The Explainer: How Increased Medicaid Spending Is Really a Cut

— When healthcare costs go up faster than the budget, enrollees get less care


Many of our stories about Republican efforts to re-reform healthcare, and particularly Medicaid, have referred to the GOP budget projections for Medicaid as "cuts." And many of the comments from our users have questioned whether that's appropriate, since Medicaid spending will continue to increase.

It is appropriate, in our view, and here is why.

First, let's consider why Medicaid spending under the Affordable Care Act -- the baseline for the $800-some billion reduction in projected spending through 2026 -- is expected to increase.

Is it because states are going to be more generous with their eligibility requirements, leading to more people on Medicaid? No.

Is it because Medicaid is getting more generous, year over year, in the services provided to enrollees? No.

Is it because administrative costs per enrollee are expected to increase? No.

Is it because healthcare costs generally are increasing, such that the average basket of services costs more each year -- for everyone, including Medicaid enrollees? YES.

In this country healthcare gets more expensive every year. The same services cost more. Thus, even if the number of Medicaid enrollees doesn't change, more money needs to be budgeted to Medicaid every year just to provide the same level of services. That, along with general population growth, is why Medicaid spending under the ACA is projected to grow. It's to keep services for enrollees the same.

What happens if $800 billion less is budgeted for Medicaid? Enrollees will receive fewer services.

And that, my friends, is a cut.