How the deficit hawks can satisfy their concerns about Medicaid spending

July 13, 2010

Remember when the Republican-controlled Congress passed the Medicare Prescription Drug and Modernization Act in 2003, providing “Part D” drug benefits to Medicare recipients while enacting offsetting cost cuts and tax increases to make the measure deficit neutral?

If you do you’re memory’s faulty because the net cost of the program in its first ten years is expected to be $500 billion or more –or roughly $50 billion per year. There was never a serious attempt to make the program deficit neutral. And Medicare is not a means tested program. That means plenty of well-off seniors are having their Medicare expense –including but not limited to Part D– subsidized by working class people paying FICA (aka, suckers) who themselves are uninsured. I’ve been opposed to Part D on inter-generational equity grounds from the beginning, and I’m still against it.

Now the Senate is stalling on providing an extra $24 billion in Medicaid funds to cash-strapped states. Deficit hawks (mainly Republicans) insist that the funding be made deficit-neutral, which is not wise or practical in the current depressed economic times. As a result states are getting ready to tighten up Medicaid eligibility and cut services, even though Medicaid expansion is meant to be a foundation for health reform. That tie-in of Medicaid to health reform helps explain the opposition to the current funding.

But there is a straightforward and equitable way to make the $24 billion available: cut the Part D subsidy –preferably by means-testing the program– and move the funds over to Medicaid.

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