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Impact of Republican Budget Cuts on Medicaid 04/30/95
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52875142
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Impact of Republican Budget Cuts on Medicaid 04/30/95
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Records of the Domestic Policy Council (Clinton Administration)
Devorah Adler's Files
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REVISED: April 30 1995
METHODS FOR CALCULATING THE EFFECTS OF
MEDICAID CUTS
MEDICAID
The aggregate amount of the Republican cuts was specified: $160 billion (a 6% cap) or a 5% cap
($192 billion). The analyses assumed that all expenditures including DSH and administration
- are capped, and used the CBO baseline.
The effects on provider payments, services and recipients were estimated assuming managed
care. The managed care savings estimate of $5 billion over the 7 year period comes from OMB's
estimate of $4.5 billion, rounded up. It was assumed that approximately $1 billion of this
savings occurs in 2002. Thus, all of the provider payments, services and recipients effects were
calculated using the total Republican targets of $160 billion or $192 billion minus the $5 billion
savings from managed care. For the year 2002 estimates, the target amount is $43.7 billion or
$52.3 billion minus $1 billion from managed care.
It was assumed that 25% of the cuts came from provider payments, 25% from services, 25%
from recipient reductions in kids and 25% from recipient reductions in elderly and disabled. In
order to account for interactions, these cuts were taken sequentially, as described below.
Service cuts: There were two steps in calculating these costs. First, the 2002 federal
expenditures for Medicaid services were converted to total computable costs. Second, a
conversion factor was used to account for the CBO and Administration baseline differences.
This was done using the information available on the differences between acute and long-term
care benefits expenditures. In 2002, the acute care estimates were: CBO: $97.3 b, Admin:
$92.5 b. This yields a ratio of 1.05, which was applied to all services considered acute care. In
2002, the long-term care estimates were: CBO: $62.7 b, Admin: $48.1 b. This yields a ratio of
1.3, which was applied to all services considered acute care.
After these adjustments, services were chosen that, when summed, are less than or equal to the
target cut allocated to service reductions ($10.7 b or $12.8 billion).
Provider payment reductions: This is simply the target amount of $10.7 b or $12.8 billion; we
did not calculate it as a percent of payment for this exercise.
Recipient cuts: The Administration baseline's per-recipient costs in 2002 are the basis of these
estimates. The 2002 total expenditures for each of the groups, kids and aged & disabled, were
calculated. Three adjustments were made to these totals. First, the expenditures for the
eliminated services for each group were subtracted from the total expenditures for the groups.
Second, the provider payment cut was subtracted. The amount of the provider payment cut
allocated to each recipient group was calculated by using the group's proportion of total
expenditures, net of the eliminated services' expenditures. Third, there was also an adjustment to
the kids' per-recipient cost to account for managed care savings. It was assumed that $500
million of the full $1 billion savings in 2002 were associated with kids. Fourth, the kids' per-
recipient costs were multiplied by 1.05 to adjust for CBO differences; the aged and disabled per-
recipient costs were multiplied by (1.05 * 0.45 + 1.30 *0.55 ), which weights the CBO ratios by
the proportion of acute care and long-term care expenditures for this group.
Once these per-recipient estimates are calculated, they are divided into the targeted amount for
each group to yield estimates of the number of recipients cut.
PER CAPITAS
Total Exp
Recip
Admin PC
PC CUTS
KIDS
Kids Total
44,233
Assoning
Kids Cuts
2,398 (Home H, EPSDT, Hospice)
Mng Care
500
Provider hit
1,891
$10.05
Net
39,444
21.94
1,798
1,887
-5.65 50% of Recip Cuts (25% of total cut)
AGED AND DISABLED
A & D Total
166,603
A&D Cut
4,108 (Home H, EPSDT, Hospice)
Mng Care
Provider hit
7,344
Net
155,151
14.32
10,832
12,863
-0.83 50% of Recip Cuts (25% of total cut)
988
PER CAP Total Exp Recip
Admin P CBO PC CUTS
KIDS
Kids Total 44,233
Kids Cuts
3,980 (Home H, EPSDT, Hospice, Dental)
Mng Care
500
Provider h
2,214
Net
37,539
21.94
1,711
1,796
-7.14 50% of Recip Cuts (25% of total cut)
CAP
AGED AND DISABLED
A & D Tot 166,603
A&D Cut
7,337 (Home H, EPSDT, Hospice, Dental)
Mng Care
Provider h
8,905
Net
150,361
14.32
10,498
12,466
-1.03 50% of Recip Cuts (25% of total cut)
SERVICES
2002
ADMIN CBO
Total
TCC
TCC
DRAFT
InptGen
44.3
MentHosp
4.1
NF
48.1
ICFMRPu
9.1 18.58407
ICFMRPv
5.2
Phys
13.6
Outpt
12.4
ALL
Drugs
17.3 14.72892 42.32246 Drugs, CBLTC,EPSDT
Rebate
-3.2
Dental
3.0 3.198263 Half
OthPrac
2.6
21.52249 Drug, EPSDT, Dental, H
Clinic
7.1
LabRad
1.8 HCB
HomeHIth
3.5
24.93446
Ster
0.3
Abort
0.0
EPSDT
2.5
2.659079
RurHlth
1.6
MCRCoD
1.2
PremGrp
8.0
SERVICES
2002
ADMIN
CBO
Total
8.26
TCC
TCC
InptGen
44.3
MentHosp
4.1
EPSDT X Home 4.6 t Hoslice 0.9
NF
48.1
ICFMRPu
9.1 18.58407
2.7
+Devizor B.d =11.4b
ICFMRPv
5.2
Phys
13.6
Outpt
12.4
ALL
Drugs
17.3
14.72892 42.32246 Drugs, CBLTC,EPSDT
Rebate
-3.2
Dental
3.0 3.198263 Half
OthPrac
2.6
21.52249 Drug, EPSDT,Dental, H
Clinic
7.1
LabRad
1.8 HCB
HomeHIth
3.5 24.93446
Ster
0.3
4.65
Abort
0.0
EPSDT
2.5 2.659079
RurHlth
1.6
MCRCoD
1.2
PremGrp
8.0
PremOth
24.9
HCBW
9.7
FrailEld
0.2
CSLA
0.0
PersCare
5.7
7.45607
TgtCasM
2.8
C.T. 0.033223
FORO
11
OthCare
12.0