Economy/Economic Policy

GOP's Block-Grant Plan Merits the Chopping Block

Tuesday, May 24, 2011

Susan Feiner calls GOP lawmakers' craze to turn federally funded programs over to states through "block grant" payments a block-headed approach to cost control that will do great harm to women.

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Programs Squeezed and Starved

Since Ryan's 2012 budget plan would limit increases in federal block grants to the rate of inflation, states would have to find new sources of funds for these programs. But that's not likely when states are facing a combined $125 billion in shortfalls this year. What's more likely is that states will reduce payments to doctors, shrink benefits to participants and restrict eligibility. In other words, the programs would be squeezed and starved.

Block-granting Medicare is another chip off the GOP's idiotic block.

Medicare, like its sister-program Medicaid, was signed into law in 1965 and today provides health insurance to 39 million Americans over the age of 65, of whom nearly 22 million (56 percent) are female. Despite the fact that nearly half of Medicaid recipients have three or more chronic conditions (thus are the most expensive population to treat), the program boasts an administrative costs-to-benefits ratio of 3 percent according to Robert Reich, an economist and the secretary of labor under President Bill Clinton.

That's far better than self-insuring large companies, which face administrative costs of 5 to 10 percent. Recent changes in tax law have induced some large employers to give up insurance purchased from an outside vendor. Self-insurance is not regulated, so firms that go this route can impose high monthly premiums and large co-pays on their employees. Consequently, the firm's medical costs decline--mostly because fewer people use it.

To really grasp Medicare's substantial and underappreciated efficiencies, check this out: Administrative costs of Medicare are this much lower than the administrative costs of private insurance plans: at least 40 percent (!!).

Reich points out that if everyone in the United States were to enroll in Medicare tomorrow, the estimated savings would be somewhere between $58 billion and $400 billion.

If the actual savings were just the middle of this range (about $230 billion), there would be more than enough money to eliminate the budget shortfalls in all 50 states. Then the states could fully fund the vital medical programs so necessary to women's financial well-being and physical health.


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Susan F. Feiner is professor of economics and professor of women and gender studies at the University of Southern Maine in Portland.

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