Scrooge Economics: The GOP Assault On SNAP And Medicaid Will Devastate Millions
If you’re like me, your mail and email inboxes are filled this holiday season with pleas for donations from charitable organizations that help people on the lower rungs of the economic ladder. Now more than ever they need our help because of the draconian cutbacks in funding contained in the legislation passed by the Republican Congress last July and signed into law by Donald Trump.
During the six-week government shutdown this fall, Democrats fought a worthy yet unsuccessful battle to renew the Biden-era’s increased Obamacare subsidies. Without them, millions of working people without employer-based coverage (the self-insured) won’t be able to afford their health insurance.
As of this writing, it seems unlikely the negotiations promised when the shutdown ended will succeed in reversing those cuts. Millions of people are expected to drop coverage next year because of the dramatic increase in their health insurance premiums.
Less attention on Medicaid/SNAP cuts
While those discussions are underway, few on Capitol Hill are talking about reversing the cuts to Medicaid and the Supplemental Nutrition Assistance Program (commonly known as food stamps), which won’t hit in full force until 2027. This was a strategic decision by the GOP to hide their full impact from voters until after the mid-term elections. Those cuts will affect far more people that the Obamacare premium increases.
Indeed, the Medicaid/SNAP cuts will be the biggest reductions in federal assistance for the poor in U.S. history. It’s already forced thousands of legal immigrants in the U.S. off of Medicaid. The Congressional Budget Office estimates it will eventually remove an estimated 7.5 million people from the program, mostly by setting up bureaucratic roadblocks to re-enrollment for people who already meet the law’s new work requirements.*
Those Medicaid cuts will account for three-fourths of the 10 million people expected to lose health care coverage over the next decade under the One Big Ugly Bill. Meanwhile, about 40 million people will receive smaller food subsidies unless states step in to help — an unlikely outcome in most areas of the country.
For anyone who cares about deficits, pay attention to the underlying math. The cuts to Medicaid and SNAP will reduce federal expenditures by about $1.1 trillion over the next decade. Extending the Obamacare subsidies would cost about $350 billion. The new and renewed tax cuts for corporations and the well-off will cost the Treasury about $4 trillion. Couldn’t they make do with just $2.5 trillion in tax cuts and leave the poor and self-insured alone?
Donald Trump and the GOP, meet Ebenezer Scrooge. You have a lot in common.
Cuts will affect everyone
These Medicaid/SNAP cuts aren’t going to affect just the poor and working class. They will hit everyone with employer-based coverage. Premiums for private coverage will rise even faster than now (six to seven percent on average for next year) due to the higher levels of uncompensated care given to the growing number of uninsured people who will be visiting the nation’s emergency rooms, where care is the most expensive.
It will also hit everyone who pays state and local taxes since states will be forced to pick up a higher share of the overall cost of Medicaid. The single biggest “revenue raiser” in the bill is a reduction in the tax that states are allowed to levy on health care providers. These provider taxes are used by states to pay for their share of the Medicaid program. They also increase the matching amount paid by the federal government. Every state but Alaska levies provider taxes, so this will be a big-time loss for almost every state in the country and their taxpayers.
Medicaid is the second largest expenditure in every state budget, just behind K-12 education. State and local officials, who must balance their budgets, will have just three options when faced with these draconian cuts. They can take money from other budgets like education (unlikely); they can raise taxes (a few blue states, maybe); or they can cut services (the most likely).
There are only two ways to cut services. They can eliminate non-emergency services like preventive screening, dental care and nascent programs to provide healthy food and shelter. These are precisely the kinds of services that prevent illnesses like cancers or tooth abscesses, which are far more costly to treat when left to fester. Cutting services is a penny-wise, pound-foolish alternative.
The other option is cutting Medicaid provider reimbursement rates, which are already lower than either Medicare or private insurance rates. Low physician payment rates are the main reason why only 70 percent of the doctors in the U.S. treat Medicaid patients, unlike the more than 95 percent who treat Medicare patients. Health care access will become immeasurably worse should states pursue this strategy.
“Things are going to get a lot worse"
Either way, the looming Medicaid cuts will have a major impact on health care systems across the country, which are usually the largest employer in every town, city and county. People with fewer SNAP benefits spend less at grocery stories.
A recent Commonwealth Fund study estimated state gross domestic products would fall by $154 billion by 2029, which is more than the federal government would save, and cost over 1.2 million people their jobs. State and local tax revenue would fall by $12 billion.
But the harshest impact will be on providers who are heavily dependent on Medicaid patients for most of their funding, which are urban safety net and rural hospitals. The GOP legislation set up a $10 billion-per-year fund for five years to help rural hospitals. But half its money will be evenly divided among the 50 states — a pittance compared to all the cuts coming down the pike. Moreover, it will do nothing for urban safety net hospitals, which are overwhelmingly located in Democratically-run cities.
The bottom line is that hospital systems and local physician groups dependent on Medicaid will face greater financial struggles, layoffs and closures. “Safety nets are struggling right now,” Dr. Erik Mikaitis, the CEO of Cook County Health, told a health care forum sponsored by Crain’s Chicago Business on Wednesday morning. The system gets 56% of its $5.14 billion budget through Medicaid. “Things are only going to get a lot worse.”
