For all its populist design, the House GOP’s latest proposal to overhaul federal Medicaid funding creates financial risks for states and could leave some enrollees worse off.
Dramatic changes in Medicaid are a big part of the House bill to partially repeal the Affordable Care Act that’s steaming toward a floor vote scheduled for Thursday.
Big revisions were made to the legislation this week to appeal to conservatives pushing to reduce federal Medicaid spending and shift more power to states. Advocates for the program fear those measures, if enacted, could lead to cuts in benefits and fewer enrollees in the state-federal health insurance program for low-income people.
“We could see a complete unwinding of the Medicaid program as we know it today,” said Donna Friedsam, a health policy expert at the University of Wisconsin.
One big change in the GOP’s current bill would immediately shut off federal money to allow any more states to expand Medicaid eligibility under the ACA, commonly known as Obamacare. During the past three years, 31 states plus the District of Columbia have taken advantage of the provision, adding about 11 million people to Medicaid, and Kansas is considering the option. States also would gain more latitude to determine Medicaid eligibility and benefits for their populations. And for the first time, states could require some enrollees to work as a condition for getting coverage.
The GOP’s original plan was to begin shifting Medicaid expansion funding away from states in 2020. In the revised bill, states could keep funds after 2020 but only as long as those adults who gained coverage in the expansion stay in the program. When they drop out or lose eligibility, their funding would vanish.
Because of changes in jobs and incomes, many Medicaid enrollees on average lose eligibility within two years, according to Census data.
Regular Medicaid funding also gets an overhaul in the GOP bill.
Since Medicaid’s creation in 1965, everyone eligible has been guaranteed coverage. The federal government’s commitment to help states deal with costs is open-ended, meaning its costs rise as states spend more. The states’ obligation is to cover certain groups of people and to provide specific benefits. Children and pregnant women who meet a state’s income criteria must be protected, for example.
The GOP bill would end that federal commitment, limiting what the government gives states to fixed amounts per year. States could choose two options.
The first way, called a per-capita allotment, means that federal dollars would be allocated to states based on how many Medicaid enrollees they served in a prior year, with annual adjustments for inflation and enrollment increases.
The second way would be a block grant.
Under the revised GOP bill, the block grant option would be available for Medicaid spending only on children, non-elderly adults without disabilities and pregnant women — groups that account for most enrollees.
All states would cover their disabled and elderly populations under the per-capita system, which would get a higher annual inflation rate adjustment than the block grant system under the GOP bill.
The objective is to ensure that funding keeps pace with rising health care costs and the needs of a growing elderly population.
Children could fare badly in states that choose the block grant option, said Joan Alker, executive director of the Center for Children and Families at Georgetown University.
They would no longer be guaranteed access to a standard Medicaid benefit that Congress created in 1967 to ensure that children got access to preventive health care services, treatment and periodic screenings to catch developing health problems early, Alker said.
“That means the governor and/or the state legislature would decide what benefits a child would get, not the child’s pediatrician,” she said.
Of the two funding arrangements, Medicaid block grants also would be financially riskier for states during economic downturns, when unemployment rises and more people seek to enroll in the program. While per-capita caps rise as enrollment grows, block grants do not — and that could leave a state short of federal aid when demand is strongest.
Most states would likely choose a per-capita cap for that reason, said Bill Hammond, director of health policy at the conservative Empire Center for Public Policy in New York.
But some would take a block grant for the freedom they would gain to change benefits and eligibility standards. As a bonus, they would also get to keep any federal money they saved and use it for non-Medicaid spending, he said.
Jason Fichtner, a Medicaid expert at George Mason University in Fairfax, Va., said a block grant would be attractive only for states if they could get more money than under the per-capita option, at least in the short term.
The GOP proposal would allow states to opt out of block-granted funds after 10 years and return to a full per-capita allotment.
Regardless whether the government uses block grants or per-capita caps, the prospects for dramatic changes are already causing shudders among advocates for low-income people.
“Both are really bad options and neither is good for Kentucky and neither is better than what we have now,” said Emily Beauregard, executive director for Kentucky Voices for Health.
Kentucky has a pending request with the Centers for Medicare & Medicaid Services to drastically change its Medicaid program, including adding a requirement that some enrollees work as a condition for enrollment.
The Obama administration consistently rejected states’ requests for a work requirement on the grounds that they would thwart low-income people from getting health care. Studies have found that many Medicaid enrollees who aren’t disabled or elderly already hold jobs, though often in positions that don’t provide health insurance.
The changes in the GOP bill would give states the option starting in October 2017 to add a work requirement for non-disabled adults. Pregnant women and parents of disabled children or children under 6 would be exempt.
Republican leaders said the requirement is modeled on those applied to federal welfare recipients. Under the Kentucky waiver request, people could meet the job requirement by caring for a family member or volunteering.
The work requirement provision is almost certain to face a court challenge if adopted.
This story was produced by Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.