President Obama yesterday announced his deficit reduction package. Here’s the 80-page proposal, off the White House website.
Sarah Kliff at Ezra Klein’s WonkBook at the Washington Post details the health care cuts. In terms of the DC-based advocates that whose analysis we watch closely, the Center on Budget and Policy Priorities, which generally gives it good marks. And while Families USA praises the framework, it cautions against the Medicaid cuts that are included.
But before going into specifics, let’s take the package as a whole. First of all, it is probably most important what President Obama is NOT proposing. He is not advocating the wholesale restructuring and/or dismantlement of the Medicare and Medicaid programs, as proposed by Congressional Republicans. He is NOT proposing to raise the eligibility age of Medicare, or make other major changes to eligibility or benefits in either Medicare or Medicaid. These GOP proposals don’t do anything to control the cost of health care; they simply push more of the cost of care from the federal government onto families or states. That’s not a solution—it’s simply a shift, that makes patients and taxpayers pay more in the end.
As opposed to Congressional GOP proposals, the President is seeking to prevent these radical changes by instead raising revenues, for example allowing some of the Bush tax cuts for the wealthy expire. If we are seeking to reduce the deficit in the long term, it’s appropriate to ask for everyone to share in the solution, not just low- and middle-income families who depend on these programs, but also the folks who have benefitted the most.
But even President Obama’s proposal is weighted toward cuts, 3:1. In health care, some of the cuts are to find more savings in the health system. For example, one of the bigger budget solutions is to get the same discount for prescription drugs in Medicare as we do in Medicaid. There are other solutions that smartly seek to find savings in Medicare and Medicaid.
So while we are happy that the President is protecting the basic core of Medicare and Medicaid, we are concerned about the impact of specific cuts, whether the reduction in funds for prevention and public healt, some cost increases to certain Medicare beneficiaries, or some of the Medicaid cuts that will fall on states.
We were relieved that the savings sought from Medicaid was less than originally feared, given how sparsely funded it currently is. But the cuts that remain continue to be cause for concern. The proposal would change the formula by which the federal government reimburses states for much of the cost of Medicaid, and there’s a real argument for making those formulas simpler and fairer. Depending on the formula, California could win or lose. But the issue is that this recalculation would also seek to save the federal government over $16 billion—which means some combination of states will have to pick up the difference. California would not be in a position to make up the difference—I’m not sure many states would be—and as a result the state would have to make up the difference through cuts or tax increases. Our Governor Brown was very concerned about an earlier “blended rate” proposal because of the risk to the state’s general fund, and it’s something to watch closely.
But the biggest concern is not what is in the President’s proposal, but what might come out of a negotiation with the Congressional Republicans. The President has appropriately said he would veto any proposal that cuts Medicare without a revenue increase on high-incomes. But given what the GOP has proposed, they may demand significant cuts if they were ever to agree to any deal on taxes.
The specifics are less important than the overall framework of the choices that we as a country have to make: Are we going to ask everyone to share in the solution to our budget problems, or only ask those low- and middle-income families that depend on programs like Medicaid and Medicare? Are we going to preserve and protect Medicare and Medicaid with some minor adjustments, or are we going to radically restructure them, making Medicare into a voucher program for seniors, and Medicaid a block grant program for states? And more immediately, are we going to focus on jobs and improving our economy, or harming our economy by cutting core programs, especially those that people depend on in a downturn?
The answers are up to us.