No Easy Choices: 5 Options to Respond to Per Capita Caps

Congress is debating the American Health Care Act (AHCA) that would end the enhanced matching funds for the ACA Medicaid expansion and would also end the program-wide guarantee for federal Medicaid matching dollars by setting a limit on federal funding through a block grant or per capita cap.  Under a block grant, federal spending would be limited to a pre-set amount.  States could cap enrollment or impose waiting lists as mechanisms to control costs.  Under a per capita cap, per enrollee spending would be capped, but the total amount of federal dollars to states could vary with enrollment changes and states would not be able to impose enrollment caps.

Faced with restrictions in federal financing, states would have to make hard choices. Research shows that there is not strong evidence to support large savings through options aimed at achieving Medicaid efficiencies. Under a block grant, states could cap or limit enrollment; however, the incentives and options under a per capita cap could be different.  This brief outlines the key measures states could use to manage their budgets and the associated challenges under a per capita cap:

Kaiser Health Tracking Poll – June 2017: ACA, Replacement Plan, and Medicaid

  • As the Senate prepares to hold a vote on a plan to repeal and replace the Affordable Care Act (ACA), a majority of Americans say they have an unfavorable view of the plan (55 percent) while three in ten have a favorable view. In the past month, support for the replacement plan has decreased among Republicans (from 67 percent in May to 56 percent currently) and among supporters of President Trump (from 69 percent to 55 percent).
  • Over the past year, Kaiser Health Tracking Polls have found a modest increase in support for the ACA and this month’s poll finds about half of the public (51 percent) expressing favorable views of the ACA while 41 percent hold an unfavorable view. This is the first month that favorability has tipped over the 50 percent mark since Kaiser Family Foundation began tracking attitudes on the law in 2010 and continues the trend found last month with the public more favorable towards the ACA than the replacement plan (51 percent vs. 30 percent).
  • Large shares of the public overall, and majorities across parties, support the federal government’s role in prohibiting health insurance companies from charging individuals with pre-existing conditions more for their coverage and requiring health plans to cover a certain set of benefits, while fewer would want to turn these decisions over to the states.
  • Few Americans, regardless of party identification, say repealing and replacing the 2010 Affordable Care Act should be the “most important priority” for President Trump and Republicans in Congress (7 percent of Democrats, 9 percent of independents, and 8 percent of Republicans). Another two in ten (22 percent) say it is “very important but not the most important” priority. Republicans are much more likely to see repealing the ACA as a very important or top priority (50 percent) than Democrats (18 percent) or independents (28 percent).
  • The majority of the public – regardless of partisanship – hold favorable views of Medicaid, the government health insurance and long-term care program for low-income adults and children. Three-fourths (74 percent) of the public say they have a favorable view of the program, including four in ten (37 percent) who have a “very favorable” view. In addition, six in ten say the program is working well for most low-income people nationally (61 percent) and seven in ten say the program is working well for most low-income people in their state (67 percent).
  • When asked about proposed changes to the Medicaid program, a majority of the public support allowing states to impose work requirements on non-disabled adults (70 percent) or drug testing as a condition of enrollment (64 percent). However, fewer support changes that would cut funding or alter the funding structure. For example, about one-third support reducing funding for Medicaid expansion or limiting how much money each state gets from the federal government each year.
  • The public is more likely to blame health insurance companies rather than the actions of the current or previous administration for insurers deciding not to sell insurance in certain ACA marketplaces. About four in ten (42 percent) say the problems are mainly due to profit-driven decisions by health insurance companies while fewer say the problems are due to either the way the law was designed by the Obama administration and Democrats in Congress (28 percent) or uncertainty brought on by the actions of President Trump and Republicans in Congress (22 percent).

The Republicans’ Jekyll-and-Hyde Health Care Plan

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The Senate Republicans’ health bill that was made public today is a Jekyll-and-Hyde plan: in some ways kinder than the House Republican plan, and in some ways meaner, to use President Donald Trump’s yardstick. Overall the plan will benefit the wealthy and young adults, but hurt larger numbers of people who are old or poor.

On Medicaid, the federal-state health program covering 69 million lower-income people, the Senate plan is harsher than the House plan. Like the House bill, the Senate bill would effectively kill the expansion of Medicaid that was allowed under the Affordable Care Act. It will do this by phasing out, over four years, the law’s requirement that the federal government cover 90 percent of the cost for people added under Medicaid expansion — many of them single adults below or just above the poverty line. Medicaid expansion covers 14 million people in 30 states and the District of Columbia. (The remaining states chose not to expand their programs.) Expansion states would have to come up with hundreds of millions, in some states billions, of dollars from their own budgets to replace those lost federal funds. Based on my experience as a state human services commissioner — for a Republican governor — I predict that few if any states will be able to do that. It is also highly unlikely that other states will join the expansion once the federal match is gone.

Both the Senate and the House plans also impose a per capita cap on future federal Medicaid spending. The Senate plan imposes a harsher formula for its cap than the House plan, which already cuts Medicaid spending by $834 billion over 10 years. Because states have to balance their budgets every year, unlike the federal government, many will struggle to compensate for reductions in federal aid caused by a spending cap. Many states will be forced to choose between Medicaid and other priorities, like education, law enforcement and prisons. The inevitable result will be a reduction in health care spending on low-income people. And you cannot cut over $800 billion from Medicaid without adversely affecting health services for the poor.

Governors might be expected to loudly protest these Medicaid cuts, but the Senate bill delays the harshest cuts until 2025, after the current governors are gone. We will see how those governors balance their states’ health care futures and their own political interests.

That’s Mr. Hyde. Now for Dr. Jekyll. The part of the Senate bill that deals with the individual insurance market and the A.C.A. marketplaces is in some respects Obamacare-lite. The House bill was sharply criticized for replacing Obamacare’s system of tax credits and subsidies, intended to make insurance more affordable, with a system of tax credits that were far less generous. The Senate bill would maintain Obamacare’s tax credit system, but it would scale back the value of the credits. And as under the A.C.A. but not the House plan, the tax credits will be adjusted for income and geography — which will benefit people in parts of the country with high premiums, especially rural areas. Still, deductibles are likely to rise under the Senate plan.

Another key difference involves community rating, which prohibits insurance companies from charging sick people more than healthy people. The House bill would authorize states to apply for waivers allowing insurers to charge sick people more. The Senate bill would not allow such waivers. But it would make it easier for states to seek exemptions from other provisions of the law, including the essential benefits insurers must cover, such as maternity care and mental health. How this would play out nationally would vary greatly from state to state, but it seems certain that some states would allow significant reductions in essential benefits.

Each of the plans would eliminate funding for Planned Parenthood for one year, as well as prevent plans participating in the insurance marketplaces from providing abortions.

Conservatives may like the idea of capping and cutting Medicaid, but they will not like the Senate bill’s Obamacare-lite tax credits. Liberals and moderates will resist what they consider the near decimation of the Medicaid program. Nor will they like the idea of handing so much control over Medicaid to the states. They will see little logic in reducing eligibility for the A.C.A.’s tax credits. How, they will rightly ask, would that “fix Obamacare” when middle-class consumers who buy their own insurance are struggling to pay their bills now?

Overall, it’s important not to focus too much on the differences between the Senate and House plans. Both plans will reduce federal health care spending and cap Medicaid while shifting greater responsibility to the states. And both plans will cause more Americans to go without coverage and struggle with health care bills. Both bills are likely to increase the number of Americans having problems paying medical bills — about a quarter of the public today. For voters, that is the single most important barometer of the performance of the health care system.

If the plan passes and is signed into law, congressional Republicans and the president will win plaudits from their base for repealing Obamacare. But then they will own the problems in the health care system, including those created by their own legislation.

Winners and losers from the Senate repeal bill

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The wealthy, young and healthy come out ahead in the GOP’s newly revealed plan, while addiction treatment programs and Planned Parenthood are slated to lose funding.

The Senate’s Obamacare repeal bill, which touches all parts of the health care system and beyond, creates new sets of winners and losers. Here are a few:


The young and healthy: The plan focuses on lowering premiums by allowing states to cut some of Obamacare’s major insurance rules that help protect sicker patients but also drive up the cost of coverage. For instance, states could cut mandated coverage of emergency care and substance abuse treatment. Younger and healthier people with fewer health care needs would be able to buy skimpier health insurance.

GOP governors who fought Obamacare: Republican governors who sought less federal oversight and more state control over their insurance markets will get tremendous leeway under waivers in the Senate bill. The Senate plan would roll back requirements about what insurers must cover and expedite state applications seeking more flexibility. For instance, governors would no longer need permission from their legislatures to obtain waivers.

Some health industry groups: Medical device makers, health insurers and tanning establishments, among others, would see the eventual elimination of ACA taxes on their products or services — although some of those taxes may be kept temporarily to pay for parts of the plan. Major provider groups, however, including the American Hospital Association, have come out forcefully against the Senate bill, while many other industry groups were still reviewing the plan Thursday afternoon.


Poorer, older insurance consumers: The Senate plan, like the House bill, would allow insurers to charge their older customers up to five times as much as younger customers for the same health plan. That’s an expansion of the so-called age band in Obamacare, which allows insurers to charge older customers no more than three times as much as younger ones. In two years, the Senate plan would also eliminate a key subsidy program that helps cover out-of-pocket medical bills for low-income consumers.

People struggling with addiction: The bill rolls back the federal government’s generous funding for Medicaid expansion, which has been a major source of substance abuse treatment amid the opioid epidemic. The Senate draft earmarks $2 billion for opioid treatment in 2018 — compared to the House’s provision of $15 billion over 10 years for mental health, substance abuse and maternity care. The Senate bill does loosen some restrictions on Medicaid funding of long-term treatment for people with substance abuse and mental health issues.

Planned Parenthood and its clients: The women’s health organization, a frequent GOP target for defunding, would be cut out of the Medicaid program for one year. However, this provision could be problematic for moderate Republican Sens. Susan Collins of Maine and Lisa Murkowski of Alaska, and Republicans can’t afford to lose more than two votes.

Public health agencies: The draft kills the ACA’s $1 billion Prevention and Public Health Fund in 2018, one year earlier than the House-approved health bill. The fund makes up roughly 12 percent of the Centers for Disease Control and Prevention’s budget and has been used to address public health threats, including the Zika virus outbreak, as well as for preventive health services and immunization programs.

The Senate Puts Medicaid on the Chopping Block

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A draft version of the AHCA released Thursday shows even deeper cuts to the program than the House version.

The new AHCA is a lot like the old AHCA.

After weeks of secret gestation in back rooms, the Senate released a discussion draft of the chamber’s version of the American Health Care Act. Like the version passed through the House to cheers in May, it is likely to make health care less affordable for low-income, sick, and near-elderly people; it makes Obamacare tax credits for exchange coverage less generous; it restricts and slashes Medicaid funding deeply over the next decade; and it attempts to smooth euphemistically-named “market disruptions” from all those reforms by injecting billions into state funds and reinsurance.

There are some substantial changes in the specifics, though. For starters, the Senate bill would tweak the House bill’s tax subsidy for private insurance purchased on the exchanges. The final version of the House bill provided a tax credit to people making up to 400 percent of the federal poverty line that would be less generous than the existing ACA credits. It would also reduce the amount of expenses covered as recipients get older and have more expenses.

The Senate’s version would cut the eligibility for premium tax credits to those earning up to 350 percent of the poverty line. It would be slightly more generous for poor and near-poor people, although credit percentages would taper off more sharply as recipients grow older, and they would be severely restricted for people as their income approaches that 350 percent threshold. Unlike the House plan, however, the Senate plan would fund Obamacare exchange cost-sharing subsidies through 2019, which would soften some of the immediate impacts of a less generous tax credit.

The House’s bill would allow private insurers to charge people more as they grow older, and permit plans in certain states to cover fewer services. It also would have made exchange coverage more expensive and less comprehensive on average for low-income, sick, and older people. It would likely reduce coverage for pregnant women and people with mental-health issues as well. The last Congressional Budget Office score found that many of the 23 million fewer people who would be covered were drawn from those groups, as well as many of those who would keep coverage but suffer dramatic increases in premiums.

The Senate bill would alleviate some of these issues with slightly more generous credits for the poor, but would keep those central disruptions intact, and would leave more middle-class people without affordable coverage. It also allows even less generous plans to stand as benchmarks for exchange and employer coverage, which could likewise contribute to disruptions and deductible increases.

In recognition of the disruptions to the state-level exchanges through which individuals purchase coverage, the House bill set up a “Patient and State Stability Fund,” which would inject over $100 billion into state high-risk pools and reinsurance funds. The Senate largely replicates this approach with slightly less funding, although it does add an additional $2 billion fund for fighting the opioid crisis in 2018.

The much more drastic changes in the Senate bill as compared to the House bill come in the realm of Medicaid. The House bill immediately ended enhanced funding for the Medicaid expansion to able-bodied low-income adults under the ACA, while the Senate bill would slowly phase that funding out. This, in theory, would put millions fewer people immediately in the ranks of the uninsured and increase government spending over the House plan. But seven states (Arkansas, Illinois, Indiana, Michigan, New Hampshire, New Mexico, and Washington) have “trigger laws” that would immediately void their Medicaid expansions with any change in federal support, and it’s likely more states would choose to shutter their expansions well before the end of the enhanced funding window in the face of rising costs.

Several independent analyses have concluded that this funding structure would lead to large-scale shortfalls in every state, which would need to be closed by reducing enrollment or benefits, and cutting capacity to respond to disasters and public-health crises. Those affected most would be poor children, people with mental-health issues, and disabled people.

After President Trump reportedly called the House draft “mean” earlier this month, many observers expected the Senate to produce a more moderate plan. Instead, the Senate plan actually deepens long-term Medicaid cuts. The bill keeps the same basic inflationary index of the House bill until 2025. But after that, instead of using the more generous medical inflationary index (since costs in the health-care sector increase faster than broader measures of inflation), the Senate plan uses the general Consumer Price Index for all urban consumers (CPI-U), which will dramatically slow the rate at which funding for the program increases.

A recent report from the Urban Institute shows some of the long-term effects of this switch in inflationary indexes. While it assumes an existing Medicaid expansion and compares an immediate difference in indexing, instead of the 2025 phase-in, the paper illustrates how Medicaid funding will be flattened in the future under the CPI-U. States will have to plan for much less generous Medicaid funding down the road, and most signs point to even more cuts in benefits and eligibility for some of the most vulnerable populations than under the House plan.

That restriction on Medicaid might seem like bad politics, and it remains to be seen if moderate Republicans will warm to the bill, or if public pressure will change some minds. But among the Republican base especially, Medicaid remains deeply unpopular, and is frequently maligned. Even as strengthening the private-insurance subsidies became a key issue for Senate Republicans, Medicaid remained a target, and reducing its generosity has long been a rather uncontroversial piece of the party’s goals.

The full impact of all these changes in the Senate draft won’t be known until it receives a score from the CBO. But what appears clear is that along with broad cuts in Obamacare taxes that mostly benefit middle-class and upper-income people, the Senate plan—perhaps even more so than the House plan—is a massive constriction of the safety net. It will have a substantial impact on both wealth and health, shifting the benefits of public policy away from the poor and the sick, and toward the healthy and the affluent. For Republicans who have long despised the redistributive effects of Medicaid, that is precisely the point.

Promises Made To Protect Preexisting Conditions Prove Hollow

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Built into the Senate ACA replacement bill are loopholes for states to bypass those protections and erode coverage for preexisting conditions. That could lead to perverse situations in which insurers are required to cover chronically ill people but not the diseases they suffer from.

Senate Republicans praised the Affordable Care Act replacement bill they presented Thursday as preserving coverage for people with cancer, mental illness and other chronic illness. But the legislation may do no such thing, according to health law experts who have read it closely.

Built into the bill are loopholes for states to bypass those protections and erode coverage for preexisting conditions. That could lead to perverse situations in which insurers are required to cover chronically ill people but not the diseases they suffer from.

Depending on what states do, plans sold to individuals might exclude coverage for prescription drugs, mental health, addiction and other expensive benefits, lawyers said. Maternity coverage might also be dropped.

Somebody with cancer might be able to buy insurance but find it doesn’t cover expensive chemotherapy. A plan might pay for opioids to control pain but not recovery if a patient became addicted. People planning families might find it hard to get childbirth coverage.

“The protection your insurance provides could depend a lot on where you live,” said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute. In some states, “over time, [patients with chronic illness] might find it increasingly difficult to find insurance companies that will offer plans that cover their needs.”

The Senate provisions aren’t expected to affect job-based health plans or Medicare for seniors. It would mainly affect the kind of insurance sold to individuals through the Affordable Care Act’s online exchanges, which cover about 10 million people.

Hospitals Pan Senate ACA Repeal Plan

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he hospital sector offers unanimous thumbs down to the Senate’s proposal to repeal and replace the Affordable Care Act.

The nation’s largest hospital associations united in rejecting the Senate’s proposal to repeal and replace the Affordable Care Act, and urged lawmakers to “hit reset” and “go back to the drawing board.”

Senate Airs Obamacare Repeal ‘Draft’

The response to the Senate plan released Thursday was virtually identical to the unanimous disdain shown this spring for the House Republicans’ American Health Care Act.

That is not surprising because the two bills are fundamentally the same on key points. They both eliminate the individual mandate, slash Medicaid, and eliminate a 3.8% tax on investment income above $200,000 that is a key funding source for Obamacare.

Moody’s Investors Service said Thursday the Senate bill would hurt hospitals.

“Under the proposed Senate bill, both for-profit and not-for-profit hospitals would face weaker demand for services and higher rates of uncompensated care expense, with the most significant impact on the sector occurring after 2020 when the changes to federal Medicaid funding are phased in,” said Daniel Steingart, a vice president at Moody’s.

“Transitioning federal Medicaid payments to a per-capita, or block grant system, and freezing Medicaid expansion would reduce the number of people with insurance and increase hospitals’ exposure to bad debt and uncompensated care costs.”

The nonpartisan Congressional Budget Office has yet score the bill, but by some estimates as many as 11 million people who gained coverage under the Medicaid expansion would be booted from the rolls under the Senate plan.

Hospitals Say ‘Hit Reset’

Rick Pollack, president and CEO of the American Hospital Association, said the Senate Better Care Reconciliation Act “moves in the opposite direction” from “key principles” the AHA had set down to protect health insurance coverage, particularly for vulnerable patients.