"Blended Rate" Proposals for Medicaid Could Lead to Substantial Reductions in the Program
By David Heymsfeld, AAPD Policy Advisor
In the on-going negotiations to reduce the deficit in the federal government budget, one proposal frequently mentioned as a means of reducing Medicaid spending is the so-called “blended rate” proposal. This proposal would change provisions in the current program which establish different rates for the federal match for State Medicaid expenditures, depending on the type of beneficiary. The blended rate proposal would replace the differing rates with a single rate for the federal match for all beneficiaries. This may sound like a technical adjustment to simplify the program. But in reality, the proposal has the potential for substantially reducing federal Medicaid payments to the States, forcing the States to cut back on beneficiaries and services.
How the blended rate would work Under the Medicaid program, each State establishes a Medicaid program, and the federal government pays a share of the costs of each State’s program. A different rate is established for each State based on per capita income. This rate, known as the federal medical assistance percentage (FMAP) averages 57%. However, the States receive higher percentages than the FMAP rate for services to some beneficiaries ; for example, the federal share for services to beneficiaries made eligible by the health care reform act will be 100% for three years.
The blended rate concept is to develop a single rate for each state, by averaging the rate for all federal funds the State would receive.
How the blended rate could reduce funding. By itself, replacing the multiple rates with a single average rate would not reduce the federal funding a State would receive. However, the major purpose of going to the single rate would be to reduce funding. This would be accomplished by lowering the average rate below the rate which would result in no loss of funding. The more the rate is lowered the more federal funding would be reduced. The proposals now on the tab le in the deficit reduction talks would reduce federal funding by about $50 billion over ten years. This is modest compared to the $700 billion reduction in the Ryan budget passed by the House, a reduction of more than 30% in the program. But the blended rate proposal is not tied to any particular reduction, and it would be simple to change the rate to produce reductions of hundreds of billions in Medicaid.
Suggestions for Advocates
Because the federal negotiations are so fluid, advocates for persons with disabilities have focused on opposing large cuts to Medicaid generally, rather than on the details of how this is accomplished. However, as negotiations get more specific advocates should be aware that blended rate proposals have the same potential for large cuts as earlier proposals, such as “block grants” or “global spending caps.”
For more detailed analysis of blended rates, see http://www.cbpp.org/cms/index.cfm?fa=view&id=3521