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Medicaid and Children's Health

Nurse taking care of patient

Medicaid plays a central role in our health care system, providing coverage that is unavailable under Medicare or most employer-sponsored health insurance. People needing coverage for long-term care services and supports, rehabilitative services, personal care, assistive technology or non-emergency transportation usually must obtain this coverage from Medicaid. The program also is crucial in covering the uninsured. In particular, children, people with disabilities, older adults and low-income households depend on Medicaid for their coverage. Medicaid’s coverage of the uninsured will expand significantly in 2014 under the Affordable Care Act if all states choose to adopt the expansion. The Medicaid program is administered jointly by the federal government and the states, with the federal government paying for 57 percent of the program’s costs today and a substantially higher percentage when states expand coverage.

Medicaid’s track record highlights its importance in our health care system and economy:

  • Medicaid covers 68 million Americans. It will become a primary source of coverage for an estimated additional 17 million people by 2016 when coverage is expanded by all of he states under the Affordable Care Act, according to the Congressional Budget Office.
  • Medicaid is the nation’s major source of coverage for children, covering one in three children and more than 40 percent of all births. Of the 30 million children covered, most live in households at or below the poverty level.
  • Medicaid covers 8 million people with disabilities and 9 million low-income Medicare beneficiaries. The program plays a unique role in providing services to address the extensive and complex needs often faced by individuals with disabilities and older adults.
  • Medicaid provides important fiscal stimulus during economic downturns. Medicaid is considered an “automatic stabilizer” for the economy, providing coverage for families that lose employment-based coverage and maintaining jobs in the health care sector. Between 2007 and 2009, Medicaid and its sister program, the Children’s Health Insurance Program (CHIP), picked up coverage for an additional 4.6 million children.

Medicaid has been a victim of the country’s skyrocketing health costs, which have plagued all forms of health coverage. Opponents of Medicaid (and public health programs in general) are trying to use the economic crisis and state budget problems to advance proposals they have pushed for years to make huge cuts in the program. Some of these proposals would end Medicaid as we know it by fundamentally restructuring the program.

  • Block grants. For example, converting Medicaid to limited block grants, which several state governors and members of Congress have proposed, would result in capped annual contributions to state programs from the federal government. If this proposal were implemented, Medicaid could not expand during economic downturns to address health coverage gaps or provide economic stimulus.
  • Reducing federal matching funds (“blended rates”). Another proposal to restructure Medicaid’s financing would base federal payments to the states on estimates of the number of people in each state who need Medicaid. However, the explicit goal of this proposal is to reduce spending, so the calculation of need will necessarily be designed to ratchet down funding to the states. This approach, like block grants, would amount to an arbitrary reduction in Medicaid funding.
  • Curtailing eligibility. Another approach to cutting Medicaid is to allow states to roll back eligibility. States have been given additional federal funding for their Medicaid programs to allow them to meet growing need during the economic crisis. In addition, under the Affordable Care Act, the federal government will cover most of the cost of allowing millions of uninsured people to join Medicaid in 2014 and after. A condition of receiving this extra funding, however, is that states must maintain eligibility for the groups they currently cover. This will ensure that the new funding will be used to cover more people. As the economic crisis continues, however, states continue to face falling tax revenue and a number of them are seeking to dump people from their Medicaid programs.
  • Weakening Medicaid as an automatic stabilizer. All of these proposals to slash Medicaid funding would subvert one of the program’s most important functions: providing needed assistance and economic stimulus when the economy is bad. As a result of these proposals, millions of people would go without coverage, and hundreds of thousands of health sector jobs would be at risk. 

It is essential that savings in Medicaid be achieved through improving the efficiency of health care delivery and the accuracy of payments to providers, not through arbitrary reductions in funding.

Children’s Health Insurance Program (CHIP)

When the CHIP was established in 1997, 10 million children were uninsured. To address this problem, the CHIP program provides flexibility for states to expand their Medicaid programs or to establish separate programs to provide coverage for children. Like Medicaid, CHIP is a federal-state partnership, but the federal government pays a matching rate that is higher than the rate it pays for Medicaid, covering 70 percent of CHIP spending, on average.

Currently, the CHIP program provides essential coverage to nearly 8 million children in low-income families. During the economic crisis, CHIP and Medicaid enrollment expanded to protect families in need. Between 2007 and 2009, the uninsured rate for children actually declined by 600,000—despite a reduction in the number covered by employer-sponsored insurance—thanks to an increase in CHIP and Medicaid enrollment. The expansion of the program also served as fiscal stimulus that has preserved health care jobs during the recession.

Nevertheless, there are still 8.3 million uninsured children in the United States, including 5 million who are eligible for CHIP or Medicaid. When Congress reauthorized CHIP in 2009, it established a new grant program to address this enrollment gap through outreach and education. The health exchanges that will be established under the Affordable Care Act will facilitate enrollment in CHIP and provide subsidized coverage for many children who are not eligible for the program.

The CHIP program is only funded through fiscal year 2015. It is critical that future health reform efforts build upon the success of CHIP in providing health care coverage for all of America’s children.

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