State leaders would gain enormous freedom to reshape their Medicaid programs under the new House Republican healthcare plan (PDF) to repeal and replace Obamacare. But that freedom likely would come at the price of a big loss of federal dollars, reduced coverage for their residents, and less money to pay providers.
Medicaid experts say it's impossible to predict exactly what would happen under the proposal because it lacks details and contains no numbers of how much it would cost or save or how many people would gain or lose coverage. But they warned that the effects could be dramatic, particularly as pressing new healthcare needs arise, such as treatment for opioid addiction, and costly but effective new medications and technologies, such as hepatitis C treatments, become available.
“The effect would be fewer dollars to cover people,” said Deborah Bachrach, a partner at Manatt, Phelps & Phillips who is a former New York State Medicaid director. “Every state would have to make hard decisions on whether to cut reimbursements, benefits, and eligibility. And when you reduce eligibility, you have more uncompensated care.”
In their 35-page “A Better Way” white paper released last week, Speaker Paul Ryan and other House Republican leaders offered states a choice between two forms of defined federal contributions for their Medicaid programs -- per capita allotments or flat block grants. They encouraged states to roll back or eliminate the Affordable Care Act's expansion of Medicaid coverage to low-income adults, which 31 states have adopted so far and which hospitals have eagerly embraced.
The GOP proposal also would:
- Reduce the ACA's enhanced federal funding for the Children's Health Insurance Program by 23 percentage points
- Eliminate federal funding for Medicaid expansion to low-income adults for states that had not accepted the expansion before Jan. 1, 2016
- Allow states make major changes to their Medicaid programs without having to obtain federal waiver approval
- Let states impose premiums, work requirements, enrollment caps, waiting lists, and reduced income eligibility thresholds for optional coverage populations such as non-disabled adults.
The House Republican leaders seek to carry out conservatives' longstanding project, going back to the Reagan administration, to transform the open-ended Medicaid entitlement program into a capped federal contribution to the states. It would let the states set eligibility, benefits, and delivery system approaches in whatever way they choose. The authors' stated goal is “cutting federal spending, advancing federalism, and empowering the states with flexibility” to reform Medicaid, which they argue has suffered from significant waste, fraud, and abuse and has failed to improve beneficiaries' health despite costing the federal and state governments $545 billion in fiscal year 2016. Medicaid now covers nearly 72 million Americans, more than Medicare.
“We want states to design a plan that works for them,” Rep. Fred Upton (R-Mich.), chairman of the Energy and Commerce Committee, said when the House GOP white paper was presented last week. He noted that Medicaid costs are projected to nearly double over the next 10 years, arguing that states should be able to make changes on their own “rather than go to Washington and ask, 'Mother, may I?' We want savings and we want states to provide a plan that helps their citizens.”
The five-page Medicaid proposal represents the Republican view that Medicaid is a safety net program for deserving poor, elderly, and disabled Americans, rejecting the Affordable Care Act model that uses Medicaid as a vehicle to expand health coverage to nearly all low-income people. “This says Medicaid and the Children's Health Insurance Program should be pulled back and focused as a safety net for the poorest and most deserving people,” said Diane Rowland, executive vice president of the Kaiser Family Foundation and an expert on Medicaid policy. “It says the ACA has overreached Medicaid's role.”
Making a coverage pullback almost certain is that the House Republican plan would repeal all of the ACA's hundreds of billions of dollars in new revenues, which funded the ACA's Medicaid expansion. That would leave no revenue for keeping the expansion.
Under the per-capita allotment option, starting in 2019 states would receive a monthly per-beneficiary contribution from the feds for the four major beneficiary categories—aged; blind, and disabled; children; and adults. The per-capita amount would be based on each state's average medical assistance and non-benefit expenditures per beneficiary for the base year of 2016, adjusted for inflation. The amount would grow “at a rate slower than current law.” Some payment categories such as disproportionate share payments to hospitals and graduate medical education would be calculated through a separate funding stream.
States that already have expanded Medicaid to low-income adults under the ACA would receive no more expansion funding in 2019 than they receive today. The enhanced rate of federal funding for the expansion population would be slowly phased down each year until it equaled each state's normal federal matching rate. States that had not expanded Medicaid as of Jan. 1, 2016 “would not be able to do so.” According to the white paper, the aim of this policy is “transitioning many of the able-bodied adults from Medicaid into commercial coverage.”
Under the block-grant option, states would get a lump sum not including money for the Medicaid expansion population. They would receive nearly total flexibility to design their program in any way they choose, limited only by the mandate that they “provide required services to the most vulnerable elderly and disabled individuals” for whom the current Medicaid law requires coverage. Any program spending that exceeded the federal amount would have to be financed by the states themselves.
Medicaid experts say it's impossible to predict exactly what would happen under the proposal given the lack of details and numbers. Some analysts said it's likely the House Republicans received numbers from the Congressional Budget Office on how their plan would affect federal spending and the number of people covered but didn't want to release the scores because they would have drawn criticism from Republicans on cost grounds and from Democrats on coverage grounds.
When the Congressional Budget Office scored Paul Ryan's similar House budget proposal to block-grant Medicaid in 2011, the agency estimated that federal Medicaid spending would be 35% lower in 2022 and 49% lower in 2030 than projected spending without the changes.
“If the costs of medical services for Medicaid enrollees continued to rise faster than the growth in the block grant amounts, states would have to decide how to respond,” the CBO wrote at that time. “Because of the magnitude of the reduction… states would face significant challenges in achieving sufficient cost savings through efficiencies to mitigate the loss of federal funding.” It said states could cut payment rates for doctors, hospitals, or nursing homes, reduce benefits covered, or limit eligibility, and that such cuts could increase uncompensated care.
Even without numbers for the current House GOP proposal, experts warned that the effects of the GOP plan would be profound. “Whether it's the per-capita or block grant approach, this would shift financial responsibilities from the feds to state governments,” Bachrach said. “It's a bad deal for states because they would get a fixed amount of money that does not accommodate local differences or increased demand for services. Governors all want more flexibility but it's not worth the price that's being suggested here.”
Under the ACA, “we've moved toward giving more people an entitlement to coverage,” Rowland said. “This could have the potential of saying to the low-income population, 'You don't have that entitlement any more.'”
Bachrach predicted that even though Medicaid long has drawn less voter attention than Medicare gets, the Republican proposal has the potential to become an important election issue this year, because Medicaid has become the single largest healthcare payer. “When you mess with Medicaid, you're messing with a lot of people, a lot of providers, a lot of health plans, and ultimately the states' economies,” she said.