Medicaid

Trump's Medicaid 'Cuts' Actually Increase Federal Spending

Under Trump's budget, Medicaid spending would reach the highest level in U.S. history.

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Last week, President Trump proposed massive spending increases for Medicaid.

Of course, most of the media didn't report it that way. They reported that the president's proposal "slashes spending." That he wants to cut "at least $610 billion" from Medicaid. That "Trump's Budget Cuts Deeply Into Medicaid." And so on.

That might be vaguely true in the Washington sense. It's not at all true in the real-world sense.

Here's the difference.

If you look at the actual White House budget proposal, you'll note that it includes tables for "baseline" spending and "proposed" spending. Baseline spending is spending that would occur if nothing changes—if Congress doesn't order any new aircraft carriers, and America doesn't start any new wars. If entitlement eligibility rules remain the same, and expected benefits for each recipient neither shrink nor grow. Things like that. Make some minor adjustments for inflation and population growth and, barring some unforeseen windfall or cataclysm, you can project how much a program will cost in future years.

The baseline spending curve for Medicaid points upward. In 2017, the program is expected to cost roughly $378 billion. A decade from now, the baseline spending for Medicaid rises to $688 billion—an 82 percent increase in nominal dollars.

Trump's proposed spending for Medicaid points upward, too—just not as sharply.

Under his budget proposal, Medicaid spending would rise from $378 billion this year to $524 billion in 2027. That's a 38 percent nominal increase.

True, inflation will reduce the effective size of either increase to some extent. And population growth could increase demand for Medicaid and other social programs, although population growth in the U.S. is the slowest it's been in nearly a century.

Either way, the Medicaid budget is going to grow. But under Trump's proposal, it would grow more slowly. This is how Democrats and the media can scream about supposedly savage "cuts" to the program.

The same goes for Medicare. Under the current baseline, Medicare would grow from $593 billion to $1.19 trillion. Under the Trump budget, it would grow to only (!) $1.16 trillion.

Or take non-defense discretionary programs. Those are the expenditures for just about everything else the federal government does, from environmental protection to bridge construction. Unlike entitlement programs, whose spending is formula-driven (until Congress changes the formulas, anyway) spending on discretionary programs is set each year by the appropriations process.

The growth of entitlement spending has squeezed discretionary spending mercilessly. In 1965, so-called mandatory spending consumed just under 27 percent of the federal budget. Discretionary spending got 65.8 percent, and interest on the debt made up the rest. Today, the spending figures have almost reversed. Mandatory spending makes up almost two-thirds of the federal budget and discretionary spending less than 32 percent.

If current trends continue, by 2044 Medicare, Medicaid, Social Security, and interest on the debt will consume 100 percent of federal revenue. Everything else will be financed with debt—and debt will reach 150 percent of GDP. That's roughly where Greece stood five years ago.

Discretionary spending falls into two buckets: defense and non-defense. In 1965, defense made up 43 percent of the federal budget. Now it makes up only about 16 percent. Don't let that fool you into thinking defense spending has shrunk, though. In 1980, Pentagon spending stood at $143 billion. Adjusted for inflation, that's $446 billion in today's dollars. Baseline defense spending for next year is $600 billion.

Under the current baseline, non-defense discretionary spending is going to grow, too. Over the next decade, it is slated to rise from $624 billion to $739 billion. Under Trump's proposed budget, though, it would shrink to $429 billion. Now that's an actual, honest-to-God budget cut.

So far we have been talking about what will happen, or what might happen. We still haven't reached the question of what should happen.

For instance: Should we want more people going on Medicaid? As Shikha Dalmia laid out in brutal detail back in February, Medicaid is "arguably the civilized world's worst health insurance program." It costs roughly $7,000 per recipient, and people with Medicaid often have health outcomes no better than people who have no health coverage at all. One third of doctors no longer will accept new Medicaid patients—and the system's costs continue to soar.

Yet even if we assume, contrary to evidence, that Medicaid is a wonderful program, we still might question whether we want enrollment to rise. Once upon a time, people generally thought relying for support on the government—on the sweat and earnings of your fellow citizens—was, to put it gently, a less than optimal way to live. Presumably it still is. Thus the goal should be to get people off Medicaid, not onto it.

True, some people always will need public assistance, and a compassionate society must provide it. But public assistance should be a last resort, not the default option. Ideally, social-welfare programs should shrink over time, not grow.

But that's a normative debate for another time. The current one concerns simple math. It's true that in the Washington sense, Donald Trump could be said to be "cutting" Medicaid. But it's also true that under Trump, Medicaid spending would reach the highest level in U.S. history.

This column originally appeared at the Richmond Times-Dispatch.

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  1. It’s okay for you and me to make that argument, but anybody that speaks of re-building our starving, gutted military has little room to complain about their political opponents using twisted logic and rhetoric when it comes to government spending.

    In other news, highly-placed sources have informed me that several NYT and CNN executives have committed suicide after seeing Trump’s Memorial Day remarks at Arlington wherein he did not depart from his prepared remarks to slam Hillary or Comey, brag about the size of his electoral victory, talk about how much he loves ketchup, not even to pointedly comment on how many of the honored dead gave their lives defending America and the free world from really bad German political leaders and their ideology and how unfortunate it is that history has a habit of repeating itself.

    1. I’m willing to debate how much military spending is enough but at least defense is an enumerated federal power. Fine by me if defense is cut, but something like Medicaid shouldn’t even exist.

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  2. So those accusing him of cuts lied again?

    Or maybe they flunked math…

  3. It’s been like this for decades: increases are built in, so are the std. of comparison. But if you want to cut, you have to start somewhere, & cutting increases is better than leaving increases uncut.

  4. “Baseline spending is spending that would occur if nothing changes?if Congress doesn’t order any new aircraft carriers, and America doesn’t start any new wars. If entitlement eligibility rules remain the same . . .

    If the Senate passes the AHCA, eligibility rules will not remain the same. The ObamaCare Medicaid eligibility expansion will disappear.

    “Under his budget proposal, Medicaid spending would rise from $378 billion this year to $524 billion in 2027. That’s a 38 percent nominal increase.”

    It’s also a garbage comparison. A proper comparison would match the two proposed sets of cash flows.

    The status quo is not static spending on Medicaid. If Medicaid is presently scheduled to increase by a larger rate in the future, then Trump’s lower rate of increase represents an actual budget cut.

    In other words, the net present value of Trump’s lower growth rate on future costs is less than the net present value of the status quo’s increasing costs.

    I’d love it if they cut Medicaid so severely that it actually led to lower outlays in absolute terms in year 1–that budget wouldn’t get to first base in Congress.

    The Senate has the ability to slash Medicaid in absolute terms starting three years from now–and that’s by passing the AHCA.

    If Trump had slashed Medicaid that severely in his budget, it would probably have less chance of passing than the AHCA.

        1. You got some splainin to do.

    1. If Medicaid is presently scheduled to increase by a larger rate in the future, then Trump’s lower rate of increase represents an actual budget cut.

      BULLSHIT. An increase is an increase, even if it’s not as much as the bureaucrats think they’re entitled to loot from us.

      -jcr

      1. 1) The net present value of costs is lower than it would have been otherwise without Trump’s cut.

        We’re not talking about a budget item for next year; we’re talking about a rate of increase over the next however many years. When you compare the status quo to Trump’s cuts, Trump is cutting the cost of Medicaid lower than it would be without his cut.

        The “Trump’s Medicaid ‘Cuts’ Actually Increase Federal Spending” headline is misleading at best. It sure as hell isn’t Trump’s cuts to Medicaid that increase federal spending on the program–and the net present value (costs) of that program are lower with Trump’s cut than they would be otherwise without Trump’s cut.

        Jesus Christ, it’s like arguing with creationists around here sometimes.

        1. we’re talking about a rate of increase

          Exactly. So calling it a cut is a fucking lie. Quit lying.

          it’s like arguing with creationists around here sometimes.

          Fuck you, too.

          -jcr

          1. “Exactly. So calling it a cut is a fucking lie. Quit lying.”

            We’re talking about lowering the rate of increase.

            It is a cut.

            No financial analyst anywhere would call it anything other than a cut.

            We’re talking about a string of cash flows. The net present value (cost) of Trump’s cash flows is lower than what we’ve already budgeted to spend.

            The only honest way to describe that is a “budget cut”. We budgeted for more, but Trump is proposing we cut the budget.

            I’m not lying, and if I call you an ignoramus, it’s giving you the benefit of the doubt. Otherwise, your honesty would be on the line. Since when is cutting budget not a budget cut?

            Seriously, get your head around Net Present Value and IRR. This is a great opportunity to make yourself a more persuasive and credible libertarian–to people who know what they’re talking about.

            1. Ken, this is not a budget cut. There is no budget for the next federal fiscal year for which Trump is proposing a budget (year-ending Sept. 30, 2018) or any year after that. Until there’s a budget there can’t be a budget cut. As an ex-CFO, if I told my staff to budget for a reduction in labor costs next year, you can bet they’d interpret that as a cut in the absolute level of spending. If they came back with a budget that increased costs, and called it a cut because HR had a policy of increasing salaries and wages by 5% each year, they wouldn’t last long in my organization, or any other. The vast majority of headlines about this budget were along the lines of “Donald Trump Budget: $800 Billion in Medicaid Cuts” (CNN). Cuts versus what? Certainly not versus next year’s budget, since there isn’t one yet. I think most people would interpret it as against the current level of spending.

              1. It is of course a cut because it is a cut in an entitlement, which is an obligatory expenditure *regardless* of whether there is or is not a budget. The federal government has gone many years without budgets. Congress can–and does–appropriate without budgets. That’s why, when everyone thinks a CFO can run the government, they’re wrong.

      2. 2) Trump fought like hell to get the AHCA passed, which cuts the eligibility of Medicaid. I guess the only thing worse than faulting Trump for lowering the future costs of Medicaid is ignoring the fact that he’s also fighting to cut eligibility for the program!

        Fer cripe’s sake, if Trump is both fighting to cut eligibility for Medicaid and–in addition to that–is also fighting to cut the cost of the program in the future by way of the budget, then we should be celebrating . . .

        . . . not acting like a bunch of whiny little babies with Trump Derangement Syndrome.

        What, are you against cutting the rate of cost growth? Are you against cutting Medicaid eligibility?

        Or maybe you’re against Trump cutting the rate of growth in Medicaid because it doesn’t cut it all the way to negative 100% next year?! Did you think that was seriously under consideration in Congress?

        Let’s act like grown ups.

        1. Let’s act like grown ups.

          Follow your own advice. How about you quit lying for a start?

          -jcr

          1. He’s not lying, he’s just using the terms the way an accountant would. They do indeed project the way he’s describing. You would too for your own finances.

            1. Yeah, you look at two alternatives.

              You could do Plan A or Plan B.

              Here’s the cash flow of Plan A.

              Here’s the cash flow of Plan B.

              In this case, Plan A is what we already have legislated to spend on Medicaid in the future at growth rate x.

              Plan B is Trump proposing we spend less than what we’ve already budgeted by cutting that growth rate.

              The financing for Medicaid in the future has already been authorized through legislation and signed by Barack Obama.

              Trump is cutting the budget.

              And measuring budget cuts by what we spend next year isn’t even the closest approximation.

              Net Present Value is what I’d give you TODAY in exchange for those cash flows (say over the next ten years). It’s like buying a bond today and collecting all the annual yields. Q: What are those yields worth today? A: You take their Net Present Value.

              In this case, NPV is cost. If Trump’s budget would cut Medicaid payments in the future below what we’ve budgeted for now, then the NPV of those costs will be lower. That’s the freakin’ definition of a budget cut. We budgeted for “x”, but Trump’s plan would cut those costs. Lower costs means lower NPV.

              Incidentally, Trump wants to take those savings and use them for tax cuts. To whatever extent Trump wants to act like a small state libertarian–we should cheer him on. Is there anything more small state libertarian than cutting the budget so we can cut taxes? Oh noes! Trump wants to shrink the size of government! How do we stop him?

              1. What it is is people are used to thinking about 1-time or discrete purchases, & iin that case just comparing price tags makes perfect sense. Is the price going up or down, & by how much? In their own affairs, people much less often have to take note of ongoing cash flow or other such bookkeeping determinations, where the type of figuring you’re showing is standard & expected.

                1. I appreciate that these things are sometimes presented in ways that aren’t intuitive, but I blame the people who present them that way. The concept itself isn’t exactly counterintuitive.

                  Total cost is the scheduled payments all added together. A decrease in the growth of those payments means the total cost of those payments will be less.

                  That isn’t counterintuitive unless somebody makes it counterintuitive.

                  “Trump’s Medicaid ‘Cuts’ Actually Increase Federal Spending”

                  I bet de Rugy wouldn’t sign off on a headline like that for fear of hurting her academic reputation.

                  “Under Trump’s budget, Medicaid spending would reach the highest level in U.S. history.”

                  Wouldn’t an honest sub-headline point out that without Trump’s cuts to Medicaid in his budget, Medicaid spending would be even higher?

                  Will we get another story about what will happen to Medicaid spending if Congress doesn’t enact Trump’s cuts to Medicaid?

                  At some point, when I’m being called a liar for correcting headlines that are, at best, . . . um . . . misleading, whether the concept I’m trying to explain is intuitive stops being the issue.

                  People aren’t misunderstanding this stuff because it isn’t intuitive. They’re misunderstanding it because of the way it’s being sold, right?

  5. Medicaid is “arguably the civilized world’s worst health insurance program.” It costs roughly $7,000 per recipient, and people with Medicaid often have health outcomes no better than people who have no health coverage at all.

    Yeah it is a pretty crappy program but it is dishonest to average it all out. It is very different things.
    a)spending on nursing homes and hospices for the really old. This is mostly a real estate scam. $85 billion a year – or $13,500 per beneficiary
    b)spending on the completely disabled. There can be no GOOD outcomes here and no state does a good job figuring this one out – ranges from ‘ignore them until they die’ to ‘spend a fuckton on nothing that helps much’. This costs $168 billion – or $16,500 per beneficiary.
    c)spending on children. Most states do a pretty good job of managing costs and providing access to care and good outcomes. This costs $82 billion a year but covers a LOT of kids – $2,500 per beneficiary
    d)spending on poor adults. This is the main expansion group and the outcomes are all over the place (good in states with managed care, crappy in states with fee-for-service). It costs $65 billion or $3,200 per beneficiary.

    1. one point that gets glossed over is that the fourth group, d – the poor, is built on the assumption those who are poor now will always be, making it the easiest to scam. Kids eventually grow up, presumably into tax-paying adults. The disabled, you’re right, but this is not a large group, at least it wasn’t until disability became the new unemployment.

      That leaves nursing homes and a system that encourages people to divest themselves of assets in order to avoid payment. Hospice is a god send, and that’s from personal experience. Nursing homes and hospices, by definition, are temporary but they also have a regular turnover. Still, not the scam factory of the poor, poor pitiful poor who, if born into Medicaid, seem to stay on it forever. Much like the kid who is on free lunch in kindergarten and still on it in 12th grade.

      1. Increased longevity is the root of many problems — both health care spending and unemployment. At the same time it’s obviously something that is good to have in most cases.

        This probably sounds harsh, but people who enter nursing homes and hospice are highly unlikely to be useful to society again. As Medicaid is pure welfare, not even promoted as insurance that you pay into (as SS and Medicare are), I don’t understand how we justify using it for such things.

        Personally I hope the people who game the Medicaid system by moving their money around burn in hell. Luckily post-2005 it is much harder to game the system due to the 5-year reachback.

        Of course if it weren’t for Medicaid, you might not enjoy dealing with your state’s filial responsibility laws.

      2. Nursing homes and hospice are mostly a housing issue not a healthcare issue. There should never be any payment – NONE – from govt to private landowners unless the govt tax to pay that comes from property taxes. Landownership is already easily the biggest cronyism around. Having those then also reap the benefits of taxes on income/sales – with most of that money going to places that already have both high real estate prices and relatively low property taxes is obscene. To me that is entirely a local issue and personally I would prefer living in a place that does provide end-of-life housing options. But to have this in Medicaid where the rest of the country subsidizes NY/CA real estate investors is mindblowingly corrupt.

        As for providing incentives/disincentives for the poor, yeah we need that a lot. But Medicaid is only a piece of that – and honestly our focus on income taxes for everything creates more of a poverty trap (effective marginal taxes and eligibility reductions can exceed 100% for anyone who’s trying to work their way out/up) here in the US than it does any significant rewards for dependency. Switzerland does it right IMO. Local admin and no kicking people in the teeth when they try to stand up. We still have a bit of the overmoralizing debtor’s prison mindset re the poor here – and that hasn’t worked since Dickens’ day.

      3. And the reason nursing homes/hospices is a scam is because the actual recipients of the money are ALWAYS the same group – those who own nursing homes and hospices. It doesn’t matter one whit that the beneficiaries always change. If anything that turnover just helps disguise the scamminess of the program.

  6. Of course, the ‘budget’ proposed by any president is a meaningless document in constitutional terms; only the House can initiate spending bills. Just because the wimps demanded some sort of paper tiger from the President so they can claim the spending is not theirs does not absolve them of blame. I really wish some President (it could be you Donny boy) would present a budget that completely eliminates all departments not mandated by the constitution, and slashed taxes to the point of just enough to support the survivors. It would be a magnificent commentary on the abdication of responsibility of congress, as well as a cogent reminder of where the government should be.

  7. That might be vaguely true in the Washington sense.

    No, it’s a goddamned lie in Washington too, and those motherfuckers know it. They just expect everyone else to be stupid enough to swallow the notion that getting a smaller increase is the same thing as cutting spending.

    -jcr

  8. Someone really should start putting out a political edition of Webster’s dictionary….seeing how they have their own damn language.

  9. Anyone here try to figure out the moderation policy at Glibertarians? I got booted there today before I could figure out what hit me!

    1. The only thing I could find in their instructions is that they can’t take trolling. But I was being totally sincere. Maybe they’re so suspicious that everything looks insincere to them.

      Eh, I’ve gotten booted from more forums than I can count right now. Recently from WFMU’s comments I got booted twice in the same weekend, and it’s always for different reasons. So I have myriad ways of insulting people unintentionally. But this one’s the most mystifying yet, unless I count one in the 1990s where it took me a long time after to find out why (where someone else had been annoying and I got swept up in it spuriously).

      1. I don’t know your political leanings but Glibertarians is for conservatives only.

        1. Palin’s Buttplug|5.29.17 @ 9:35PM|#
          “I don’t know your political leanings but Glibertarians is for conservatives only.”

          Turd post lefty bullshit only, so keep that in mind.

          1. I’m familiar with Palin’s Butt Plug, whoopee. So do you have any idea? I don’t think it has anything to do w ideology, seems to be personal.

            1. Some Fauxbertarians snowflaked when Reason wouldn’t stop calling Trump a retard, decided to start a execrable blog of their own, and decided any contrary opinion would be ban-hammered.
              It’s just a Nut-Con circle jerk with even worse original posts than the Federalist.

              1. I took the cause to be all the full on statist articles.

  10. Yeah, like this is the first time “cuts” have increased the Federal budget. Study history.

  11. Good luck with that

    http://hotair.com/archives/201…..-teaching/

  12. Lots of arguing over something that should be pretty simple for libertarians.

    -A smaller increase is better than a bigger increase.
    -A decrease is better than a smaller increase.

    For whatever reason (the TEAM factor?) the budget has to either be awesome or terrible. How about…meh? Better than expected, worse than needed?

  13. Here, let me fix that for you–

    But it’s also true that under any president, Medicaid spending would reach the highest level in U.S. history.

    …unless they cut it.

    But Trump DID cut it, and he DID point out the ‘fakeness’ of the cuts before he got into office. Just like a whole lot of republicans do. So why’d he do a ‘Washington style cut’?

    Could it be that there’s something in the way? Could there be some reason why they keep doing this? Something structural–or something that has to do with previous legislation that passed?

    Could it be that the GOP needs some actual serious time to undo the mess the quasi-socialists have put us in? More than 8 years? The combined Reagan-Bush era provided a boom for Clinton to reap, no?

    I know all the ‘intellectual’ folks believe that everyone is stupid, barring themselves, and they see nothing strange about the GOP constantly calling attention to this and then seemingly doing it themselves and getting re-elected….but I can’t help but wonder if there’s more here than meets the eye.

    1. Could there be some reason why they keep doing this? Something structural–or something that has to do with previous legislation that passed?

      Yes and no. The part of the GOP that wants cuts is only interested in cuts that hurt the bottom not cuts that hurt the top. Because that makes them assholes, it makes it impossible for them to accomplish anything. The part of the GOP that doesn’t want cuts is thus the only part of the GOP that can accomplish what it wants (which is nothing).

  14. Do we really, really, have to suffer through another post that compares nominal numbers? And ignores population growth? If in year zero you can provide flu shots to all of the poor people who need them, and if in year 10 you can’t, then you’re cutting flu shots from some portion of the population. I’m sure from some bureaucratic perspective that’s not a cut (we’re still spending the same amount we spent 10 years ago!), but from a service delivery prospective, if you’re not getting a flu shot, you’ve been cut. How hard is that for people who supposedly read “Reason” to understand?

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