Is the Trump Administration Gutting Medicaid?

Is the Trump Administration Gutting Medicaid?

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Plus: The Pope on tax cuts
Thursday, February 6, 2020

Point-Counterpoint: Is the Trump Administration Cutting Medicaid?

The Trump administration last week announced major changes to Medicaid, the federal-state health care plan for the poor. The new guidance invites states to opt-in to block grants that provide capped federal payments for a subset of beneficiaries in exchange for increased state flexibility to make changes to their Medicaid programs, including eligibility standards and benefits.

“It’s the administration’s latest move to reconfigure Medicaid to discourage enrollment by able-bodied adults and prioritize care for the most vulnerable,” The Washington Post’s Paige Winfield Cunningham wrote last week.

The plan, which the administration calls “Healthy Adult Opportunity” (HAO), has come under heavy criticism from opponents who charge that it’s just another example of Trump officials seeking to curtail Obamacare expansion and reduce health care coverage.

So is the Trump administration slashing Medicaid? In two new Washington Post op-eds, the administration's top Medicaid official and a leading health care expert provide very different answers:

No, the administration is not cutting Medicaid. “Let me be clear: Fearmongering notwithstanding, HAO does not cut Medicaid funding,” Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, writes. “This optional demonstration continues federal funding to states based on their historical spending with a reasonable growth rate.”

Verma argues that Medicaid, as the largest or second-largest budget item for states, crowds out spending on other priorities, from public safety to infrastructure to education. And with the cost of long-term care projected to rise dramatically over the coming decades, the viability of Medicaid faces a threat. “We shouldn’t have to tell someone with a disability to get on a wait list for services because we’re diverting precious resources to cover someone who potentially doesn’t qualify,” Verma says. “HAO can help states prioritize these finite dollars for those who need them most.”

The administration’s policy will give states the ability to design solutions that meet their needs, Verma argues, while still making them accountable for adhering to federal standards. On top of that, given that the new policy is optional and potentially affects only a portion of the Medicaid population — working-age adults who aren’t disabled — those critics “railing against the Trump administration’s ‘cuts’ to the Medicaid program are railing against a policy that doesn’t exist.”

Yes, the Trump administration is trying to gut Medicaid. “There’s no mistaking that the Trump administration is moving to transform Medicaid from an entitlement program covering all the poor into a selective welfare program funded by fixed and limited block grants — a shift that, over time, could starve the program of funding,” writes Nicholas Bagley, a professor of law at the University of Michigan and supporter of the Affordable Care Act.

The structure of the Trump program incentivizes states to be stingy with their Medicaid programs so that they can keep more federal dollars and channel them to other health programs. “Pruning the Medicaid rolls will thus yield a financial windfall for them,” Bagley says. He adds:

“The agenda here isn’t subtle. Republicans see ‘block granting’ Medicaid — turning it into a fixed yearly payment rather than one that automatically rises to meet needs — as a way to limit the federal government’s obligations to the poor. There’s a clear parallel to 1990s-era welfare reform. In 1996, President Bill Clinton cut a deal with Republicans to transform cash assistance to the indigent into block grants to states. … The size of those block grants hasn’t budged in more than two decades. In real terms, they’re worth about one-third less than they initially were, even as the U.S. population has swelled by 60 million.”

Read Verma’s op-ed here and Bagley’s here. And you can find a new Kaiser Family Foundation report on the implications of the Trump policy here.

Pentagon Wants to Shift Billions Toward New Technologies

The Trump administration is scheduled to release its 2021 fiscal budget request on Monday, and it’s expected to propose about $740 billion in funding for defense.

That’s an increase of just $2 billion over current funding levels, and Defense Secretary Mark Esper said Thursday that the Pentagon needs to accept the fact that its budget won’t be growing very much. Speaking at an event in Washington sponsored by the Johns Hopkins School of Advanced International Studies, Esper said “we have to brace ourselves that at best, defense spending will be level” in the coming years.

In the meantime, Esper is pushing ahead with an effort to shift billions in defense funds from legacy weapons systems and offices to modernization programs that focus on new technologies. Pentagon officials have identified $5.7 billion in cuts they want to make in aging, outdated or redundant programs, and Esper will ask Congress to approve the use of that money for what he says are more pressing projects, including nuclear modernization, missile defense, artificial intelligence and hypersonic weapons.

Esper said the effort is driven in part by the need to stay ahead of China and Russia. “The Chinese have used at least the last 18 years while we were in Iraq and Afghanistan to make enormous strides with regard to the professionalization of their force, modernizing their doctrine, building new capabilities, going after us asymmetrically,” Esper said.

Iraq War Has Cost Nearly $2 Trillion So Far: Analysis

The bill for the 16-year war in Iraq comes to about $1.92 trillion through the end of 2019, says Neta C. Crawford, a political scientist who helps run the Cost of Wars project at Brown University.

The cost breakdown:

  • $838 billion for “emergency” and “overseas contingency operation” funding in Iraq.
  • $382 billion in increases related to Iraq in the base budget of the Pentagon (out of a total $800 billion in increases since 9/11).
  • $59 billion for State Department and USAID efforts in Iraq and Syria.
  • $199 billion for the care of veterans who served in Iraq.
  • $444 billion in interest on borrowing to pay for the Iraq war effort.

Crawford says that spending in Iraq has fallen off sharply since its annual peak of roughly $140 billion in 2008, with the Pentagon requesting less than $10 billion in 2020 for Operation Inherent Resolve in Iraq and Syria. However, Crawford notes, “that budget may already be blown. Earlier this month, the US sent more troops into a war zone that was supposed to be winding down.”

Quote of the Day: The Pope on Tax Cuts

“Today’s structures of sin include repeated tax cuts for the richest people, often justified in the name of investment and development; tax havens for private and corporate profits; and, of course, the possibility of corruption by some of the largest companies in the world, not infrequently in tune with some ruling political sector.

“Every year hundreds of billions of dollars, which should be paid in taxes to fund health care and education, accumulate in tax haven accounts, thus preventing the possibility of the dignified and sustained development of all social actors.”

“Poor people in heavily indebted countries bear overwhelming tax burdens and cuts in social services, as their governments pay debts incurred insensibly and unsustainably. In fact, the public debt incurred, in a few cases to boost and encourage the economic and productive development of a country, may become a factor that harms and damages the social fabric.”

Pope Francis, speaking at the Vatican, on Monday. Translated from the original Spanish.

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Why the Economy Keeps Growing and Growing

Bloomberg columnist Noah Smith wonders how it is that the economy keeps on chugging along despite a host of potential threats that could have curtailed the expansion, now in its 11th year.

Trump supporters may credit the 2017 tax law, but it’s an unlikely explanation, Smith says. “If the Tax Cuts and Jobs Act had made the economy more efficient, it would be have led to a surge of business investment. But economics research finds little impact, and real private investment actually decreased in the second through fourth quarters of 2019.”

Moreover, the tax changes mostly benefitted the wealthy, meaning it likely didn’t provide a major lift in consumer activity. “Wealthier people tend not to change their consumption much in response to changes in income, because unlike poor and middle-class people they have no pressing need to pay off their debts or buy necessities.”

And while some have pointed to the increased deficits resulting from both the tax cuts and increased government spending as a driving factor behind the economy’s recent growth, Smith is skeptical, at least of the tax part — he doesn’t touch on spending. “Fiscal stimulus also tends to have much less of an effect when the economy is healthy than when it’s in recession,” he says. “Thus, the tax cuts probably provided little stimulus while raising the deficit.”

Smith similarly dismisses low interest rates, noting that they haven’t yet sparked a consumer borrowing boom, and Trump’s trade war, since exports didn’t rise last year.

“The truth is, there’s no obvious driver of U.S. growth,” he writes. “The most likely explanation is that the economy is simply in a phase of boring normality” — a phase in which the economy keeps growing in the absence of Federal Reserve interest rate hikes or external shocks to slow it down. “Barring a new financial crisis, a major Chinese collapse, a sharp reversal of course from the Fed, or more dramatic meddling from Trump, the economy may simply keep sailing along.”

Read the full column at Bloomberg.


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