Fiscal cliff fast approaching: Potential impacts on Medicaid, CHGME

fiscalcliffThe so-called “fiscal cliff” deadline is fast approaching and you’re likely seeing a lot of news coverage on whether President Obama and Congressional leaders can reach a debt reduction deal. The “fiscal cliff” is a term used to describe the date when several tax cuts are set to expire and across-the-board federal spending cuts will be enacted.

But most media coverage hasn’t addressed if and how Medicaid might be impacted if a deal is reached. Children’s policy experts are looking at where the Medicaid program stands now and some additional areas of concern in negotiating a budget deal.

Children’s Hospitals and Clinics of Minnesota provides care to kids from all across our state and to many areas in neighboring North and South Dakota, Wisconsin and Iowa. We treat every child who needs care regardless of their ability to pay, so Minnesota’s Medical Assistance program (our state Medicaid program) is essential to keeping our doors open (it currently represents 42 percent of Children’s revenue).

What happens to Medicaid if we go over the cliff?

In the event that policymakers in Washington are unable to reach a deal and sequestration cuts are implemented, Medicaid won’t be impacted. The program has been exempted from the automatic cuts that are set to go into effect in 2013.

However, Medicaid may still be a target for cost reduction in negotiations to reach a deal.

One pediatric program that would suffer from the fiscal cliff is called the “Children’s Health General Medical Education” program (CHGME). The CHGME program isn’t exempted from automatic cuts. If a deal isn’t reached, the program would likely suffer a 9.1 percent cut in funding. That would bring money for the program down to $244 million in 2013, from $268.4 million in 2012.

CHGME funding is essential because it allows for training medical students, fellows and residents entering into general pediatrics and pediatric specialties. Because there’s already a shortage of pediatricians and the Minnesota state legislature cut funding for a companion education program by half (called “MERC”) in 2012, maintaining CHGME at current funding levels is critical for ensuring kids have timely access to the best care.

Will Medicaid suffer if a deal is reached?

President Obama and Republican Congressional leaders have released separate proposals for the fiscal cliff negotiations, but neither has specified to what extent Medicaid might be affected. We do know that both plans contain provisions from entitlement program savings, though the amounts differ. Medicaid is not exempt from cuts outlined in a debt reduction agreement.

However, as of Jan. 10 the White House has said it no longer supports the $100 billion in Medicaid savings proposed in previous talks. These savings would have to come from changing the way the federal share of Medicaid spending is calculated. It’s likely that this change would have shifted additional costs to states—a move that may have made it more difficult to convince states to expand the program. Medicaid expansion has been a priority of the Obama administration and a critical piece of the Affordable Care Act.

The take from Children’s?

Because we know that Medicaid provides coverage for thousands of kids in Minnesota and is a key component of continuing to provide high quality care, we are concerned about potential cuts to the program.

The health care landscape is rapidly changing and there is potential to improve patient care through innovations like care coordination that could reduce costs over time. We are one of only nine providers participating in a pilot project with the Minnesota Department of Human Services to care for Minnesota Health Care Programs (MHCP) patients under a payment model that holds Children’s accountable for the total cost of care and quality of services provided.

The results of the debt reduction talks remain unknown, though the Jan. 9 meeting between President Obama and House Speaker John Boehner may signal a move forward. We’ll be following any news of how the fiscal cliff might impact kid’s health care. Follow us (@childrenspolicy) on Twitter for up-to-date information on Medicaid during fiscal cliff negotiations.