KY Group–Medicare, Medicaid Plans Sever Societal Covenant

House Budget Would Make Steep Cuts to Needed Services in Kentucky

The U. S. House of Representatives recently passed a budget plan for 2012 and beyond that would dramatically reduce the federal government’s role in supporting basic economic security and make deep cuts to programs that serve low to moderate income Americans. Yet the plan would do almost nothing to reduce the deficit because it includes major tax cuts for wealthy Americans and corporations.

Ryan Budget

Op-Ed: Proposed Medicare and Medicaid Cuts Break an American Promise

Published in the Lexington Herald-Leader at http://www.kentucky.com/2011/04/15/1708672/ky-voices-gop-plan-breaks-medicare.html

For most advanced countries, health care is treated as a societal covenant in which all citizens have coverage for treatment of sickness, pain and disability.

America has never made that universal covenant. But when the Medicare and Medicaid programs were enacted in the 1960s, our country did make an important promise: basic health security for seniors, people with disabilities, and children living in poverty.

Now, Rep. Paul Ryan and the leaders of the U. S. House of Representatives have put forward a proposal that would break that promise. 

Ryan’s new budget plan would deliberately erode the share of Medicaid and Medicare expenses the federal government will pay. That will unquestionably lead to loss of health care coverage, access and benefits for millions of Americans.

The House plan is wrapped in rhetoric about fiscal responsibility and reducing the deficit. But it has no credibility on that claim. The plan contains deficit-worsening measures including huge new tax cuts for the wealthiest Americans and for corporations and repeal of the Affordable Care Act, which independent analysis has shown reduces the deficit in coming years.

The plan redistributes wealth to the top and embodies an ideology that says government has little responsibility to provide for the common good and secure a basic standard of living for all.

But those justifications are a hard sale, so Ryan and allies are trying to hitch their proposals to real economic challenges related to rising health care costs and eroding middle class economic security.

But the real challenge the country faces in regard to rising health care costs is not caused by Medicare and Medicaid.

Those programs are far more efficient than private health insurance. Medicaid costs less than private insurance once you adjust for health status–27 percent less for children and 20 percent less for adults. Medicare and Medicaid costs per beneficiary have been growing slower than private insurance.

Instead, unsustainable cost growth is about the entire health care system. We don’t spend enough to prevent health care problems or treat them early on, so we end up spending more later. We allow incentives for overutilization of expensive medical technologies without understanding their effectiveness. We don’t do enough to stand up to powerful corporate interests in the insurance, pharmaceutical and other health care industries.

The proposals in Ryan’s plan would limit the federal government’s contribution to Medicare and Medicaid to less than the cost of care in coming years. That will mean a big shift in costs either to states (in the case of Medicaid) or, more likely, to the elderly, poor and disabled. That will take the form of higher premiums and co-pays, reduced benefits, cuts in eligibility, and reductions in provider payments—a formula for greater financial strain on families and lower access to needed care.

Congressional Budget Office analysis shows that in 2022 a typical 65 year-old would pay twice as much out of pocket for Medicare under Ryan’s plan than without it.

Medicaid and Medicare are essential to health security in Kentucky, and will become even more important. The Affordable Care Act that Ryan proposes to repeal is scheduled to fill the hole in coverage for 261,000 uninsured Kentuckians through Medicaid. The share of the population over 65 in Kentucky, who benefit not just from Medicare but also Medicaid’s support for nursing homes, will grow from 13 percent now to 20 percent by 2030.

In another health care struggle of a different time, President Harry Truman lamented that “millions of our citizens do not now have a full measure of opportunity to achieve and to enjoy good health. Millions do not now have protection or security against the economic effects of sickness. And the time has now arrived for action to help them attain that opportunity and to help them get that protection.”

Truman couldn’t achieve that goal, but he was on hand two decades later when President Lyndon Johnson signed the legislation creating Medicare and Medicaid.

Plans like Ryan’s call the future of that 45 year-old achievement into question.

Jason Bailey is Director of the Kentucky Center for Economic Policy (KCEP).

Medicare and Medicaid Cuts.pdf

Op-Ed: Proposed Medicare and Medicaid Cuts Break an American Promise

Published in the Lexington Herald-Leader.

For most advanced countries, health care is treated as a societal covenant in which all citizens have coverage for treatment of sickness, pain and disability.

America has never made that universal covenant. But when the Medicare and Medicaid programs were enacted in the 1960s, our country did make an important promise: basic health security for seniors, people with disabilities, and children living in poverty.

Now, Rep. Paul Ryan and the leaders of the U. S. House of Representatives have put forward a proposal that would break that promise.

Ryan’s new budget plan would deliberately erode the share of Medicaid and Medicare expenses the federal government will pay. That will unquestionably lead to loss of health care coverage, access and benefits for millions of Americans.

The House plan is wrapped in rhetoric about fiscal responsibility and reducing the deficit. But it has no credibility on that claim. The plan contains deficit-worsening measures including huge new tax cuts for the wealthiest Americans and for corporations and repeal of the Affordable Care Act, which independent analysis has shown reduces the deficit in coming years.

The plan redistributes wealth to the top and embodies an ideology that says government has little responsibility to provide for the common good and secure a basic standard of living for all.

But those justifications are a hard sale, so Ryan and allies are trying to hitch their proposals to real economic challenges related to rising health care costs and eroding middle class economic security.

But the real challenge the country faces in regard to rising health care costs is not caused by Medicare and Medicaid.

Those programs are far more efficient than private health insurance. Medicaid costs less than private insurance once you adjust for health status–27 percent less for children and 20 percent less for adults. Medicare and Medicaid costs per beneficiary have been growing slower than private insurance.

Instead, unsustainable cost growth is about the entire health care system. We don’t spend enough to prevent health care problems or treat them early on, so we end up spending more later. We allow incentives for overutilization of expensive medical technologies without understanding their effectiveness. We don’t do enough to stand up to powerful corporate interests in the insurance, pharmaceutical and other health care industries.

The proposals in Ryan’s plan would limit the federal government’s contribution to Medicare and Medicaid to less than the cost of care in coming years. That will mean a big shift in costs either to states (in the case of Medicaid) or, more likely, to the elderly, poor and disabled. That will take the form of higher premiums and co-pays, reduced benefits, cuts in eligibility, and reductions in provider payments—a formula for greater financial strain on families and lower access to needed care.

Congressional Budget Office analysis shows that in 2022 a typical 65 year-old would pay twice as much out of pocket for Medicare under Ryan’s plan than without it.

Medicaid and Medicare are essential to health security in Kentucky, and will become even more important. The Affordable Care Act that Ryan proposes to repeal is scheduled to fill the hole in coverage for 261,000 uninsured Kentuckians through Medicaid. The share of the population over 65 in Kentucky, who benefit not just from Medicare but also Medicaid’s support for nursing homes, will grow from 13 percent now to 20 percent by 2030.

In another health care struggle of a different time, President Harry Truman lamented that “millions of our citizens do not now have a full measure of opportunity to achieve and to enjoy good health. Millions do not now have protection or security against the economic effects of sickness. And the time has now arrived for action to help them attain that opportunity and to help them get that protection.”

Truman couldn’t achieve that goal, but he was on hand two decades later when President Lyndon Johnson signed the legislation creating Medicare and Medicaid.

Plans like Ryan’s call the future of that 45 year-old achievement into question.

Jason Bailey is Director of the Kentucky Center for Economic Policy (KCEP). 

What Are Taxes For?

Tax Day is an important time for Kentuckians to consider the role of government in our state and nation. Taxes are a critical tool for doing things together that we cannot do alone. They support investment in education, health care, infrastructure, social services and other public structures essential for the common good in Kentucky.

Tax Day 2011

Kentucky’s Economy a Long Way from Full Recovery

iStock_000011438781XSmallWhile recent announcements of positive job growth are good news for the country, the difficult economic situation will not end soon and neither will the related challenges for the state budget. The economy fell into a deep hole in the downturn that began in late 2007, and has a long way to go until it reaches pre-recession strength.

Talk of a small possible revenue surplus in Frankfort this year must be put into context. Revenues are still at lower levels than before the recession, while the cost of public services has continued to grow and the need, demand and eligibility for services is higher due to the weak economy. Positive growth numbers must be balanced with understanding of the depth of the downturn.

Economy must climb out of a deep hole

When the economy fell into recession following the collapse of the housing bubble and subsequent financial crisis, the drop was dramatic. Between December 2007 and August 2009, Kentucky lost 110,000 jobs–or one out of every 17 jobs we had. By February 2011, Kentucky still had 88,800 fewer jobs than when the recession started in December 2007. The working-age population has also continued to grow over that period, making the gap between the amount of jobs we have and the amount we need even larger. Kentucky now needs 134,126 more jobs to replace the employment that was eliminated and catch up with population growth (Figure 1).

Figure 1

Job Gap_0

Sources: Author’s calculation, Bureau of Labor Statistics, Economic Policy Institute

How large is a gap of 134,126 jobs? Employment has been growing at an average rate of only 2,000 jobs a month in Kentucky over the last year. At that pace, it would take 5 ½ years or until 2016 to close the gap. Even that estimate doesn’t take into account the fact that the working age population will continue to grow over that period as well, stretching out the time period for full recovery even further.

This recession is not like others

The recession that began in 2007 was deeper and recovery has taken longer than previous recessions. Figure 2 shows the indexed job loss and job gain in Kentucky for the 2007 recession compared to the recessions of 1981, 1990 and 2001. In this figure, job levels for each month are expressed as a share of jobs in the state immediately before the recession began. An index of 1 means that employment has returned to pre-recession levels. The 2007 recession resulted in much steeper job loss than others, particularly in the second year of the recession. And like the 2001 recession, the 2007 recession has taken longer than previous recessions for real job growth to return.

Figure 2

Index Job Loss

Sources: Author’s calculation, Bureau of Labor Statistics, Economic Policy Institute

Possible revenue surplus must be put in context

The governor’s recent veto retained language in the legislature’s budget bill that assumes $22.4 million in extra revenue for 2011 above the state’s official forecast. The Office of the State Budget Director’s second quarter report provided an interim estimate of an additional $54 million for Fiscal Year 2011 above the forecast.1  The surplus is expected based on larger-than-anticipated corporate income tax revenues (due to high corporate profits) and coal severance tax revenues.

But any potential surplus must be put into a broader context. Even if the extra money materializes, General Fund revenue for 2011 won’t surpass the amount collected in 2008. General Fund dollars in 2010, 2011 and 2012 are each $1.2 billion less than was expected in an August 2007 official state estimate (Figure 3).2

Figure 3

GF Revenue

Sources: Author’s calculation, Office of the State Budget Director

Lower than expected revenue is compounded by spending pressure due to greater eligibility, need and demand for a variety of state services and programs in the weak economy. For example, there are 91,300 more enrollees in Kentucky’s Medicaid program in June 2010 than there were in June 2006.3 And for 2012 there is no additional Recovery Act money, which played a major role in helping fill budget gaps over the years 2009 to 2011.4 Congress looks poised to enact federal budget cuts instead, which could cause additional harm to the economy.

Looking forward

Difficult times are likely to continue in Kentucky for the foreseeable future. Federal leaders should be taking greater action to create faster job growth and a more robust recovery. State leaders should be taking a more balanced approach to ongoing budget challenges rather than narrowly and repeatedly cutting needed public services and investments. Kentucky needs better-funded public services in order to weather hard times, make the most positive contribution to economic recovery and prepare its workers and communities for growth when it returns.

Kentucky Recovery.pdf

The Kentucky Center for Economic Policy (KCEP) conducts research, analysis and education on important state fiscal and economic policy issues. KCEP seeks to create economic opportunity and improve the quality of life for all Kentuckians. Launched in 2011, the center receives support from foundation grants and individual donors and is an initiative of the Mountain Association for Community Economic Development (MACED).

  1. Office of the State Budget Director, “Quarterly Economic and Revenue Report: Second Quarter Fiscal Year 2011,” http://www.osbd.ky.gov/NR/rdonlyres/7CD70E7E-1FEF-4A32-BF17-D8208D132389/0/1101_2ndtQtrRpt2011.pdf.
  2. 2011 and 2012 revenues are the official estimates of the December 2009 Consensus Forecasting Group as adjusted by the 2010 Special Session of the General Assembly.
  3. Kaiser Foundation State Health Facts.org, “Monthly Medicaid Enrollment,” http://www.statehealthfacts.org/comparetable.jsp?ind=774&cat=4&sub=52&yr=1&typ=1.
  4. Jason Bailey, “End of Recovery Act Funds Could Mean Serious Budget Challenge for Kentucky,” Kentucky Center for Economic Policy, January 10, 2011, http://www.kypolicy.org/recovery_act.