Changing Medicaid into a program with per-capita spending caps would require consideration of what benefits would be covered, how the money would be allocated and how states would be held accountable for spending the funds, according to a Government Accountability Office report released Friday.
The idea has been mentioned in policy circles for years as a way to possibly cut costs and ensure Medicaid's solvency. It has most recently been embraced by Republicans but was also put forward by President Bill Clinton in the 1990s.
GAO identified four areas of key policy considerations: coverage and flexibility, allocation of fund across states and over time, accountability and broader effects.
The GAO report offers no stance on whether or how Medicaid should be reformed.
“Rather, our goal was to identify key policy and data considerations for designing a Medicaid per-capita cap that could be useful should policymakers elect to pursue a Medicaid per capita cap financing strategy or related approaches to restructuring Medicaid financing in the future,” the authors wrote.
The report was requested by the chairmen of the Senate Finance and House Energy and Commerce committees. Sen. Orrin Hatch (R-Utah) and Rep. Fred Upton (R-Mich.) wrote a 2013 report suggesting Medicaid per-capita caps and other reforms. Many of these were included in the Patient CARE Act they introduced last February as a replacement for the ACA.
In a statement, Hatch said lawmakers will need to consider Medicaid reforms as the program costs continue to rise.
“On the financing front, a per-capita approach is a worthy option that could, when paired with other program reforms, set Medicaid on a fiscally responsible course while protecting beneficiaries from harsh, across the board cuts in the future,” he said.
Many Republicans have embraced the block-grant approach, which reimburses states a set amount regardless of enrollment numbers.
The recently released House Republican Plan titled A Better Way suggests states choose between per-capita financing or a block grant. The platform Republicans approved at their convention this year calls for block grants.
Jim Capretta, resident fellow at the right-leaning American Enterprise Institute, said per-capita caps would be a huge departure in Medicaid policy, but the leverage states received when the U.S. Supreme Court ruled that the ACA could not require Medicaid expansion could leave an opening for such reform.
“We're kind of ripe for a change in Medicaid anyway,” he said. “There a lot of dissatisfaction out there.”
Republicans might push for the change even if Democratic presidential nominee Hillary Clinton wins the presidency. More flexibility for states would be a carrot the White House could offer to push more states toward expansion, Capretta said.
“I think this will appeal to a lot of state policymakers,” he said.
The report found that, in the area of coverage, policy makers would have to decide whether all populations should be under a single cap or whether there should be separate caps for groups like children or people with disabilities. The same would have to be decided for services, which could be covered in subsets or under the same cap.
They would also have to consider how healthcare costs vary by geography and the differences in available state resources. How the per-capita amounts change would also have to be discussed. They could be tied to a growth index, change automatically after set periods of time or specific events or some combination of those.
Capretta said these would likely be the most difficult decisions. Historical data that could be used to create rates is flawed and noisy, and could lead to questions of fairness between states.
The report notes that state accountability could be ensured by tying certain conditions to the receipt of federal funds or creating healthcare goals for states. The report notes that strong internal controls, performance data and transparency would be needed for a successful program.
The authors state that interviews with experts showed that healthcare demand and costs either increase or decrease under a per-capita cap system, depending on how it was implemented and whether care shifted to more efficient services or to more costly one, like emergency care.