 years.

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