Mitt Romney's Medicaid Cuts Could Curtail State Innovations He Praises

Republican presidential candidate Mitt Romney speaks during the third and final presidential debate with US President Barack
Republican presidential candidate Mitt Romney speaks during the third and final presidential debate with US President Barack Obama at Lynn University in Boca Raton, Florida, on October 22, 2012. The showdown focusing on foreign policy is being held in the critical toss-up state of Florida just 15 days before the election and promises to be among the most watched 90 minutes of the entire 2012 campaign. AFP PHOTO/Jewel Samad (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

Republican presidential nominee Mitt Romney cited Arizona and Rhode Island as models for a redesigned Medicaid system that states control during his debate with President Barack Obama Monday. What Romney didn't say is that his own plan would slash funding for the program in those states along with the rest of the country.

"We’ll take that health care program for the poor and we give it to the states to run because states run these programs more efficiently," Romney said. "States like Arizona [and] Rhode Island have taken these Medicaid dollars [and] have shown they can run these programs more cost-effectively," he said.

But Romney supports a plan that would reduce federal Medicaid funding for states by 38 percent. Arizona and Rhode Island, like other states that have reformed Medicaid with federal approval, did so by tapping funding above what Romney's proposal would allow. Romney's Medicaid proposal could even jeopardize the health care reform law he enacted as governor of Massachusetts in 2006, which is partially financed by federal Medicaid dollars.

"State innovation is a source for improving program functioning," said Alan Weil, executive director of the National Academy for State Health Policy. But there's not enough inherent inefficiency in the current Medicaid program to "give me confidence that you could take that much money out of the program and have no negative consequences," he said.

A plan authored by Rep. Paul Ryan (R-Wis.), Romney's running mate, and adopted by the Republican-led House this year, would cut federal Medicaid spending by $810 billion over a decade, according an Urban Institute analysis issued Tuesday. Including Romney's vow to repeal Obama's health care law, the Medicaid cuts would total $1.7 trillion. Together, these plans would reduce enrollment in Medicaid by as much as 37.5 million, or half of those projected to receive benefits under current law by 2022, the report says.

Romney favors converting the existing Medicaid entitlement program into a system under which states would receive lump sums of money each year in the form of "block grants," as well as eliminating some federal requirements. Romney would cap federal spending growth for Medicaid at inflation plus one percent per year, which is below the rate at which health care costs are rising.

By relaxing federal standards and cutting federal funding, Romney's plan would free states to make more cuts to coverage, benefits and payments to doctors, hospitals and nursing homes without federal approval.

Arizona was the last state to adopt Medicaid, waiting from its creation in 1965 until 1982 to open the program to its poor residents. The state also pioneered the use of private health insurance companies to cover all of its Medicaid beneficiaries, an approach since copied by other states. In 2011, there were 1.1 million Arizonans enrolled in Medicaid, or 18 percent of the state's population, according to census data compiled by the Henry J. Kaiser Family Foundation. Nationally, Medicaid covers 16 percent of Americans.

"Arizona has always been operating in the current financing and entitlement structure of Medicaid. They're not operating the structure that Mitt Romney wants to go to," said Joan Alker, co-executive director of the Georgetown Center for Children and Families in Washington.

In recent years, Arizona has raised co-payments and frozen enrollment for poor adults -- and is weighing a request for additional federal money to preserve coverage for about 150,000 people and reopen the program to new applicants. The state also put limits on coverage of organ transplants in 2010, but rescinded the policy the following year.

Rhode Island obtained a "waiver" from federal Medicaid rules in 2009 that enabled the state to establish a cap on its spending between 2009 and 2013. The Rhode Island initiative has been hailed by conservatives as a model for future block grant programs because the state has reduced its spending. But Rhode Island implemented its Medicaid reforms with extra federal money and the savings turned out not to be as large as originally believed, according to an analysis by the Center on Budget and Policy Priorities that cites the findings of a report commissioned by Rhode Island Gov. Lincoln Chafee (I). Rhode Island's Medicaid program covered 180,000 people last year, or 17 percent of residents, according to the Kaiser Family Foundation.

Obama has a radically different position from Romney when it comes to Medicaid. The president would leave the current entitlement program in place. The health care reform law he enacted in 2010 aims to extend coverage through Medicaid and the Children's Health Insurance program, a related benefit, to 14 million people by 2022, according to the Congressional Budget Office.

When the Supreme Court upheld the law in June, however, it made the Medicaid expansion optional for states. Arizona Gov. Jan Brewer (R) hasn't made a decision, while Chafee wants to expand Medicaid in Rhode Island.