Senate GOP moderates signal openness to ending Medicaid expansion funding

Moderate Republican senators from Medicaid expansion states are dropping their opposition to ending the Affordable Care Act's enhanced federal funding for expansion as they embrace the idea of winding down that funding over several years.

Sens. Dean Heller (R-Nev.), Shelley Moore Capito (R-W.V.), and Rob Portman (R-Ohio) all previously said they wanted to preserve expansion funding, and all indicated this week that they could go along with killing the extra funding if the cutoff was delayed. The three reportedly are pushing to start phasing out expansion funding in 2027, seven years later than the House's proposed 2020 start date in the American Health Care Act.

Their new stance signals a potential breakthrough for Senate Majority Leader Mitch McConnell (R-Ky.) to corral enough GOP votes to pass an ACA repeal and replace bill, just days after Senate GOP leaders worried they wouldn't be able to meet the vote threshold. Under the budget reconciliation rules, McConnell needs only a simple majority to pass the bill. (Vice President Mike Pence would cast the 51st vote.)

But extending the ACA's expansion funding could create major budget headaches for Senate GOP leaders when the Congressional Budget Office scores its financial impact. The Senate reconciliation rules require the bill to produce the same $119 billion in 10-year deficit reduction as the House bill.

Ending the enhanced Medicaid expansion funding likely accounts for at least half of the projected $834 billion in reduced Medicaid spending created by the House bill, according to Matt Fiedler, a budget expert at the Brookings Institution's Center for Health Policy.

If the Senate bill delays the phaseout and if states keep their expansions even temporarily, that could cost tens of billions of dollars, he added.

Senate leaders have signaled they may have to delay repeal of at least some ACA taxes to pay for the extended Medicaid sweetener. That could cost them support from Senate conservatives such as Ted Cruz of Texas and Mike Lee of Utah, who want to immediately end all ACA taxes.

Delaying the end of Medicaid expansion funding won't necessarily win the Senate moderates political points back home. Hospital leaders and patient advocacy groups said that merely delaying the phase-out would do little to mitigate the damage. They also warn that states will likely terminate Medicaid expansions to low-income adults because they cannot afford to come up with state funding to replace the billions in federal dollars.

"A delayed phaseout of the enhanced (federal contribution) is marginally less harmful than what is currently included in the AHCA," said Greg Vigdor, CEO of the Arizona Hospital and Healthcare Association, whose state expanded Medicaid. "However, phasing it out whether in 2020 or 2027 will create big problems for Arizona's patients, healthcare system and local economies."

At a private meeting of Senate Republicans Tuesday, McConnell reportedly proposed delaying the cutoff of enhanced Medicaid expansion funding for just three years.

There also is discussion among GOP senators about gradually reducing the federal contribution for expansion from 90% to each state's standard matching rate, which averages 57%.

"My hope is that a longer glide path with flexibility will give the states and the governors the ability to extend the coverage to the population," Capito told reporters Wednesday, cautioning that she still has to see if "the glide path is too steep."

Capito's spokeswoman said the senator "remains focused on affordability and giving states flexibility to operate their Medicaid programs."

Other Senate GOP centrists from expansion states, including Bill Cassidy of Louisiana, Cory Gardner of Colorado and Jeff Flake of Arizona, also indicated they were moving toward supporting the repeal-and-replace effort despite their objections to the House bill. Sen. Susan Collins (R-Maine), who has backed Medicaid expansion in her state, also spoke favorably of the emerging Senate bill, which is being written behind closed doors with no hearings planned.

Senate Democrats blasted the Medicaid changes in the evolving Senate GOP bill as cosmetic. "No matter how they want to put lipstick on a pig, it is going to be a plan that devastates healthcare for millions of Americans," Sen. Patty Murray of Washington told the Washington Post.

Some analysts were not surprised that Capito and others now seem to be coming around, as GOP centrists are facing fierce pressure from party leaders to support repealing the ACA, a key Republican promise for the last seven years.

"It's just a matter of dollars, and dollars can be worked out even if no one likes the final arrangement," said Tom Miller, a conservative health policy expert at the American Enterprise Institute. The moderates "don't want to be the ones in the way of this bill. They'll have to deal with the political consequences of passing nothing."

All this has put healthcare industry groups that favor making the Medicaid expansion permanent in the uncomfortable position of offering suggestions to Senate Republicans on how to reduce the harm from rolling it back.

Steven Summer, CEO of the Colorado Hospital Association, said he and Colorado hospital CEOs have met with Sen. Gardner and emphasized the value of having more than 400,000 people covered under the Medicaid expansion, which has reduced uncompensated care by more than half and significantly reduced wasteful emergency room visits.

He said Gardner, as a former state lawmaker, knows that his state requires a voter referendum to raise taxes and therefore is unlikely to come up with state funds to replace the enhanced federal expansion funding. That means the state's Medicaid expansion almost surely would end if the GOP bill cuts off those federal dollars.

The hospital leaders have suggested various alternatives to Gardner, such as modestly phasing down the federal match from 90% to 85% or even 75%. "Our preference would be to keep the Medicaid expansion and the current 90% match," Summer said. "But we want to give him some ideas for constructive discussion."

Conservative analysts say the GOP moderates' shift on Medicaid expansion bodes favorably for the repeal-and-replace effort, but the outcome in the Senate remains uncertain. The moderates are still skittish about ending their states' Medicaid expansions, and will watch to see what other moderates do so they aren't in the position of being the senator who blocked the repeal of Obamacare, the American Enterprise Institute's Miller said.

"Expansion state senators will dig in their heels if they know they aren't the ones stopping it," he said. "But if the leaders can pick off one senator at a time, then it's harder for them to hold out. It's not absolutely a done deal."