Updated April 19, 2011

House Budget Would Make Steep Cuts to Needed Services in Kentucky

The U. S. House of Representatives recently passed a budget plan for 2012 and beyond that would dramatically reduce the federal government’s role in supporting basic economic security and make deep cuts to programs that serve low to moderate income Americans. Yet the plan would do almost nothing to reduce the deficit because it includes major tax cuts for wealthy Americans and corporations.1 The House plan, proposed by Representative Paul Ryan, would dramatically increase out-of-pocket Medicare costs for seniors by changing the federal program into a voucher to buy private insurance; turn Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) into block grants, thereby eroding federal support for these programs over time; and put in place a plan to nearly end most every other federal program except Social Security, health care and defense by 2050.2 The plan passed the House on April 15 and now goes to the Senate for consideration. Impacts of the plan on Kentucky include the following: Effect on Medicare in Kentucky

The House plan to privatize Medicare and turn federal support into a voucher would both make Medicare more expensive and shift more of the cost to beneficiaries.

Starting in 2022, a typical 65 year-old would have to spend an estimated $12,500 in out-of-pocket expenses for Medicare under the House plan compared to $6,150 under traditional Medicare.3

Medicare is an important part of the Kentucky health care system—it provides coverage for an estimated 568,000 Kentucky seniors and 185,000 Kentuckians with disabilities.

Effect on Medicaid in Kentucky

The House plan to turn Medicaid into a block grant would reduce federal Medicaid funding to states by 35 percent nationwide by 2022—and 49 percent by 2030—below the levels the federal government is projected to provide for the program under current law.4

If the plan had been in place starting in 2000, it would have cut $1.1 billion from Kentucky Medicaid in 2009—a 29% cut in federal support. Over that nine-year period, it would have cut an estimated $6 billion from the Medicaid program in Kentucky. 5

To make up this lost funding, Kentucky would have to eliminate coverage, cut benefits, and/or reduce already low payment rates to health care providers.

By eliminating the Medicaid expansion scheduled for 2014 under the Affordable Care Act, the plan would deny health insurance to an estimated 261,000 Kentuckians.6

The Medicaid block grant plan would lock in program spending and remove funding adjustments to respond to cost spikes and eligibility changes such as due to recessions, new illnesses or introduction of new medical technologies.

Effect on the Supplemental Nutrition Assistance Program (SNAP) in Kentucky7 SNAP helps provide food for 778,000 people in Kentucky in 2010, 72 percent of which live in a

household with a child and 39 percent of which live in a household with someone age 62 or older or who has a disability.

The House plan would cut $2.09 billion from Kentucky’s SNAP program in the next 10 years leading to cuts in eligibility, benefits or both.

If the cuts were made solely from dropping participants, an estimated 161,000 Kentuckians could lose SNAP in 2012. If the cuts were solely from reducing benefits per person, benefits would no longer buy a nutritionally-adequate monthly diet.

The increased discretion of a block grant at the state level would leave the program vulnerable to other state needs in the face of budget shortfalls, and would remove the flexibility to respond to recessions that create spikes in enrollment.

More than 40 percent of SNAP households are very low-income, living below half the poverty line, meaning that cuts to this program would impact the most vulnerable families in the Commonwealth.

For more on the House budget, click here. The Kentucky Center for Economic Policy (KCEP) conducts research, analysis and education on important state fiscal and economic policy issues. KCEP seeks to create economic opportunity and improve the quality of life for all Kentuckians. Launched in 2011, the center receives support from foundation grants and individual donors and is an initiative of the Mountain Association for Community Economic Development (MACED). Please visit KCEP’s website at www.kypolicy.org. 1 James R. Horney, “Ryan Budget Plan Produces Far Less Real Deficit Cutting Than Reported,” Center on Budget and Policy Priorities, April 8, 2011, http://www.cbpp.org/cms/index.cfm?fa=view&id=3458. 2 Robert Greenstein, “CBO Report: Ryan Plan Specifies Spending Path That Would Nearly End Most of Government Other than Social Security, Health Care and Defense by 2050,” Center on Budget and Policy Priorities, April 7, 2011, http://www.cbpp.org/cms/index.cfm?fa=view&id=3453. 3 Congressional Budget Office, “Long-Term Analysis of a Budget Proposal by Chairman Ryan,” April 5, 2011. 4 Congressional Budget Office, “Long-Term Analysis.” 5 Edwin Park and Matt Broaddus, “What If Ryan’s Medicaid Block Grant Had Taken Effect in 2000?” Center on Budget and Policy Priorities, April 12, 2011, http://www.cbpp.org/cms/index.cfm?fa=view&id=3466. 6 Kentucky Voices for Health, “The New Health Care Reform Law: What It Means for Kentuckians,” July 2010, http://kyvoicesforhealth.org/images/files/pdfs/IssueBrief_NewHlthLaw_July2010.pdf. 7 Dottie Rosenbaum, “Ryan Budget Would Slash SNAP Funding by $127 Billion Over Ten Years,” Center on Budget and Policy Priorities, April 11, 2011, http://www.cbpp.org/cms/index.cfm?fa=view&id=3463.