Some states had already begun negotiations with the Centers for Medicare and Medicaid Services on securing Medicaid waivers, Fitch said.
Despite the Senate’s failure to pass an ACA repeal and replace bill, state governments are moving ahead with their own efforts to revamp Medicaid, especially through waivers, according to a Fitch Ratings report.
Some states had already begun negotiations with the Centers for Medicare and Medicaid Services on securing Medicaid waivers granting them more flexibility. State waiver proposals could affect both Medicaid expansion beneficiaries and the traditional enrollees, the report said.
Arkansas, Indiana and Kentucky have submitted proposals to CMS asking to add work requirements to their Medicaid expansions. Other states including Arizona, Maine, Pennsylvania and Wisconsin are considering work requirements for at least some traditional Medicaid enrollees as well, Fitch said.
Fitch ratings agency said the Trump administration has indicated they are in favor of such measures.
Overall, Fitch said states have indicated their proposed Medicaid changes could reduce costs and also “support key policy goals.”
The states proposing these measures suggested they support “key policy goals” and could yield cost savings. “However, the actual amount of cost savings could be low as some health policy experts have raised questions about the efficacy of such work requirements given characteristics of the current Medicaid population. Adding work requirements could also add to state administrative burdens for oversight of the Medicaid program,” the agency said.
Fitch also projects states will continue to focus on controlling Medicaid spending as they look at their budgets. CMS predicted long-term rises in Medicaid spending due to growth in higher-cost traditional Medicaid-eligible populations, especially the elderly and disabled, and their most recent 10-year forecast for National Health Expenditures showed state and local government Medicaid spending will rise an average of 6.1 percent annually between 2017 and 2025.
“This is far ahead of Fitch’s expectations for national economic growth and state tax revenue growth, signaling continued pressure on states to manage their budgets accordingly,” Fitch said.
The biggest single change called for by the Republican health-care bill that may be voted on by the U.S. Senate this week is its reduction in federal spending on Medicaid, the program for poor and disabled Americans. The bill is being championed by Majority Leader Mitch McConnell and backed by U.S. President Donald Trump as a way to “repeal and replace” the Affordable Care Act, also known as Obamacare. The Senate bill, like one passed in May by the House of Representatives, would roll back Obamacare’s expansion of Medicaid and make other far-reaching changes to the program as well.
1. Who does Medicaid serve?
It’s the biggest health insurer in the U.S., providing benefits to about one in fourAmericans. It covers almost half of all births, almost two-thirds of people in nursing homes, almost 40 percent of all children and almost a third of adults with disabilities. Total Medicaid spending was $552 billion in the 2015 fiscal year, 17 percent of overall health spending. Along with education, Medicaid is one of the two largest components of spending by state governments, which administer the program and fund it in partnership with the federal government.
2. How did Obamacare change Medicaid?
It expanded Medicaid to cover those who were unable to afford private insurance but didn’t have incomes low enough to qualify for Medicaid before. After a Supreme Court ruling made the expansion optional, 31 states and the District of Columbia used the financial incentives offered under the Obamacare law to add about 12 million people to the Medicaid rolls. To congressional Republicans’ ire, the expansion was funded in part by tax increases on higher-income people. The federal government pays more than 90 percent of the cost of the Medicaid expansion.
3. What would the Republican bills do?
Reverse the expansion of Medicaid, at different paces. The House bill would wind down funding for the expansion starting in 2020. The Senate bill would phase out the expansion’s funding between 2021 and 2024.
4. How else would they change Medicaid?
Currently, the federal government generally reimburses states for a fixed percentage of Medicaid expenditures, regardless of total spending or number of people enrolled. The Republican bills would impose a per-person limit on Medicaid reimbursement that would increase over time at a rate linked to inflation. The Congressional Budget Office said that under the House bill, which uses the rate of medical inflation to set the pace of spending, federal Medicaid spending would decrease by $834 billion between 2017 and 2026. The Senate bill would set a lower growth rate starting in 2025 by using the general inflation rate as a benchmark for much of Medicaid’s spending, rather than the medical inflation rate.
5. What would the impact be?
The Congressional Budget Office estimates that between 2017 and 2026, 15 million fewer people would be covered by Medicaid under the Senate bill, and 14 million fewer under the House bill, than under Obamacare. In both cases, Medicaid would account for about two-thirds of the increase in the number of uninsured projected by the CBO.
6. How else could poor people get coverage?
The House and Senate bills would make them eligible for subsidies for individual insurance policies, meaning people who are dropped from Medicaid could use the subsidies to buy their own coverage. Critics say the bill would make those policies unaffordable to low-income people by increasing deductibles.
7. What’s the debate about the bills like?
8. What’s Trump’s position?
During the 2016 campaign, Trump said that unlike other Republican candidates he would not cut Medicaid, Medicare or Social Security. But he did support the House health-care bill. After McConnell introduced a draft version of his bill, Sean Spicer, the White House spokesman, said that Trump was “very supportive” of the bill but was “committed” to making sure that people currently on Medicaid didn’t lose their coverage.
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.
The House’s plan also restructured the open-ended funding of Medicaid to a per-capita cap scheme, where states receive a capped amount of funding each year per enrollee, and could choose to receive the funding up front in block grants. That Medicaid restructuring increased yearly funding by the medical Consumer Price Index plus 1 percent, a measure designed to keep per-capita caps roughly in line with inflation in the industry, but one that would also underfund Medicaid over time, leading to a growing gap between the number of patients who would be eligible under current guidelines, and the funds available to pay for their care.
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.
The Senate version of the repeal (and “replacement”) of the Affordable Care Act — which Mitch McConnell is now sharing with Senate Republicans — eliminates just about all of its extra taxes on the rich by deeply cutting Medicaid and reducing subsidies to the poor. But McConnell figures he can keep moderate Republicans in the fold (he needs almost all their votes) by delaying these provisions and allowing states to reduce insurance coverage.
The plan:
1. Basically retains Obamacare’s insurance subsidies. But starting in 2020 this assistance wouldn’t be available for most of the working-class who now receive them, nor for anyone ineligible for Medicaid. See #2.
2. Cuts Medicaid more deeply than the House version by giving states an amount per person that grows more slowly than the growth in healthcare costs. This provision won’t kick in for 7 years, well past senators’ next reelection battles.
3. Ends the Affordable Care Act’s Medicaid expansion in 5 years — gradually reducing the extra federal payments starting in 2021.
4. Continues to protect patients with preexisting conditions, but allows states to reduce insurance coverage to everyone, including people with preexisting conditions.
In other words, all cuts are made through the back door of delays and state waivers. It only looks like a kinder, gentler version of the House repeal of the Affordable Care Act — but 7 to 10 years from now its result would be even crueler.
You can read it here, and a summary here. The highlights:
Ends the Affordable Care Act’s mandates and most of its taxes.
Phases out its Medicaid expansion over three years, ending in 2024.
Limits Medicaid spending with per capita caps, or block grants for states that choose them. The spending growth rate would become stricter in 2025.
States could apply for waivers from many of the insurance regulations.
The ACA’s tax credits would be kept in place, unlike the House bill — but their value would be reduced.
Funds the ACA’s cost-sharing subsidies through 2019, but then repeals them.
Want more? Keep reading.
There’s a stabilization fund to help states strengthen their individual health insurance markets.
$15 billion a year in 2018 and 2019, $10 billion a year in 2020 and 2021.
There’s also a long-term state innovation fund, $62 billion over eight years, to help high-cost and low-income people buy health insurance.
The ACA tax credits continue in 2018 and 2019.
After that, they’d only be available for people with incomes up to 350 percent of the poverty line.
The “actuarial value” — the amount of the medical costs that insurance would have to cover — would be lowered to 58 percent, down from 70 percent for the ACA’s benchmark plans. That’s likely to reduce the value of the tax credits.
All ACA taxes would be repealed except for the “Cadillac tax” for generous plans, which would be delayed.
Medicaid spending growth rate under per capita caps would be same as House bill until 2025. Then it switches to the general inflation rate, which is lower than House bill.
States would be able to impose work requirements for people on Medicaid, except for the elderly, pregnant women and people with disabilities.
Children with complex medical needs would be exempt from the per capita caps.
HENRY KOTULA 