House Committee Targets Medicaid, CHIP Cuts for Budget Savings

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By Nathaniel Weixel

March 14 — Legislation that will be marked up in the House Energy and Commerce Committee targets Medicaid cuts and reforms in order to save $25 billion over 10 years.

Under the Common Sense Savings Act sponsored by Rep. Joe Pitts (R-Pa.), “multimillion dollar jackpot” lottery winners wouldn't be eligible for Medicaid, states would be able to lower the maximum provider tax and the federal government would pay a lower share of Medicaid expenses for prisoners, among other provisions. The markup is scheduled for March 15, and could hint at how House Republicans are positioning Medicaid in their annual budget.

The bill (H.R. 4725) also would repeal the ACA's Prevention and Public Health Fund and make changes to the federal matching funds to states as part of the Children's Health Insurance Program.

“Commonsense reforms like moving million dollar jackpot winners off the taxpayer’s dime deserve our support,” committee Chairman Fred Upton (R-Mich.) said in his prepared testimony March 14. “Reforms that also strengthen Medicaid and the State Children’s Health Insurance Program, so they can better serve the most vulnerable who rely on their critical services.”

The legislation isn't bipartisan. Democrats are expected to object that the budget levels were already agreed upon and shouldn't be cut further.

“The ‘Common Sense Savings Act’ is just another sham—it is an insincere attempt by Republican leadership to slash billions from the budget in a futile effort to appease the extreme right wing of their party,” a Democratic spokeswoman told Bloomberg BNA. “Funding levels for FY 2017 were already agreed to in last year’s bipartisan budget agreement, but Republican leadership, once again, can’t end the dysfunction in their own conference and are now looking for this committee to help bail them out.”

‘Cost Shift.'

State Medicaid programs aren't happy about the legislation either.

“This looks to be a $25 billion cost shift to states,” Matt Salo, executive director of the National Association of Medicaid Directors, told Bloomberg BNA March 11. Salo said many of the provisions would penalize states, and there appears to be little rationale behind them.

Rep. Frank Pallone Jr. (D-N.J.), the committee's ranking Democrat, said in his prepared testimony the legislation “merely shifts costs onto states, thus leaving a gaping budget hole for financing care for our most vulnerable populations. We’re talking about forcing states to cut access to benefits and health coverage for low-income children, the frail elderly and the severely physically or intellectually disabled. To pretend this bill does anything else is simply an outright lie.”

For example, the bill would eliminate federal matching funds for prisoners who would otherwise be eligible for Medicaid and replace it with the state’s regular matching rate. As a result of the ACA's Medicaid expansion, more prisoners are likely to be eligible for Medicaid in states that have expanded Medicaid. Prisoners’ enrollment in Medicaid represents a significant cost shift to the federal government, and the legislation seeks to end that.

“This provision levels the playing field and reduces Medicaid reimbursement rates paid to states for services for those who are incarcerated,” Upton said.

However, Salo said the bill would punish Medicaid expansion states. Under the ACA, the federal government pays 100 percent of the costs of expanding Medicaid to people who earn up to 138 percent of the federal poverty level. Poor, single adults make up a large part of the prison population, and when they're released, they become part of the state's Medicaid expansion population.

“This seems punitive, to show you're hard on crime, that prisoners don't deserve the 100 percent match,” Salo said. Under the law, nearly everyone who earns less than 138 percent of the federal poverty level is eligible for 100 percent federal matching funds—even if they were prisoners, Salo said. “Once they're out, they're part of the expansion population,” he said.

Provider Taxes

The American Health Care Association, which represents nursing homes, is objecting to the provision that would lower provider taxes. States can set the maximum threshold for provider taxes at 6 percent, but the bill would lower that to 5.5 percent.

“Cutting Medicaid provider assessments by even one-half of a percent would mean billions in Medicaid dollars lost in care for our nation's most vulnerable elderly,” Clif Porter II, the organization's senior vice president of government relations, said in a March 14 statement.

One of the more common ways for states to pay for Medicaid expansion is with a provider assessment, or “bed tax.” The hospitals pay the tax either as a percentage of revenue or based on the number of beds in their facilities. In most states, according to the National Conference of State Legislatures, the cost of the tax is paid back to providers as an increase in the Medicaid reimbursement rate for their patient treatment and services. According to the AHCA, provider assessments allow Medicaid-dependent providers to offer high-quality care despite chronically low reimbursement. Medicaid fails to fully reimburse hospitals, doctors and long-term care centers the total cost required to care for patients. In many cases, a bed tax allows providers to accept Medicaid patients without putting the viability of their centers at risk, the group said.

To contact the reporter on this story: Nathaniel Weixel in Washington at nweixel@bna.com

To contact the editor responsible for this story: Brent Bierman at bbierman@bna.com