With federal budget cuts, the sky may really be falling

My son loves books, and one of our favorite things to do every night is read before bed. Many of the stories we choose also provide a learning experience. One of our recent favorites has been Chicken Little, which I think my son chooses to laugh at me stumbling over tongue-twisting character names. It also gives us a chance to talk about thinking rationally.

This lesson is applicable from our kids to my policy work to the highest levels of government. But when President Donald Trump released his “skinny budget” in March—despite being light on detail—the potential impact it could have on our state budget and Michigan residents was stifling. And at times, I really do feel like the sky is falling.

My fear is not unfounded. Michigan has grown increasingly reliant on federal funds. Over the past decade, while our total state budget has grown by about 29%, federal funds in our budget have grown by nearly 69%. In our current budget, federal funds provide $22.7 billion of our $54.2 billion state budget. This means that more than $4 out of every $10 provided for important programs like public education, healthcare for children and families with low wages, food assistance and road maintenance are paid for by federal dollars.

Think-the-federal-budget-does-not-matter_CROP

These federal grants do matter to our state budget. According to a recent report from the Center on Budget and Policy Priorities, federal grants to states and local governments make up nearly one-third of non-defense discretionary spending. Michigan receives 3% of total federal grants to states, and only California, New York, Texas, Florida, Georgia, Illinois, Pennsylvania and Ohio get a bigger share than Michigan. Cuts to these discretionary programs, which are already at historically low levels, would harm workers, college students, local communities and families with low- and moderate-incomes.

What’s more is that this “skinny budget” proposes to completely eliminate funding for the Low Income Home Energy Assistance Program (LIHEAP), which helps families and many seniors pay heating bills; a block grant that supports housing, community facilities and economic development; the HOME program which helps develop and repair affordable rental housing and repair homes for homeowners with low incomes; and the Community Services Block Grant, which provides anti-poverty services.

While President Trump’s budget only outlines changes in discretionary spending, changes to mandatory grants may still be forthcoming, for example block granting or putting a per capita cap on Medicaid. (While the first round of the American Health Care Act was withdrawn, you can bet that Congress will try, and try again, to repeal the Affordable Care Act and alter Medicaid funding.) Changes in these programs, including Medicaid, the Children’s Health Insurance Program (CHIP), free and reduced-priced school meals, child care assistance and other assistance for families with low incomes, would mean deep cuts to these programs as states would be unable to absorb the costs themselves. This would reduce services to those Michigan residents who really need it.

Cuts to federal grants to state and local governments, and changes in federal programs, will only mean cuts to the very Michigan residents that rely on these services. Changes will result in more potholes and unsafe bridges, fewer Michigan residents with healthcare coverage, more children going hungry, less affordable housing, more poverty and more problems, all having a long-term negative impact on our economy.

So pardon my doomsday sentiment, but states really rely on federal funds to run. And these changes would affect our state for years to come. But we can change the future. It is important for all of us to get in touch with our members of Congress and tell them the things that really matter to us as they make decisions on the federal budget that will have a direct impact on our great state.

— Rachel Richards

Kresge grant helps League redefine health policy work in Michigan and Detroit

For Immediate Release
March 31, 2017

Contact:
Alex Rossman
arossman@mlpp.org
517-487-5436

$600,000 grant funded two new health policy analyst positions, helps League improve integration of state health and human services

LANSING—A $600,000 grant from The Kresge Foundation awarded to the Michigan League for Public Policy will help transform the League’s health policy work in Detroit and around the state. The funding enabled the League to hire two new health policy analysts, one focusing on Medicaid and the other specializing in the social determinants of health.

“These policy analysts provide valuable expertise regarding additional opportunities to integrate health and human services policies that will lead to great health and well-being for Michiganders,” said David Fukuzawa, managing director for The Kresge Foundation’s health and human services programs. “The League will serve as a valuable resource for Michigan’s Department of Health and Human Services as the department continues to develop integrated services for the state.”

The funding from The Kresge Foundation will support the League’s research and analysis examining the current health and well-being of Detroiters and Michigan residents. The League will identify gaps in state services and support systems and create specific policy recommendations to address those gaps. This work by the League’s two new health policy analysts will advance public policy change by supporting the integration of health and human services and helping lawmakers, state department officials and service providers better understand the connection between health and other factors.

“The Kresge Foundation has been a longstanding supporter of our work at the League, but this significant grant will help take our health policy efforts to the next level,” said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy. “We work on a variety of issues to improve the physical and economic well-being of kids and families in Detroit and around the state, and we are seeing more and more how all of these issues connect. A child’s health is directly impacted by their environment, nutrition and family’s income, and their health affects their education and future occupations and earnings. We need comprehensive strategies to tackle all of these issues, and this grant will enable us to do that.”

The League’s health policy analysts will research and write reports, analyze current and proposed policy, and work with partners, department staff and policymakers on social determinants of health and Medicaid-related issues. Emily Schwarzkopf, the League’s health policy analyst working on Medicaid, has hit the ground running as the League and our partners work to protect the Affordable Care Act and the state’s Medicaid expansion program, the Healthy Michigan Plan. Health Policy Analyst Julie Cassidy will be working on the social determinants of health, a relatively new focus of health policy work that takes a holistic approach and incorporates other needs and services.

The Kresge Foundation is a $3.6 billion private, national foundation that works to expand opportunities in America’s cities through grantmaking and social investing in arts and culture, education, environment, health, human services and community development in Detroit.

###

The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on economic opportunity for all. It is the only state-level organization that addresses poverty in a comprehensive way.

Think the federal budget doesn’t matter to states? (Federal funds as a % of Michigan budget)

pdficon

Think the federal budget does not matter to states

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harriet McTigue

Harriet McTigue

Harriet McTigue

Harriet McTigue joined the League as the Kids Count research associate in 2017. Prior to the League, she worked for the Michigan State University Sexual Assault Program as an advocacy coordinator, providing services to victims and helping to decrease sexual violence in the greater Lansing area. Prior to that, she worked for the Michigan State University Office of the Vice President for Research and Graduate Studies, assisting the university in increasing grant funding.

Harriet holds a Bachelor of Arts in public policy with minors in women’s and gender studies, and economics, as well as a Master of Arts in public policy, both from Michigan State University.

Contact: hmctigue@mlpp.org

Restore the Part-Time Independent Student Grant in the 2018 budget

pdficon

March 2017
Peter Ruark, Senior Policy Analyst

Budget Brief JPG USE THIS ONECurrently, Michigan has no financial aid grants for students who have been out of high school for more than 10 years and want to go to a public university or community college. Eliminated in 2010, the Part-Time Independent Student Grant addresses this specific need and should be reinstated in the 2018 budget.

BB Restore part-time independent student grant in 2018 budget GRAPH 1The Problem

The decision by workers to get trained in new skills is often made more than 10 years after graduation from high school. While state financial aid helps many students of traditional college age, there are no state financial aid programs to help students attend public community colleges or universities if they have been out of high school for more than 10 years. Two of the three existing grant programs explicitly exclude such individuals from eligibility, and the third is available only to those attending a private, not-for-profit institution. Additionally, none of the grant programs are available to students who go to college less than half time, even though that is sometimes the most workable choice for those who are working and raising a family.

BB Restore part-time independent student grant in 2018 budget TABLE 1The Governor’s 2018 State Budget

The governor’s 2018 budget includes $2 million to reinstate the Part-Time Independent Student Grant.

The League Recommends

Until 2010, Michigan offered two grants to older students: the Part-Time Independent Student Grant (formerly called the Adult Part-Time Grant) and the Educational Opportunity Grant (which was also available to qualifying “traditional” students). Given that the two grants previously available for this population were funded at a total of more than $4.7 million during the most recent years prior to their elimination, we urge the House and Senate to join the governor in reinstating the Part-Time Independent Student Grant and appropriate $4.7 million in funding to meet the true need for financial assistance for this group of older students and workers.

BB Restore part-time independent student grant in 2018 budget TABLE 2

How to think about health insurance and the Affordable Care Act

Few laws, if any, have been the object of more misinformation, disinformation and alternative facts than the Affordable Care Act of 2010 (ACA, also known as Obamacare). Now that Congress is considering plans to dismantle the ACA, it’s more important than ever for Americans to have access to thoughtful analysis, which is what I hope to provide here.

Why Health Insurance Is a Good Thing
The first thing to say is something that may sound obvious, but which has nevertheless often been lost in the noise: Health insurance saves lives. Across the country, thousands of people are alive today who would be dead without the insurance coverage that they have received through the ACA. That’s worth saying again—thousands of Americans would be dead without the ACA.

If the ACA is rolled back, it is estimated that nearly 24 million Americans will lose their health insurance. This includes millions of people in Michigan. If that happens, every year more and more will die needlessly.

Why the United States is the Only Affluent Country without Universal Health Insurance
The second thing to say is another thing that may seem obvious, but is worth saying because the “debate” over the ACA has obscured so much: The USA is the only affluent country in which a “debate” like this is taking place. Every other affluent country in the world (including Canada, the United Kingdom, Australia, Germany, Japan and many others) has achieved a moral consensus that all residents should have full access to the healthcare system. In these countries, the moral judgment is that it is simply wrong for a society to provide full access to healthcare for some residents, but not for others. In other words, in these other countries, access to healthcare is viewed as something that should be distributed very equally.

Healthcare 2In the United States, the lack of such a consensus indicates that many are comfortable with a very unequal distribution of access to healthcare. With that very unequal distribution, those who are rich enough or lucky enough to have good health insurance have access to the best doctors and hospitals in the world. Those who aren’t so lucky are left to pray that they don’t get sick. If they get very sick, they are sometimes lucky enough to get a hospital to provide them with uncompensated care. And sometimes not.

It’s worth noting that access to healthcare is only one of several areas in which the moral consensus in the USA is different from the moral consensus in the rest of the world. For example, in the USA, household income is distributed much more unequally than in other affluent countries. For the USA to have a distribution of income as equal as that of the countries of western Europe, it would be necessary to redistribute a few trillion dollars from the top one percent to the bottom 99 percent, every year.

These differences between the USA and the other affluent countries did not arise by accident. They are the deliberate result of policies. The other countries also have more generous provisions for parental leave and child care, much lower rates of incarceration, and the list goes on and on. In one policy area after another, the political systems of the other affluent countries reflect a moral consensus to limit inequality, while the American political system reflects a moral consensus (or lack thereof) that allows a much greater degree of inequality.

The Economics of Health Insurance Markets
Although morals and ethics are central to understanding why we in America allow so many needless deaths as a result of lack of health insurance, a full assessment of the issue also requires some knowledge of the economics of health insurance. If private health insurance markets were able to provide universal coverage at a cost that everyone could afford, the problem would easily be solved.

pediatricianHowever, private insurance markets suffer from fundamental flaws. (This is not a diatribe against private markets. Private markets do an amazing job of providing all sorts of goods and services, with only a very modest amount of government regulation and oversight. But the peculiar characteristics of insurance markets are such that they don’t work nearly as well as most other markets.)

A private health insurance company makes a profit by collecting more in premiums than it pays out in claims. Thus the best of all possible worlds for a private health insurance company is to collect premiums from very healthy customers who have few illnesses, and thus generate few claims. That’s why, before the ACA, the standard business model for private health insurance companies was to deny coverage to people with pre-existing medical conditions.

If a private health insurance company were to offer coverage at rates based on community averages, and if it could not keep out the sickest people, what would happen? The sickest people would sign up, but the healthiest would not. That would leave the company with a sicker-than-average pool of customers. This is called “adverse selection,” and it’s a formula for insurance companies to go out of business.

Denial of coverage to people with pre-existing medical conditions is extremely unpopular with the public, but it is the only way for an otherwise unregulated private health insurance market to avoid collapsing from adverse selection.

Public Policies for Overcoming the Flaws of Private Health Insurance Markets: The Simple and the Complicated
If we want people with pre-existing conditions to have health insurance, two public policy approaches are available. The simple method is to have a “single-payer” system in which everyone is covered. This simple method is used in Medicare, which pays for health insurance for all elderly Americans. Medicare is not perfect, but it does effectively solve the problem of adverse selection for elderly Americans—the elderly are covered automatically.

medical1-150x150If we were to extend Medicare to the non-elderly population, a system of “Medicare for All” would achieve universal health insurance coverage, and would thus overcome the problem of adverse selection. Everyone would be covered.

An added advantage of Medicare for All is that it would lead to a dramatic reduction in administrative costs. The healthcare “system” in the United States is a crazy-quilt hodge-podge of Medicare, Medicaid, various types of private insurance, and a separate system for veterans, each with its own rules and forms. As a result, the United States spends far more on administration than any other country. If we had a single, unified system, we would save hundreds of billions of dollars per year by reducing the cost of administering the system.

The complicated way to expand health insurance coverage is to continue to rely on private insurance companies, but to add some major tweaks to the system. The first tweak would be to prohibit the insurance companies from denying coverage to those with pre-existing conditions. But that, by itself, would push the system into a death spiral of adverse selection. The sickest would sign up; the healthiest would not; the companies would go out of business.

Thus if we desire to move toward universal coverage, while still working within the framework of a private market for health insurance, it isn’t enough to prohibit companies from denying coverage. It’s also urgently necessary to get more healthy people into the risk pool. The way to get more healthy people to sign up for coverage is to offer a set of subsidies for acquiring insurance, and/or penalties for not doing so.

Enter President Barack Obama. When he took office in 2009, along with Democratic majorities in both Houses of Congress, the levers of power in Washington were in the hands of people who were committed to pushing toward more equal access to healthcare. They faced a choice between the simple method (Medicare for All) and the complicated method (prohibition of denial of coverage, combined with taxes and subsidies).

They chose the complicated method: The Affordable Care Act prohibits insurance companies from denying coverage to those with pre-existing conditions, which is extremely popular. And then, in an effort to avoid an adverse-selection spiral, the ACA also has a complicated system of taxes and subsidies, which are unpopular.

Why did President Obama and the congressional Democrats choose the complicated method? The answer has nothing to do with the economic advantages and disadvantages of the simple method and the complicated method. It has everything to do with the political fact that health insurance companies have tremendous power. The simple approach of Medicare for All would cut out the insurance companies. President Obama and the Congressional Democrats reached the conclusion that insurance companies had enough power to block the simple method, which left the complicated method as the only option for increasing access to healthcare.

Evaluation of the Affordable Care Act
What can we say about how well the ACA has performed? In my view, the ACA is a significant improvement on what we had before. Its biggest achievement, of course, is that the number of Americans with health insurance has increased by about 20 million, including about 1 million in Michigan; as mentioned above, some of these people are alive today because of the ACA.

Emergency room 2Unfortunately, the ACA has not done as much as it might have done. One problem is that the decision to take part in the Medicaid expansion, which is an important part of the ACA, was left up to the states. Many states decided not to participate, even though the federal government would have covered a large portion of the costs. Millions of Americans thus had to continue without health insurance, and some of them died needlessly. Fortunately, Michigan’s Governor Rick Snyder is one of the few Republican governors who had the courage to put the health of residents ahead of partisan politics.

The taxes and subsidies that are designed to shore up the private health insurance market have only been modestly successful. Some insurance companies have stopped providing coverage. This is a testament to the extraordinary stubbornness of the adverse-selection problem. Even with a very elaborate system of incentives, the ACA still has not been able to get as many healthy people into the system as it should.

Efforts to Roll Back the ACA
If the 2016 elections had been won by people who place a high priority on equal access to healthcare, the ACA probably would have been tweaked in an effort to put a further dent in the problem of adverse selection.

But power in Washington now rests in the hands of those for whom equal access to healthcare appears to be a low priority. And yet the Congressional leadership also appears to understand that it would be politically unpopular to return to a system in which insurance companies can deny coverage to those with pre-existing conditions. Thus the American Healthcare Act maintains the ACA’s prohibition on denial of coverage, but would charge more in a person has a significant lapse in coverage while weakening the parts of the ACA that were designed to prevent an adverse-selection spiral. This raises the real possibility that the problem of adverse selection could worsen.

The rollback of the ACA also includes repeal of some of the taxes that were enacted to pay for the expansions of health insurance. The most important thing to know about the taxes slated for repeal is that they are paid almost exclusively by people with very high incomes. Thus again we see the linkage between moral attitudes toward different issues. The Congressional leadership seeks to scale back the ACA (thus leading to less equal access to healthcare), at the same time that it seeks to reduce taxes on the most affluent (thus increasing income inequality generally).

I trust it is clear that I am in favor of expanded health insurance. In fact, I would be happy if every American had health insurance, even though that would probably require increased taxes, some of which I would probably have to pay. It’s also true that I have been fortunate to work for the last 34 years for an employer that provides very good health insurance. Thus you might ask, why do I care whether anyone else gets insurance? If I have mine, why shouldn’t I just be happy about that (and if others don’t have health insurance, that’s just their tough luck)? The reason is that I am a member of a community. I am not an island unto myself; I am a citizen of the State of Michigan and the United States of America. I believe in the Biblical admonitions to feed the hungry, clothe the naked, welcome the stranger, and care for the sick. I believe that if you have done it unto one of the least of my brethren, you have done it unto me.

— Charles L. Ballard, Ph.D., League Board Chair

Facing the rhetoric about working families and child care

My days of raising young children are long gone, but I remember well my biggest parenting struggle and cause of angst—finding child care that I trusted. I am not unique. Two of every three young children have working parents and many are facing the same struggle.

Virtually all parents consider their children their most precious gift, and they want child care that is safe, nurturing, consistent and reliable. They want care that can help their children take advantage of the rapid growth that happens in the earliest years—in language, emotional attachment, and social and cognitive skills.

Sadly, not enough has changed in the 25 years since I was in the child care market. Despite rhetoric about the importance of children and new scientific research about the critical window of opportunity for brain development in the earliest years of life, child care providers are still some of the most underpaid workers in our state, with wages similar to dishwashers and fast food cooks (who are also underpaid).

When my youngest son was in child care, I worried about the turnover of child care providers in his center. Just when he was getting attached and feeling comfortable with caregivers, they would leave. On one occasion I went to a downtown Lansing sandwich shop to pick up some lunch, and found one of his favorite teachers behind the counter. She told me that she missed the kids and loved the work, but couldn’t afford to stay.

BB Child Care BibsMarch_17_2017 chart 2What does this say about how we value our children? And mine is a story of someone who had the means to purchase higher-quality care. What about the many parents who do not, and are forced to rely on a patchwork of relatives, neighbors and friends who do not want to provide long-term care, or are facing health or other hardships of their own?

Despite the low wages paid to child care providers, child care is a major expense for low- and moderate-income families—exceeding the cost of housing and even college tuition. A family with poverty-level wages would need to spend virtually all its income (92%) to put two children in a high-quality child care center.

The governor has proposed an increase in funding next year for Michigan’s child care subsidy program, with the goal of raising reimbursements to providers willing to care for children from families with low incomes. This will not completely bridge the gap between our rhetoric about valuing children and the reality of the state’s child care system, but it is an important step forward—with a needed focus on the families that can least afford high-quality child care, and the children who need it most. I commend the governor for this important step and hope you will too.

— Pat Sorenson

 

Child care for working families–A foundation for growing the state’s economy

pdficonMarch 2017
Pat Sorenson, Senior Policy Analyst

BB Child Care March_17_2017 chart 1Access to child care is a necessity for working parents and a foundation for Michigan’s economic growth and vitality. Sadly, Budget Brief JPG USE THIS ONEMichigan ranks among the lowest states in the country in its investments in child care for families with low and moderate incomes—even turning back federal child care funds because of restrictive state policies that prevented families from getting the care they needed to work and support their families.

High-quality child care moves Michigan forward in two ways:

  1. Child care is an engine for economic development because it helps parents work or participate in the training and education they need to move forward. For employers, it increases the pool of workers and can reduce absenteeism and turnover—a threat to their bottom line.
  2. High-quality child care provides the learning environment very young children need to be prepared for preschool and ultimately success in kindergarten and beyond—including the critical benchmark of reading by third grade.

BB Child Care BibsMarch_17_2017 chart 2The High Cost of Child Care

The cost of placing one infant in a child care center in Michigan ($10,178 in 2015) is nearly as much as the annual cost of tuition at a public four-year college ($11,994) and exceeds the median annual cost of rent ($9,168).1 For parents with two children in a child care center, annual child care costs are nearly $18,500.2 Child care expenses are a heavy financial lift for many of the state’s working parents but are particularly burdensome for families with low wages.

For families living at or near the federal poverty level, child care costs can be an absolute barrier to employment, often forcing parents to rely on a patchwork of relatives, neighbors and friends who may be unable to make long-term commitments. The predictable results are frequent work disruptions that can jeopardize their jobs, or the tough decision to leave their children in care they don’t believe is safe or adequate.

BB Child Care March_17_2017 chart 3The Low Wages of Child Care Workers

Child care providers are some of the lowest-paid workers in the state. Despite the incontrovertible scientific evidence that the first three years of life are when children’s brains grow most quickly, setting the stage for lifelong learning and success, the annual median wages provided to people caring for young children fall below those of veterinary assistants, animal control workers, manicurists and telemarketers.

Michigan’s Child Care Subsidy Program

Michigan’s Child Development and Care (CDC) program helps families with low wages who are working, completing high school/GED courses, participating in job training programs or engaging in family preservation activities. Parents can choose care in a range of settings if providers are available locally and affordable, including licensed child care centers, child care group/family homes or with unlicensed family, friends and neighbors.

Michigan has very restrictive child care policies and, as a result, the number of families receiving assistance has dropped dramatically, along with child care expenditures.

  • Between 2009 and 2016, the number of families receiving child care subsidies fell by nearly 70%, from 74,557 to 23,411 (monthly averages).
  • The dollars flowing to communities to help support working parents, employers and the local economy fell by over 70%, from $30.2 million monthly to only $8.4 million.

Payments to Providers Are Too Low to Ensure Access and Quality

The rates paid to child care providers depend on the age of the child and the type of setting, including the number of stars a provider has in the state’s five-star quality rating system. Payments range from $1.35 per hour for unlicensed providers to a maximum of $4.75 per hour for infants and toddlers in a five-star child care center. While tiered reimbursements can create good incentives for quality improvements, the reality is that in Michigan’s grossly underfunded child care system, most child care providers are not receiving the higher payment rates. In February of this year, 60% of the 8,434 child care programs in Michigan received the base child care rate because they had 0 or 1 star in the quality rating system.3

In addition to low rates, the complexity of the provider payment process threatens the supply of high-quality care for children. Michigan is one of only a handful of states that pay child care providers on an hourly basis. Without predictable income, it is even more difficult for providers to maintain their businesses and accept children with subsidies.

Child Care Eligibility Levels Are Among the Lowest in the Country

In 2016, Michigan had the lowest income eligibility levels in the country for child care assistance and second lowest as a percentage of state median income. Even with the increase to 125% of poverty in 2017 ($25,525 for a family of three), Michigan’s eligibility cutoff remains at the bottom. Without an expansion of eligibility, many families will struggle to enter the job market, and the long-term prospects for their children are bleak. Research has consistently shown that growing up under the stresses of poverty can affect children’s ability to learn and succeed later in life.

The Governor’s 2018 State Budget

  • Increase child care payments: The governor includes $6.8 million in the current budget year (2017), along with $27.2 million in the 2018 budget, to increase rates paid to child care providers by approximately 20%, effective in July of this year.
  • Increase oversight of child care providers: The governor recommends $2.2 million for annual on-site visits to unlicensed child care providers, as well as expanded fingerprinting and background checks. These changes are mandated as part of the federal reauthorization of the Child Care Development Block Grant.

Endnotes

1. Parents and the High Cost of Child Care, 2016 Report, Child Care Aware.
2. Ibid.
3. Great Start to Quality Participation Data (February 1, 2017).

Major flaws exposed in U.S. House Republicans’ healthcare plan

For Immediate Release
March 16, 2017

Contact:
Alex Rossman
arossman@mlpp.org
517-487-5436

League, federal analysis show that plan will eliminate health coverage for 24 million people, cut $880 billion from Medicaid and shift costs to state

LANSING—Congressional Republicans’ plans for Medicaid funding will hobble Michigan’s budget and jeopardize healthcare for at least 2.5 million state residents according to a new fact sheet, Medicaid block grants and per capita caps are bad for Michigan’s health, released by the Michigan League for Public Policy today. This analysis comes on the heels of the Congressional Budget Office’s (CBO) report this week that showed the House Republicans’ health plan to replace the Affordable Care Act (ACA) will ultimately result in a drastic increase in the number of uninsured in the country and substantial cuts to federal Medicaid funding.

“The Affordable Care Act was a groundbreaking policy that significantly reduced the number of uninsured in Michigan and improved people’s health,” said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy. “On the other hand, the House Republicans’ alternative plan is an absolute disaster. It will result in 24 million people losing health insurance, cut $880 billion from Medicaid, and stifle state Medicaid funding through per capita caps. The only people who will benefit from it are wealthy individuals who will get tax breaks while our residents, our small business owners and our hospitals all suffer.”

The CBO estimates that the House Republican health plan would cause 24 million people nationwide to lose insurance coverage by 2026, including 14 million people next year. The plan will slash federal Medicaid spending by $880 billion and gives $600 billion in tax cuts primarily to the wealthiest Americans while raising premiums for millions of consumers. Additional analysis on the plan is available from the Center on Budget and Policy Priorities.

“The Affordable Care Act and the related Healthy Michigan Plan have been vital in reducing our state’s uninsured rate and have provided health coverage for millions of residents,” Jacobs said. “The governor supports the Healthy Michigan Plan and it was created with bipartisan support, but putting per capita caps on or block granting our state’s Medicaid funding will put this highly successful program at risk.”

The House Republicans’ current healthcare plan will put per capita caps on federal Medicaid funding for the states, giving Michigan and other states a fixed amount of money per Medicaid enrollee. Other Republican healthcare proposals have proposed distributing Medicaid funding through block grants where the federal government would send each state a specific amount of funding to support the entirety of the Medicaid program.

Using per capita caps or block grants to distribute federal Medicaid funding will limit the amount of federal funding that states receive, shifting costs and risk to states, hurting local economies, and putting quality coverage for seniors, people with disabilities and families with kids at risk. This shift could result in a significant financial strain on state budgets, forcing Michigan lawmakers to limit spending on Medicaid by reducing the number of people it covers or cutting other vital state programs including education, public safety or infrastructure.

The League has been a major supporter of the ACA since its inception, particularly the expansion of Medicaid through the Healthy Michigan Plan that currently insures 650,000 state residents with low incomes. The League put together a fact sheet on the ACA’s tangible benefits for Michigan residents, businesses, hospitals and our state economy.

###

The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on economic opportunity for all. It is the only state-level organization that addresses poverty in a comprehensive way.

Medicaid Block Grants and Per Capita Caps are bad for Michigan’s health

pdficonMarch 2017
Emily Schwarzkopf, Policy Analyst

Medicaid, along with Medicare, was signed into law in 1965 to extend coverage to families and individuals with low incomes, including seniors, children and individuals with disabilities. Medicaid programs are operated by individual states but within federal guidelines, which can give states the opportunity to be innovative in the design and administration of the program. As the program currently stands, the federal government guarantees coverage for all eligible individuals and secures a set of covered services for enrollees. In Michigan, the traditional Medicaid program covers over 1.8 million Michiganians and over 650,000 are enrolled in the state’s Medicaid expansion program, the Healthy Michigan Plan.

As Congress debates repealing and replacing the Affordable Care Act, there is one common theme in plans that have been put forward: fundamental changes to the way Medicaid is financed. These proposals include distributing Medicaid funding to states through block grants, or setting a per capita cap on the amount per enrollee. Either of these approaches put Medicaid and the Michigan residents that depend on it in jeopardy.

What is a Block Grant?

A block grant is a fixed amount of money that the federal government gives to a state for a specific purpose. In this case, the federal government would send each state a specific amount of funding to support the entirety of the Medicaid program.

What is a Per Capita Cap?

Under a per capita cap, the federal government pays the state a fixed amount of money per enrollee.

What Are the Effects?

Per capita caps and block grants limit the amount of federal funding that states receive, shifting costs to states, hurting local economies, and putting quality coverage for seniors, people with disabilities and families with kids at risk. On the budgetary front, the use of per capita caps would result in a savings to the federal budget by ultimately increasing the financial liability and risk to states. This shift could result in significant financial stress on state budgets. It would require lawmakers to look seriously at funding priorities. In order to balance the strain on state budgets to provide benefits, states may be forced to cut other vital programs including education, public safety or infrastructure. And in some cases, states may just decide to limit spending on Medicaid, resulting in fewer people having health coverage.

These types of funding changes lock states into a fixed funding level that will only be adjusted for inflation. This funding is not expected to keep up with the growth of Medicaid costs and will result in increased cuts to Medicaid in Michigan and around the country. The anticipated cuts will reduce state flexibility and may make it harder for lawmakers to adjust to changes and alter the program in the future.

Medicaid block grants graphicBy reducing federal funding, states may be forced to make eligibility changes to the Medicaid program. Some of these changes could be eliminating entire eligibility categories, such as childless adults or seniors in nursing homes, decreasing income eligibility levels or setting enrollment caps.

Beyond budget and enrollment impacts, changes to coverage and access for beneficiaries is also a strong possibility. States could opt to eliminate or reduce benefits, establish or increase cost-sharing, reduce payments to providers, or forego state efforts to address emerging public health concerns (like the opioid epidemic).

As the Medicaid program currently stands, states already have a lot of flexibility when it comes to the design of their program and in many states, including Michigan, it is running efficiently and effectively. Any sort of cap or block grant would severely limit state strategies for integrated care and the ability to address social determinants of health, greatly harming our state’s most vulnerable residents. These plans will put Michigan’s fiscal health at risk along with the health of the nearly 2.5 million people who depend on the state’s Medicaid program.

Next Page »