10 Reasons Why Everyday Americans Need Medicaid

House Republican Budget Cuts a Threat to Middle-Class Security

Scott Lilly, Melissa Boteach, and Katie Wright explore the ugly ramifications of the House Republican plan to make the states and the middle class pay for Medicaid cuts.

While many people consider Medicaid to mostly serve the poor, many disabled and elderly Medicaid enrollees come from middle-class households. These beneficiaries make up 25 percent of Medicaid enrollees but account for two-thirds of Medicaid spending. (iStockphoto)
While many people consider Medicaid to mostly serve the poor, many disabled and elderly Medicaid enrollees come from middle-class households. These beneficiaries make up 25 percent of Medicaid enrollees but account for two-thirds of Medicaid spending. (iStockphoto)

A recently released paper by the Center for American Progress, “The Ryan Medicaid Plan: A Threat to Middle Class Security,” details the costs and consequences for Medicaid if the federal budget plan introduced by Rep. Paul Ryan (R-WI) and passed by the Republican-led House of Representatives earlier this year became law. In this column, we break down the top 10 reasons why everyday Americans should pay close attention to the House Republican proposal to replace the current Medicaid program with block-grant payments to states. Those Medicaid changes would have extraordinary implications not only for the poor individuals who are normally thought of as the principal beneficiaries of the program but for a very broad swath of middle-class families who are far more likely to become reliant on Medicaid benefits at some point in their life than most currently realize.

1. The Ryan block-grant proposal leaves the states holding the bag on Medicaid. To maintain current eligibility and services, the states would have to spend $266 billion more on Medicaid from state-generated revenues than they do at present.

Under the Ryan proposal the federal government will pay a declining share of total Medicaid costs each year over the next decade. That will leave the states with three options:

  • Cut Medicaid benefits.
  • Cut other state services to pay for Medicaid.
  • Raise taxes.

In many instances they may be forced to do all three.

2. Block-granting Medicaid would threaten the safety net for middle-class families who may have family members stricken with catastrophic illness or injury or face prolonged infirmity in old age.

While many people consider Medicaid to mostly serve the poor, many disabled and elderly Medicaid enrollees come from middle-class households. These beneficiaries, who include individuals with physical and mental disabilities, victims of catastrophic accidents, and nursing home residents, make up 25 percent of Medicaid enrollees but account for two-thirds of Medicaid spending.

3. Medicaid is a well-baby program but not really a poverty program.

While two-thirds of Americans living in poverty are not enrolled in Medicaid, the program plays an enormous role in ensuring the nation’s newborns are healthy and born on schedule. Currently, single individuals and childless couples are largely excluded from Medicaid coverage, but the program covers 65 percent of maternity stays for women under 25, and 40 percent of all maternity stays. Many of these women are uninsured individuals with incomes above the poverty line. Since Medicaid was enacted in 1965, the United States has reduced the rate of both miscarriage and infant mortality by more than 70 percent. Cutting eligibility for prenatal and maternity care would inevitably lead to loss of life for thousands of infants and unborn children while increasing the financial burden of taxpayers through the increased incidence of low-weight babies.

4. The largest share of Medicaid spending benefits the disabled.

The Congressional Budget Office estimates that federal and state expenditures on disabled individuals will reach $333 billion by 2021, up from $184 billion in 2012. Block-granting Medicaid would mean that states would be forced to:

  • Assume a much larger share of this burden
  • Pass it onto the families of the disabled
  • Leave the disabled to fend for themselves

Regardless of the choices made by the states, this would impact severely retarded children and their parents, victims of spinal cord injuries, stroke, Alzheimer’s mental illness, and other diseases. If states were forced to reduce benefits to disabled individuals, many would have to depend on the generosity of their families and friends or face homelessness. Serious cutbacks in funding for the disabled could increase the nation’s homelessness population several fold.

5. If half the savings needed to close the expected funding gap facing the states were achieved through limiting eligibility for children and nonelderly or disabled adults, it would add 20 million to the nation’s uninsured, leaving one in five Americans without coverage and overwhelming health care providers such as hospitals with demands for uncompensated care.

The House Republican budget proposal would repeal the Affordable Care Act, which is expected to reduce the number of uninsured Americans from 50 million to 20 million. In addition, if the Affordable Care Act is repealed and the federal government also withdrew eligibility from nonelderly or nondisabled adults, the number of uninsured would jump to 70 million, meaning one in five Americans would be without health insurance.

6. Seventy percent of nursing home residents eventually become Medicaid beneficiaries.

Before reaching a skilled nursing facility, many seniors go through prolonged periods of home health care or as residents in assisted living facilities. Thirty-five percent have depleted all of their resources and qualify for Medicaid when they arrive in nursing homes. Seventy percent qualify before they complete their stay.

7. Block-granting Medicaid could impoverish the wives or husbands of many nursing home residents.

Current Medicaid law requires states to exempt a portion of the assets of spouses of nursing home residents in determining eligibility. The “spousal impoverishment” requirement ensures that the spouse who is not in a nursing home has sufficient income resources to continue to support themself in a modest but dignified manner. Block-granting Medicaid under the House Republican proposal would repeal this protection, placing the loved ones of vulnerable seniors and persons with disabilities at risk.

8. Block-granting Medicaid could affect the economic security of millions of middle-class families with parents needing nursing home care.

No family with surviving grandparents knows whether or not those grandparents will eventually need nursing home care. If they do and Medicaid is not there to help, that family will have to figure out how to pay nursing home bills that now average $80,000 a year once the parent’s resources are exhausted. If they can’t, they will have to care for them at home or leave them without care. Any of these choices will have major implications for family finances including homeownership and the ability to send children to college.

9. Block-granting Medicaid could have the same effect on families with disabled spouses or children.

First-year medical costs for a young adult with spinal cord injury can total close to $1 million, with annual care costs after that totaling more than $100,000. Even for those who are insured, much of that cost can be left to the family if Medicaid coverage is unavailable. Much the same story can be told for families confronting a whole range of illnesses and injuries. A world in which Medicaid did not offer help to such families would be a world in which far more families faced not only serious health problems but financial ruin as well.

10. It is difficult to cut Medicaid without cutting eligibility.

Certainly, there are some savings that can be made in this and other programs without cutting services, and Medicaid should not be exempt from review. But we aren’t likely to find much more savings in the program because Medicaid is already the lowest cost payer and has been scrutinized annually for decades by state legislatures across the country. Enacting the major cuts proposed by Rep. Ryan and his fellow House Republicans would cut into the muscle, not the fat, of this important program.

Medicaid is a huge program that touches many lives but is nonetheless poorly understood by both the public and policymakers. Perhaps more than any other government program it is the social safety net for middle-class families—families that as the result of old age, injury, disease, or some other catastrophic happenstance could face medical and long-term care bills that far exceed what their savings and insurance will cover. Because it insured millions of Americans who got the care that they needed, millions of families did not confront financial disaster.

Changes to this program should be made with extreme caution and not before the public has a clear understanding of the consequences those changes might have on their lives and the lives of their neighbors.

Scott Lilly is a Senior Fellow at the Center for American Progress. Melissa Boteach is the manager of the Center’s Action Fund project Half in Ten: The Campaign to Cut Poverty in Half in Ten Years. Katie Wright is a Special Assistant on the Half in Ten campaign.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Scott Lilly

Senior Fellow

Melissa Boteach

Senior Vice President, Poverty to Prosperity Program

Katie Wright

Policy Analyst