The human costs of Medicaid cuts

Kimberly Adams (0:01)

The Fed Digs In to Fight Inflation From Marketplace in Washington, I'm Kimberly Adams. Yesterday, we got the word, borrowing costs are going up. Federal Reserve officials hiked interest rates by a quarter of a percentage point. But many people in this economy have already seen their home loans or credit card rates go up in recent months. So what lies ahead? Let's bring in Diane Swank, chief economist at KPMG. Good morning, Diane.

Diane Swank (0:29)

Good morning.

Kimberly Adams (0:30)

When the Fed hikes rates, what does that mean in the near term for mortgage rates or credit card interest rates?

Diane Swank (0:36)

Well, we've already seen, as you mentioned, that rates have gone higher. I think what's important to acknowledge that was missing in the messaging yesterday is that most consumers actually experience higher interest rates as inflation because it makes things more expensive. Now, it's a blunt tool that brings demand in line with a supply-constrained economy. But I think that's the reality, is that it is painful to get from where we are, where not only has inflation compounded but continues to rise too rapidly for too long, but also to get back to a place where you feel more comfortable and you're just not having that front-of-mind inflation. The path from here to there is a very rocky road.

Kimberly Adams (1:19)

Like we were just saying, even before the Fed raised rates, borrowing costs for lots of things have already been going up. Can you remind us as to why?

Diane Swank (1:29)

Well, that's an important part of the equation is, one, is inflation. People who lend us money in the Treasury bond market expect compensation for inflation. They don't want their future purchasing power in the dollars they lend us to be diminished. So one of the reasons we've seen interest rates already rise is because of inflation. And in fact, if the only way to bring those longer term interest rates down like mortgage rates is to eventually have inflation come down. So the one thing the Fed can do is at least take that inflation component out of it. Otherwise, you have even higher rates and even more pain for consumers on the road to trying to derail inflation.

Kimberly Adams (2:12)

Diane Swank is chief economist at KPMG. Thank you so much.

Diane Swank (2:15)

Thank you.

Kimberly Adams (2:34)

Now to a story about the individual health care ramifications of economic policy changes at the federal level. The big Republican tax and spending law that President Trump signed a little more than a year ago made significant cuts to Medicaid funding. States scrambling to make up for that deficit are now pulling back on some home health services for people with disabilities and older Americans. Those services already have wait lists that are often years long, and these changes could make those waits even longer. Jamie Fraser wrote about this for USA Today and joins me now for more. Jamie, good morning.

Jamie Frazier (3:09)

Good morning. Thanks for having me.

Kimberly Adams (3:11)

I'm thinking about the fact that with our aging population in the United States, it's not just people with disabilities who would be calling upon these services. It's also older Americans who need help at home.

So what it seems like you're laying out here is a situation where we've already got this backlog of folks needing these services. States are cutting back on these services due to Medicaid cuts, and even more people are going to be entering the system to need them.

Jamie Frazier (3:40)

The vast majority of people surveyed say that they would rather age in place than move into a retirement home or a skilled nursing facility.

When you look at these wait lists, about three-quarters of the people on them have intellectual or developmental disabilities, but most of the rest of them have physical disabilities, and that includes seniors. We can all experience reduced mobility or have a change in cognitive status or physical abilities, and that's where these programs come in and help people maintain their independence. But it's that one critical step that these programs help with and enable people to remain at home.

Kimberly Adams (4:22)

So what does the fact that all this is coming down the pipeline mean for folks with disabilities or the elderly?

Jamie Frazier (4:31)

We're going to see more of the same. The passage of the Americans with Disabilities Act in 1990 and the Olmstead Decision in 1999 really made clear there's a promise that people with disabilities, whether you're born with them or acquire them in old age, deserve to be part of American life broadly. We haven't always funded our programs enough to make sure that we hold that promise. Now, with the cuts in the One Big Beautiful Bill and states adapting to that by cutting voluntary services like home-based care, I think we're just going to see more people falling into that gap.