Dramatic Changes to Medicaid Alarm Governors, Democrats

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Victoria Pelham

Senators pored over the newly released GOP health-care bill June 22, with negotiations and some changes to the plan expected to continue, they told reporters on Capitol Hill.

Many congressional Republicans offered measured support to a bill that contains echoes of earlier proposals, though some defections called its viability into question.

Meanwhile, as Republicans worked to come to a consensus, Democrats in Congress and governors slammed the proposal.

At issue are its deep cuts to Medicaid, which would include the ability for states to impose work requirements in the program, phase out Medicaid expansion starting in 2021 over three years, and restructure financing with the option for either lump-sum grants or per-enrollee spending ceilings.

The bill could shift costs to the states and ultimately harm the most vulnerable, they warned, even with a newly added provision for disabled children. The safety-net health insurance program covers more than 74 million people and has taken on increasing roles in senior and disability care and in efforts to curb the opioid crisis.

“It’s every bit as bad as the House bill, in some ways even worse,” Senate Minority Leader Charles Schumer (D-N.Y.) said. He called it “a wolf in sheep’s clothing, only this wolf’s teeth are even sharper than the House’s.”

“This is a step to eradicating [Medicaid],” he said.

Moving State Medicaid to a Fixed Income

The shift to a fixed Medicaid income, either per enrollee or by group of enrollees, is the culmination of a long debate, analysts said.

But it’s one likely to frustrate state leaders. The Senate plan would implement the caps beginning in 2020.

“Fundamentally the legislation will deliver fewer federal dollars to states, and any time that happens governors have to make tough choices,” Elizabeth Carpenter, senior vice president for consultant Avalere Health, told Bloomberg BNA.

“There are only so many levers states have,” she said.

States, left in the lurch by a dwindling federal commitment, could scale back spending in other areas or fund-raise in other ways, the way California did to include undocumented children into its coverage.

On the flip side, their Medicaid programs could dial down services, the amount of beneficiaries or payments to providers and managed care organizations. Further, they could implement a greater cost-sharing burden onto patients themselves.

The Senate draft has yet to be scored by the Congressional Budget Office, but the House-passed American Health Care Act, which also contained this provision, would have stripped a projected $839 billion from the program.

The Senate version released June 22 would go even further, moving from a medical inflation growth rate to overall inflation (the consumer price index for all urban consumers) starting in 2025. The new rate would make the net cuts even steeper, Carpenter said.

Medicaid Health Plans of America, which represents Medicaid managed care plans, believes the Senate will likely get rid of that portion of its bill during negotiations.

Jeff Myers, the group’s president and CEO, told Bloomberg BNA the provision “doesn’t make sense or in any way match the experience of beneficiaries in terms of costs incurred and services needed.” Medicaid enrollees are more costly on the whole than the CPI-U combination of all prices.

And Myers said the universal rate’s location, pushed to the bottom of the bill, is a good sign the Senate will avoid it.

Still, he said plans are worried about the level of reductions a future CBO score might show and how cuts on a certain scale could destabilize the Medicaid program.

That has to be balanced, he said, with an understanding that the $550 billion program is currently unsustainable barring any fixes.

“If they don’t reform Medicaid, states are going to get in the position where they can’t afford their programs,” Myers said.

He pointed to Illinois as a harbinger of what could come without an overhaul. The state is $2.8 billion in debt to Medicaid managed care plans, he said, and owes an additional $15 billion to nursing homes and hospitals.

Net Win or Loss?

Sen. John Cornyn (R-Texas) flatly rejected claims from Democratic colleagues that the Senate proposal gutted Medicaid and fell short of the House bill.

“We want to improve on what the House did,” he said June 22. “It’s a work in progress, but it does represent in many instances an improvement over the House bill.

He noted that states would be locked in to federal payments using a growth rate that would mean they received more money in the next year than this one, and he said the essential safety net is kept safe.

“This is a complex issue, but the fact of the matter is it’s absolutely critical to reforming Medicaid and making it work better,” he said.

Many senators have warned that without changes, Medicaid’s ballooning spending, expected to reach $624 billion in federal spending by 2026, could crowd out other priorities and jeopardize the most needy in its ranks.

Myers added that the Senate version is “significantly different” than the House bill and corrects mistakes the House version had made. MHPA had criticized that proposal.

Allowing states more freedom with an average base-year calculation over eight quarters, rather than using 2016 as a base, would treat states more fairly and allow every state to pick the framework that is better for them, he said. That means they will cap their dollar amounts at a higher amount than under the House plan.

The proposal also contains a prevention and public health fund allotting $2 billion to fight the opioid epidemic, which critics of Obamacare repeal have warned might be radically harmed under any cuts to Medicaid.

Medicaid expansion under the Affordable Care Act offered health insurance to at least 11 million new Americans in the 31 states (and the District of Columbia) that chose to grow their programs, with a federal match rate of 100 percent for those newly insured up to 2016. That would go down to 90 percent by 2020, according to the Kaiser Family Foundation.

A critical, underlying question from governors on both sides of the aisle in the lead-up to overhaul debates was preserving that coverage for those that opted in and treating both expansion and nonexpansion states fairly.

The Senate bill would implement a phase-down of the enhanced match for expansion beneficiaries beginning in 2021, rather than 2020 like in the House, with the dollars gone by 2024.

States that chose to grow their programs, including Republican-led states, would feel the impact of this Senate proposal most deeply, Carpenter said.

“There are a lot of provisions causing us a lot of concern,” Myers said. “The step-down on [financing for] the expansion population is better than the House, but stepping down posits enormous concern.”

Next Steps

Democratic governors from California and Colorado said in separate statements the bill would shift cuts and hurt the vulnerable with “even deeper cuts.”

“Trumpcare 2.0 has the same stench—and effect—as the bill House Republicans and the White House slapped together last month: Millions will lose health care coverage, while millionaires profit. The American people deserve better,” California Gov. Jerry Brown (D) said.

Republican governors in recent days have signed on to calls for more bipartisan-minded overhauls that would protect the most needy.At least one was wary of the Senate draft bill. Gov. John Kasich (R) of Ohio shared “deep concerns” over what his party’s plan might mean for drug addicts and the mentally and chronically ill. “Sustainable solutions to the many complex problems facing our health-care system will never be solved with a one-party approach that’s developed behind closed doors, without public discussion and input,” he said in a statement June 22. Kasich called for senators to step back and re-evaluate in a bipartisan way.The National Association of Medicaid Directors could not be reached for comment.

Lawmakers on Capitol Hill have also criticized the secretive way Senate Republicans have formed their bill.

Senate Democrats called the repeal-and-replace bill “truly shameful.” They said it would raise health-care costs, especially for seniors and people with pre-existing conditions, “put patients’ fates back in the hands of insurance companies” and hurt access for beneficiaries like Alzheimer’s patients and kids with special needs.

“Senate Republicans are trying to con Americans into thinking they’re fixing problems here when in reality they’re causing new ones,” Sen. Ron Wyden (D-Ore.) said.

He added that the lawmakers are “going to keep telling Americans they’re fixing their health care right up until the second they take it away.”

Sen. Bill Cassidy (R-La.) and other lawmakers told reporters they expect some changes to the bill before it moves forward. Cassidy said it contains elements of his earlier proposed repeal bill, with others he has assured can be pursued through state waivers.

Four Republicans in the Senate, however, said June 22 they stand ready to oppose the bill but are open to negotiations.

Senate Republicans have said they plan to vote on their proposal the week of June 26.

To contact the reporter on this story: Victoria Pelham in Washington at vpelham@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The Senate GOP measure is at http://src.bna.com/p65,

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Health Care on Bloomberg Law