Believe it or not, I recently had a conversation with a friend who is a psychotherapist, who bills Medicaid for many of his clients, and he didn't know some of the basic facts about the program. I told him that the Republicans would try to convert it into a block grant, and he thought it already was. So I think I'd better lay out the basics.
Medicaid is an entitlement program, like Social Security and Medicare. That means anyone who meets eligibility requirements can receive it. There's a somewhat complicated history regarding who has been eligible. Originally it was for families that qualified for Aid to Families with Dependent Children, what was usually meant by "welfare" back in the day, which was abolished under the Clinton Administration. Originally states also had the option to include people who were "medically indigent," including not only beneficiaries of AFDC and disability, but also people over 65.
As all people over age 65 were now to be covered by Medicare, perhaps it did not occur to people that this provision would be important. However, as people tended to live longer past age 65, and to develop costlier medical needs, notably including long-term care that Medicare does not pay for, states increasingly were compelled to provide Medicaid to Medicare beneficiaries who had unaffordable medical and long-term care costs. This “dual eligible” population now accounts for 19% of Medicare beneficiaries and 14% of Medicaid beneficiaries, but 30% of Medicaid spending. The median cost of a nursing home stay is about $8,000 per month nationally. In Connecticut, it’s more than $13,000, that is $156,000 per year. As you can see very few retirees have incomes approaching this amount, and that is why they account for such a disproportionate amount of Medicaid spending.
But it continued to be the case that only poor families with children qualified, along with people who were eligible for Medicare. That meant that poor people under 65 who didn't live in households with children were not eligible. The Affordable Care Act gave states the option to expand eligibility to anyone under 135% of the federal poverty level, regardless of whether they are caring for dependent children. Most have done so, but there are a few holdouts. A program called the Children's Health Insurance Program also covers children in families that aren't poor enough to qualify for Medicaid, but who have expensive health care needs. Most states essentially fold this into the Medicaid program and it works in a similar way. Right now there are about 72 million people enrolled in Medicaid, and 7.2 million enrolled in CHIP. Of the total 79 million, about half are children.
However, despite being just 14% of Medicaid beneficiaries, so-called "dual eligible" Medicare and Medicaid beneficiaries, mostly people over 65, account for 30% of spending, because long-term care is so costly. Next, I'll explain how the program is financed, and what the Republicans want to do to it.