While it’s hard to know which of the Trump-Musk-Heritage Foundation budget cuts and other initiatives will hold in the face of reality and push back, here is some of what we know and can surmise from their actions and proposals to date:
Medicaid: Block Grants
Medicaid (MassHealth in Massachusetts) is a joint federal-state program with the federal government contributing about half of costs and the states the other half. In order for the states to receive their federal contributions, their Medicaid programs must follow various federal guidelines. The House budget bill calls for its House Energy and Commerce Committee to cut spending under its jurisdiction by $880 billion over the next 10 years. They insist that they won’t cut Medicaid, but an analysis by the Congressional Budget Office concludes that the bulk of these cuts will have to come from Medicaid
Medicaid programs currently cover one in five Americans including almost a million nursing home residents and 1.5 million Americans aged 65 and over receiving home and community-based care. Funding cuts would like have a severe impact on both their eligibility for coverage and their quality of care.
So, how will Congress and the administration cut Medicaid. Based on past history, they will seek to turn Medicaid in a block grant system where the states simply receive a check from the federal government with few or no strings attached. The concept is that this would save money in two ways. First, while the block grants might start based on prior year federal contributions, any increases would be based on the inflation rate. Second, those who support this approach believe that with more flexibility state Medicaid programs will be more creative and efficient, resulting in savings.
Advocates for Medicaid beneficiaries are worried about this approach on many levels. First, any inflation adjustments may be based on the general rate of inflation rather than increased medical costs, which often run higher than overall inflation. Second, it’s not clear whether the block grants would based on overall prior federal contributions or per capita contributions. If Congress chooses the former, the contributions will not take into account the growing number of seniors and their growing needs as they age, putting more of a burden on the states.
Finally, while federal Medicaid guidelines are seen by some as restricting state creativity and flexibility, they are viewed by advocates as protecting individual rights to coverage. Some states may choose to save money in the face of lower federal contributions by limiting eligibility for benefits, leaving more people uncovered.
Social Security: Staff Cuts and Privatization
If you think the wait times to talk to a Social Security representative either in person or over the telephone are egregious now, the possibility of doing so in the future is likely to disappear completely. With staff cuts to the Social Security administration (as well as to the Internal Revenue Service), the federal government will become more like high-tech companies that only provide on-line or chat bot assistance.
“Everything they’re doing is driving this agency to system collapse,” said former Social Security Administration Commissioner Martin O’Malley. “It will lead to interruptions in service, and that will ultimately cascade into more frequent system interruptions for the processing of claims, ultimately leading to system collapse and eventually the interruption of benefits.”
Economist and Social Security expert Larry Kotklikoff: “Musk’s goal seems clear — gum up the System’s unbelievably complex and dilapidated works to the point that it will no longer pay benefits or correct benefits on time, if at all. His method? Fire or incentivize the immediate retirement of everyone with knowledge of how the 89 year-old machine, with its 20,000 plus pages of rules (no joke), is supposed to work — especially those who know how to fix it.”
According to the Associated Press, Doge plans to close 47 Social Security Administration offices, 26 of them before the end of the year. This is at the same time that it is tightening identification rules requiring beneficiaries who are unable to identify themselves through the my Social Security online service to visit a field office to complete the verification process. In addition, the administration is reinstating a policy of clawing back Social Security overpayments by completely halting benefits. Often such overpayments are the result of mistakes by beneficiaries but also due to mistakes by the Social Security Administration itself. About a year ago, the Biden administration had adopted a policy of limiting such clawbacks to 10 percent of the beneficiary’s monthly payments.
Further, there’s talk of privatizing Social Security. President George W. Bush pushed this concept during his term, the idea being that private investment accounts would do better than Social Security for beneficiaries. Proponents argue that the stock market over time provides better returns than our contributions to Social Security.
These arguments ignore several features of the Social Security system as well as the reality of investing. Social Security is not an investment program. Instead it provides insurance, including coverage for spouses, minor children and people with disabilities. The costs of insuring them would need to be factored into any calculation comparing investments and the return on Social Security contributions. Further, while the stock market has produced great returns over the decades, most individual investors do not do as well since they make poor investment decisions.
Many people see the move to privatize Social Security as largely a way to steer more fees to Wall Street.
Medicare
The Trump administration has offered all 80,000 employees of the Department of Health and Human Services a $25,000 buy out if they agree to leave their jobs by 5:00 p.m. this Friday. We don’t know how many will take up this offer, but it could mean the loss of significant institutional knowledge and mass confusion as its various departments deal with under staffing. Its effect on customer service to Medicare beneficiaries would be similar to that for Social Security beneficiaries discussed above.
Nursing Homes
Most nursing home residents are covered by Medicaid. While there’s much debate about whether Medicaid reimbursement rates are sufficient for facilities to be able to provide high-quality care, reducing such rates to save funds is likely to have a deleterious effect on care. It will also likely to lead to the closing of nursing homes just before the oldest baby boomers start needing long-term care in hugely increasing numbers.
Reductions in staffing of Medicaid agencies could also delay the already long application process, putting both families of nursing home residents and the facilities themselves in limbo as they await coverage.
Estate Taxes
The current $14 million estate tax exemption is slated to be cut in half at the end of the year as the tax cuts of the first Trump administration are phased out. Surely, the administration and the Republican-led Congress will seek to preserve this exemption, if not eliminate estate taxation entirely.
Consumer Protection
The Trump administration has ordered the Consumer Protection Financial Bureau to stop all work and may seek to eliminate it entirely. This would curtail or end its work to help prevent scams targeting seniors and other forms of elder financial abuse.
Immigration
It’s hardly news that many caregivers, whether in nursing home and assisted living facilities or providing home care, are immigrants. Some are documented and some are not. (See this New York Times video.) The crackdown on immigrants is likely to further aggravate the already existing shortage of caregivers throughout the United States.
We will do our best to keep you informed as the Trump initiatives take shape.