How the Senate Might Do Even More Damage to Medicaid

One of the things Senate Republicans may be plotting in secret is a “cap” on Medicaid spending that guarantees very deep cuts down the road. Photo: Bill Clark/CQ-Roll Call,Inc.

As we all wait with bated breath for Senate Republicans to unveil the revision of the American Health Care Act they have been working on in secret, one especially complicated but crucial issue could be coming into focus: the two very different but often conflated ways in which GOP legislation will cut Medicaid, the country’s principal low-income health-care entitlement program.

According to the Congressional Budget Office, the House-passed AHCA accomplished an estimated $834 billion in reductions of federal Medicaid spending over ten years. CBO did not break down the cuts by specific AHCA provision, but it is reasonably clear the bulk of them, especially after 2020, would come from the new per capita cap on federal Medicaid allotments to the states. The per capita cap, which really has nothing to do with Obamacare, reflects a long-standing GOP goal of ending Medicaid’s original status as an open-ended entitlement program in which the federal government would contribute a specified percentage of the costs incurred by states in covering eligible enrollees. Under AHCA, the federal share of costs would be “capped” at a particular level per enrollee, with a fixed annual “growth rate” (basically the medical inflation rate). Any costs above that level would have to be picked up by the states. (States could elect to replace a per capita cap with a “block grant” that limits total spending for most categories of beneficiaries, regardless of the number covered, though it is unlikely states would go in that direction unless they are determined to significantly reduce eligibility or benefits).

But the AHCA Medicaid provision that has gotten the most attention has not been the per capita cap — a permanent provision that affects all 50 states and represents a fundamental change in the program — but rather the phase-out of the Affordable Care Act’s generous federal subsidies for states (31 at this point) that choose to expand Medicaid eligibility to the universe of people (including able-bodied adults without children) with incomes under 138 percent of the federal poverty line.

Under ACA, the federal government initially covered 100 percent of the costs of covering the expansion population, a “super-match” that this year began declining toward a permanent level of 90 percent, still far above the usual match rate (which varies from state to state based on demographics, ranging from a minimum of 50 percent up into the 70s for a few really poor states). The House-passed AHCA would drop the super-match for new enrollees after 2020 (previous “expansion” enrollees would continue to receive the super-match so long as they had continuous coverage; in reality most would not meet that condition).

Republican senators from states that expanded Medicaid have been making a lot of noise about slowing down the phase-out of the super-match. By and large, they have expressed much less (if any) concern about the per capita cap (which affects the 11 million enrollees brought in under ACA expansion along with the 63 million receiving Medicaid under the old rules).

Inevitably, given the imbalance of political pressure, it looks like the Senate might wind up trading a bit more generosity on the Medicaid expansion phase-out in exchange for a significantly tighter per capita cap. Axios reports a possible deal in the works that would create a three-year “glide path” for the expansion phase-out but then a per capita cap that after 2025 would base the growth adjustment on the general inflation rate. That is typically is quite a bit lower than medical inflation, not to mention actual per capita costs, expected to go up as the expensive senior segment of the Medicaid population grows.

This kind of trade-off would be terrible for the states and terrible for poor people, but would really please the conservatives who are driving AHCA, for all the talk of influential “moderates.” The odds of Republicans achieving “entitlement reform” in the brief window before a likely setback in the 2018 midterms are vanishingly small when it comes to Social Security and Medicare. But they may soon be able to boast that “Medicaid as we know it” is gone, without that many people even noticing.

The main obstacle to that outcome is better understanding of which Medicaid cuts matter most, and a few Republican senators who care about them. The most encouraging sign came just today, when Shelley Moore Capito of West Virginia told Axios she was “uncomfortable” with a lower per capita cap than the one in the House bill.

I think that’s a problem. I think that sort of defeats the purpose of keeping people on, and at a level at which the program can be sustained.


How the Senate Might Do Even More Damage to Medicaid