When Texas Governor Rick Perry recently threatened to pull his state out of Medicaid, he was hardly alone. Across the country, state budgets continue to be strapped. Federal stimulus dollars are running out. And the latest federal tax and stimulus package will not provide much relief at the state and local levels. Meanwhile, looming provisions of health reform will add a projected 16 million to the Medicaid rolls. Where are the facilities to take care of these folks? Where is the money?
As the United States slogs its way through a third year of recessionary conditions, the cumulative impact on government support programs for older Americans has become worrisome. Most eyes are on the federal government's massive budget deficits. Safety net programs would be affected by deficit reduction proposals that have been introduced to generally favorable receptions. Whether you call them entitlements or part of a welfare state, the big three—Social Security, Medicare, and Medicaid—must be reined in for meaningful deficit reduction to occur. The battle over these programs has already begun and will intensify when the new Republican majority takes office next year in the U.S. House of Representatives.
Even as the lines are drawn for the federal deficit-reduction war, the states have become a battleground for resources to fund Medicaid. The states share funding for Medicaid services with Uncle Sam, and have been increasingly hard-pressed to come up with their portion of Medicaid funding. Where Washington can, in effect, print money to pay its share of the tab, states cannot. Their budget deficits are, in many cases, getting worse instead of better.
Along with the Medicaid battle there will be countless skirmishes over continued funding for local support programs for seniors. Such efforts may receive some government funds but also depend on private philanthropy and the work of an extensive network of nonprofit agencies. After three years of flat or reduced contributions and austere operating budgets, this government-volunteer network is stressed and tired. And there is no relief in sight.
With government resources strapped, private philanthropy is not well positioned to pick up the funding slack. A group of several charitable organizations, called the Nonprofit Research Collaborative, recently issued its annual survey of 2010 donation trends. The good news is that the worst appears to be over. Slow recoveries in the economy and in investment values have supported a stabilization in charitable giving.
The bad news is that philanthropy appears to be stabilizing at disappointing levels. "The slide in giving found in 2009, when 51 percent of organizations reported a decline [in contributions] has slowed in 2010," the survey report said. "However, giving still did not reach levels seen in 2006 and 2007."
Meanwhile, demand for services continues to rise. That's particularly the case for seniors, who face a second straight year with no cost-of-living increases in Social Security. The poverty level of people aged 65 and older compares favorably with other age groups in the United States. That's almost entirely due to Social Security payments, which are large enough to keep most seniors above the poverty line. However, millions of older Americans live on incomes that are very near the poverty level.
Mandated increases in federal benefits under the health reform law are not the only source of financial pressures on safety nets. Baby boomers will begin turning 65 next year at the rate of an estimated 7,500 people a day. That's hardly welcoming news to a Medicaid program that already is hurtling toward insolvency.
David Certner, AARP's legislative policy director, agrees that many local seniors' programs will be at risk. But he stresses that Social Security and Medicare will continue to provide solid support to seniors. Even with growing debates about how to control the costs of both programs, they remain reliable components of senior safety nets.
"The Social Security debate is more about future retirees," says Certner. He also emphasizes that Social Security payments are critical to people in all income classes. Monthly benefits are "critical to low-income recipients as a safety net, but they're also crucial to the middle class," he says. "They are what allows people to stay in the middle class."
While federal support for Medicare is being reduced in the Medicare Advantage program, health reform will require that many preventive office visits and tests, including an annual physical, must be provided at no charge to Medicare participants. Federal support to pay for prescription drugs is also being increased for seniors with large drug bills.
"So, you have the two big programs—Social Security and Medicare—with no big problems next year, and Medicare may even be a little better," Certner concludes.
The picture will be different at the local level, he says: "I think this year that we're coming into is going to be extremely difficult at the state level." Certner expects the greatest pressure for cutbacks in home and community-based support programs for older residents. "When states are under pressures to cut their Medicaid services, these are the first things that have been cut," he says.
Every year, nonprofits and government agencies scrap for additional funding as an aging society raises the demand for senior services. But now, the funding competition has become more intense. The size of the economic pie is shrinking, and there is fighting over each piece of that pie.
"When you don't have the money, you can only do so much," Certner says. "That will invariably undermine safety nets."