Is Medicaid Doomed? How Ryan's Plan Would Affect America's Very Poorest

He doesn't just want to trim America's insurance program for the poor. He wants to bulldoze the whole thing and replace it with something more modest.

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(Reuters)

Democrats are giddy to attack Paul Ryan's Medicare reforms, but it's his plan for Medicaid that would have the fastest and most massive impact on U.S. health care. How massive? Think 44 million additional Americans without insurance, in a worst case scenario.  

If that number leaves you a bit dizzy, or skeptical, it's a testament to how radically Ryan would like to reshape the federal program that's responsible for insuring low-income Americans, and which also happens to be at the heart of Obamacare's attempt to expand health coverage. In his most recent budget proposal, Ryan pledged to cut Medicaid spending by $810 billion over ten years. But forget the precise dollar figures for a moment. Romney's new running mate doesn't just want to trim the program. He wants to bulldoze the whole thing, then build a more modest replacement in its stead.  

Think of Medicaid as the quiet giant of domestic spending -- smaller and less gabbed about than Medicare, but just as important to a big swath of the country. Under the program's complex rules, the federal government and states split the cost of insuring Americans who generally live in poverty, or close to it, with Washington paying the lion's share. Currently, it covers more than 62 million people. The majority are either children or parents, but most of the program's funding goes to the old and disabled. In 2010, the price tag was roughly $263 billion for the feds and $125 billion for the states. Much of that spending pays for basic services such as drugs and doctor's visits, but a large chunk is devoted to long-term care, such as nursing homes for the elderly poor.  

Before Obamacare, Washington kept its checkbook for Medicaid fairly wide open. The federal government set the minimum guidelines for who had to be covered by the program, but states could be more generous if they chose, so long as they stayed within certain guidelines. Some (think New York) tried to provide coverage to as many of their residents as possible. Others (think Florida) shot for far fewer. Health care reform opened up the checkbook even further. By expanding the program to cover childless, able-bodied adults for the first time, it lifted some of the last meaningful limits on Medicaid's largesse, other than the desire of states to shoulder their portion of the expense. 

Under Ryan's proposal, Washington's open-ended commitment to helping the poor get care would be history. Instead of offering them unlimited funding, the federal government would hand each state a fixed sum of money -- or a "block grant" -- to cover the poor and uninsured as they saw fit. On its own, that change wouldn't necessarily devastate the program. But here's the key detail, the trick that yields all those budget savings conservatives are after: The grants would be indexed to grow much slower than healthcare costs.

The point is to make them stingier over time. Conservatives hope that will force states to find new efficiencies. More likely, it will just lead them to insure fewer residents, offer less generous coverage, or both. In essence, every state would have to act more like Florida, and less like New York. The graph below, from a study published last year by the Urban Institute and the Kaiser Family Foundation, shows the growing gap between Ryan's spending for Medicaid, and the program's growth with or without Obamacare. 

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Jordan Weissmann is a senior associate editor at The Atlantic.

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