The Trump Medicaid Mystery Is a Cliffhanger

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Trump Medicaid-Medicare administrator Seema Verma has a common interest with Mike Pence in cutting slack for states that accepted the Obamacare Medicaid expansion. Photo: Drew Angerer/Getty Images

As the clock ticks down to the swearing in on January 3 of a new Republican Congress, the operative assumption continues to be that the Trump era will kick off with an Obamacare repeal enacted via a budget reconciliation process that prevents Democratic filibusters in the Senate. (The bill will probably also include a measure defunding Planned Parenthood, the other item conservatives threatened to shut down the government and default on the national debt over in recent years — and perhaps some other particularly urgent gifts to the party base.)

In terms of the Obamacare repeal, the intra-party debate appears to be centering on whether a repeal-and-delay plan should carry a two-year or a three-year effective date, with House Republicans mostly favoring the shorter delay. Yes, there are some important details to be resolved about what it might take to keep repeal from panicking insurance companies and tanking the Obamacare exchanges during the “delay” phase, and arguments about whether that ought to matter to true ACA-haters. But you can begin to see a plan emerge from murky negotiations at both ends of Pennsylvania Avenue.

But the other “half” of Obamacare — actually quite a bit more than half in terms of the number of previously uninsured people being covered — is the ACA Medicaid expansion, and the GOP’s plans there remain shrouded in mystery. When I wrote about the questions Republicans needed to ask and answer about this issue over a month ago, it did not occur to me that these questions would still be outstanding as Washington geared down for a brief Christmas break.

The original template for the Obamacare repeal legislation, the 2015 budget reconciliation bill President Obama vetoed, simply terminated authorization for the Medicaid expansion immediately, returning the 31 states that had accepted the expansion (made optional by the U.S. Supreme Court) to the status quo ante. Right now these states receive federal funding covering 90 to 100 percent (depending on date of enrollment) of the cost of expanding Medicaid to people with incomes less than 138 percent of the poverty level. Under last year’s bill, these states would lose all that federal money, and would presumably need either to collectively drop a lot of people from the Medicaid rolls or cover them entirely with state dollars.

Now congressional Republicans might simply decide to make the effective date for a Medicaid expansion repeal the same as that for other features of the Affordable Care Act. But that decision is complicated by the fact that ten of those 31 states have Republican governors who took a lot of heat for going in that direction, in some cases as part of a deal with the Obama administration whereby they were given waivers to conduct conservative policy experiments with the Medicaid population. In this last category is one particular governor with outsize clout in the Trump administration, Vice President-elect Mike Pence. And coincidentally or not, the person who has been selected to oversee the Medicare and Medicaid programs once the Trump-Pence team takes office, Seema Verma, helped design Indiana’s program.

All other things being equal, it seems unlikely than Pence and Verma (not to mention the Republican members of Congress representing Medicaid expansion states) are going to be willing to screw over GOP governors who took the expansion money. But they can’t cut them slack without doing the same for the Democrat-governed states that accepted expansion, too. And just freezing the status quo would discriminate against the 19 states (all governed by Republicans) who did as their Washington counterparts urged by rejecting the expansion.

If that’s not enough of a complication, congressional Republicans have repeatedly promoted (and Donald Trump has endorsed) the idea of a Medicaid “block grant” (either a fixed statewide amount or a per capita cap on federal expenditures) that would begin to phase down (and possibly phase out) direct federal spending on the program in exchange for state flexibility in running it. This isn’t just an exercise in theoretical federalism: It’s a part of what Republicans mean when they talk about “entitlement reform,” and every Republican’s budget scheme assumes immediate and vast federal savings from this action. How will the introduction of a block grant mesh with the continuation or elimination of the Medicaid expansion? And will Republican governors who took the expansion-for-flexibility deal really go along with a new arrangement that supplies flexibility they already got from the Obama administration in exchange for a lot less federal money?

Compared to this situation, designing a phase down of the private-insurance exchange part of Obamacare looks relatively easy. The key intermediaries there are private insurance companies that will just move on and make money some other way. Republican governors are stuck with Medicaid and the fallout, fiscal and political, from radical changes in the program. I’m sure they are on pins and needles to see what administration and congressional Republicans have in store for them, and for the people in danger of losing health coverage.

The Trump Medicaid Mystery Is a Cliffhanger