With Medicaid Costs Soaring, Republicans Plan Dramatic Eligibility Changes
Policy + Politics

With Medicaid Costs Soaring, Republicans Plan Dramatic Eligibility Changes

iStockphoto/The Fiscal Times

It’s hard to predict precisely how the puzzle pieces will eventually fall. Yet Republicans made it clear last week that – one way or another – the 52-year-old Medicaid program for the poor and disabled is headed for significant changes in the coming year.

Although President Trump promised during the campaign that he would protect Medicaid, Medicare and Social Security from budget cuts or radical changes, Medicaid was put into play by House Speaker Paul Ryan (R-WI) and other conservatives in drafting legislation to repeal and replace the Affordable Care Act. The fate of that legislation is in doubt, with both conservatives and moderates raising strong objections to a bill likely to come up for a vote this week in the House.

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Even if that legislation fails – or undergoes significant change – the Trump administration and House Republicans are working on separate legislation and administrative actions that would significantly tighten state eligibility regulations and impose new requirements including that able-bodied beneficiaries find work or pay for part of their health coverage.

“Certainly Medicaid is under assault here . . . and what is being proposed is the biggest threat to the program since it was enacted in the 1960s,” said Edwin Park, vice president for health policy at the liberal leaning Center on Budget and Policy Priorities. 

The 1965 Medicaid law today covers about 75 million people, including poor children and pregnant women, the disabled and poor older people. While the program has been a lifesaver for millions of people, the growing numbers and associated costs have conservatives worried about runaway spending, fraud and waste.

Medicaid spending grew 9.7 percent to $545.1 billion in 2015, or 17 percent of total national expenditures on health, according to government data. That increase was twice the rate of growth in spending for Medicare for the elderly.

Related: Why the GOP Plan for Medicaid Could Be a Bad Deal for the States

Moreover, federal spending on Medicaid expansion under Obamacare proved to be much costlier than originally predicted, according to an analysis by Forbes. The Centers for Medicare and Medicaid Services (CMS) estimated in its 2014 Medicaid Actuarial Report that newly eligible enrollees would cost $4,281, on average, in 2015.  Yet a 2015 CMS report issued in July 2016, the per capita cost was $6,366—a 49 percent increase.

The most immediate question is whether House Republicans can agree among themselves on a plan to repeal and replace the Affordable Care Act that will phase out the expanded version of Medicaid in 31 states and the District of Columbia. That program has grown in popularity -- even in more conservative states – and currently provides health care coverage to more than 11 million able-bodied childless adults or parents who previously were excluded from Medicaid.

The Ryan-Trump bill headed for House floor action this week would phase out the expanded Medicaid coverage beginning in 2020, or even sooner if conservative critics have their way. That change if approved would represent a serious blow to a large segment of the U.S. population that has struggled without health insurance for years.

The change would effectively freeze out millions of people who would have received coverage if the program were still in existence while causing current enrollees to eventually lose their coverage.

A far more serious threat to low income Americans, however, is a provision in the bill that would impose a new per capita limit on federal matching funds for Medicaid, rather than continuing to treat the program as an open-ended entitlement.

That move would effectively shift costs and risks to the states and put coverage at risk for millions, according to some analysts. Essentially, states would receive a fixed amount of funds to provide coverage for an individual that would be adjusted for inflation in medical costs.

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The Congressional Budget Office (CBO) analysis of the GOP health care replacement plan found that the Medicaid cuts in the bill and the new per-capita spending cap would result in Medicaid enrollment declining by 14 million. Overall, the CBO projected that 24 million would either lose or decline their insurance by 2026.

“The bill needs its deep Medicaid cuts — $880 billion over ten years in total — to offset its hundreds of billions of dollars in tax cuts to the wealthy, pharmaceutical companies, and insurers, and states simply couldn’t make those cuts without harming millions of Medicaid beneficiaries,” said an analysis published last week by the Center on Budget and Policy Priorities.

The Ryan-Trump replacement bill has encountered stiff resistance in the House and is considered unpassable in the Senate in its current form with some conservatives saying it isn’t tough enough and moderates saying it goes too far and leaves many of their constituents without insurance coverage.

Trump boasted on Friday that he has begun winning over conservative dissidents and predicted a victory when the bill comes to a vote in the House this week. “I think we have a very unified Republican party,” he said at a Friday news conference.

William Galston, a political and public policy expert with the Brookings Institution, said last week, “I would be amazed if any bill emerges from the Senate that’s within hailing distance of the bill that emerges from the House.”

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“My gut tells me we are a long way from a legislative product signed by the president that would redo Medicaid,” he added. “Unlike members of the House, most of whom are in safe districts, there are a lot of red-state senators whose citizens have participated in the Medicaid expansion, and many of them voted for Donald Trump, and I think Trump knows that.”

But even if the legislation goes down in the House or fails in the Senate, congressional Republicans and the new Trump administration are seeking ways to tighten eligibility rules that have long been championed by conservative lawmakers and think tanks like the Heritage Foundation.

On Thursday, for example, House Budget Committee Republicans signaled they would pursue legislation requiring able bodied adults without children to find work or lose their coverage. Many conservatives have complained for years that Medicaid beneficiaries were free-loaders who should be making money to defray their health care costs.

Research by the Kaiser Family Foundation and the CBPP indicate that between 60 percent and 80 percent of adult Medicaid recipients live in families where at least one person is a full-time or part time employee. Many of those who don't hold jobs have an illness or disability that prevents them from working or are care givers to other members of their families.

Related: How Republicans Got Trapped by Their Health Care Promises

While Democrats and liberal advocacy groups are on high alert regarding what they see as growing peril for Medicaid, others are less certain about the prospects for change -- even if Trump and his congressional allies miraculously pass the Obamacare replacement legislation pending in the House.

“I’m not sure,” said Michael Cannon, a health care policy expert with the libertarian Cato Institute. “In fact, the bill as it exists right now does not make serious changes in Medicaid.”

Echoing the concerns of conservatives in the House Freedom Caucus and other factions, Cannon said that the prosed repeal of the Medicaid expansion is “unserious” because it doesn’t begin to take effect until 2020 and contains too many loopholes.

 He also argued that the proposed per capita matching grants to the states might have the unintended effect of encouraging states to enroll more able-bodied adults to generate more income while cutting back on benefits to vulnerable populations.

“So the Medicaid provisions are just more of the same,” Cannon insisted in an interview, dismissing the Ryan-Trump legislation as “Obamacare Lite.”