Most States Sick Over GOP Health Bill, Impact on Budgets

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By Che Odom

Rick Noonan said he wanted to cry when he heard the American Health Care Act was getting closer to becoming law.

“It is very personal because the lives of people I care about are on the line,” the 49-year-old machinist and resident of a Philadelphia suburb told Bloomberg BNA. “No way Pennsylvania can cover the cost.”

States can expect to receive billions of dollars less in federal Medicaid matching funds over the next 10 years if the Republican plan to replace the Affordable Care Act becomes law.

A vote on the bill scheduled for March 23 was pushed by House Speaker Rep. Paul D. Ryan (R-Wis.) because the measure lacked the necessary support among Republicans. A vote, however, could take place March 24 or next week.

The act calls for a change in the way money is given to states, establishing a per capita cap on funding to states that would be adjusted periodically to the federal index for health services prices. The Republican bill, backed by the White House, also shifts from premium subsidies to refundable tax credits.

The variation in funds could present long-range planning challenges for states, possibly leading some states to further tighten spending to provide a cushion each year.

Medicaid Expansion States in Trouble

The 32 states and the District of Columbia that opted to expand Medicaid services under the ACA could be hit particularly hard by changes in the American Health Care Act.

Expansion states would need to increase their spending on Medicaid by an estimated $253 billion over 10 years to maintain their expansions, according to the left-leaning Center on Budget and Public Policy.

Pennsylvania, for example, “would have to find $2.2 billion to cover the costs of just those in the Medicaid expansion category, a cost we simply cannot absorb without devastating cuts to other critical programs,” Gov. Tom Wolf (D) told Bloomberg BNA.

Pennsylvania, which went for President Donald Trump, who promised to “repeal Obamacare,” spends approximately 24 percent of its budget on Medicaid.

It can expect more than a 10 percent reduction in federal matching funds under the Republican bill, according to an assessment of numbers in an early version of the bill by the Congressional Budget Office.

Deep Cuts Loom

The potential cuts to Pennsylvania are just as deep for many other states.

Colorado, New Jersey and Washington should brace for almost 20 percent less in federal Medicaid matching funds under the American Health Care Act than they would receive under the current system, according to an Urban Institute study.

Delaware, Hawaii, Maryland, New Hampshire, New Mexico, North Dakota and Oregon may see more than a 15 percent reduction.

California could lose more money than some states see in their entire fiscal budgets. The Republican bill would force California to pay $24.3 billion more in 2027 to fund its current level of Medicaid services, according to the state’s Department of Finance and Department of Health Care Services.

Another $400 million a year would be lost through the bill’s freeze on payments to providers that offer abortion services and elimination of some Medicaid coverage at hospitals.

In 2020, California would exceed the per capita cap on funding by $1 billion and be required to repay $679 million to the federal government. By 2027, its over-the-cap spending would grow to $9 billion, with $5.3 billion of that owed to the federal government, the state agencies said in a report released March 22.

Too Soon to Panic?

Though some are making predictions on the impact the GOP health bill will have, many states are taking a wait-and-see approach. That’s largely because the bill may change in important ways before it gets through the Senate.

“There are too many unanswered details in the present Congressional proposal at this time to be able to formulate any estimate of fiscal impact,” Mark Trogdon, director of the North Carolina Legislature’s fiscal research division, told Bloomberg BNA.

Officials in Maryland, South Carolina, Ohio and elsewhere say it is just too soon to make any estimates, but they are watching Congress closely.

Where to Cut?

One thing is certain, the replacement act will force states that expanded Medicaid services under the Affordable Care Act to make tough choices about who will lose coverage, according to officials from California, New York and other expansion states.

“After seven years of progress under the Affordable Care Act, the Republican Congress has proposed an inadequate, ill-conceived and unacceptable plan that places the coverage of more than 1 million New Yorkers in jeopardy and, once fully phased in, would shift more than $2.4 billion in costs onto taxpayers and hospitals each year,” Gov. Andrew M. Cuomo (D) said in a statement.

The House Republican bill to repeal and replace the Affordable Care Act would cost New York state $4.5 billion over the next four years, with an immediate budget hit of $240 million in the state’s 2017-2018 fiscal year, Cuomo said.

The analysis from the state Health Department said the American Health Care Act would jeopardize the health coverage of 1 million New Yorkers who currently benefit from the Affordable Care Act.

In addition, $400 million in tax credits used by New Yorkers to purchase health insurance on the state exchange would be lost under the House bill, according to the analysis.

Refundable Tax Credits

Another significant change present in the Republican health bill is a shift toward refundable tax credits and away from premium subsidies.

Flat tax credits won’t cover as much of the cost of premiums as the current income-based tax credits, according the Missouri Budget Project.

In the end, Missouri and other states will be stuck with a difficult decision about who and what they can afford to cover.

“Given Missouri’s budget trends, it’s hard to imagine how it could replace this funding,” the Missouri Budget Project told Bloomberg BNA in an email.

Income Shifting

Noonan said he has a cousin struggling with a drug problem who receives help thanks to the expansion to Medicaid. He questioned the wisdom of cutting what he considers essential programs.

“We fought hard for health coverage,” he said. “How will we pay for it? Where is that money going to go?”

Raymond Castro, senior policy analyst at the New Jersey Policy Perspective, said in a March 21 paper that the Republican health bill should be viewed as a vehicle for “shifting income from working and poor families to the wealthy.”

While reducing or eliminating health coverage for half a million New Jerseyans, the bill would reduce federal taxes for “250 New Jersey millionaires” by an average of $57,000 a year, Castro said.

Washington Gov. Jay Inslee (D) has the same view, contending at a March 15 press briefing that the GOP bill has nothing to do with improving health care. He said it is “an effort to move money from the health care of Washingtonians into the pockets of the wealthy friends of the Republicans.”

Washington is on the hook for about $2.2 billion annually if Medicaid expansion were to continue at the current level of service, state Health Care Authority Chief Policy Officer Nathan Johnson told Bloomberg BNA.

That number rises by about $90 million if the state chooses to continue providing the same level of long-term care services to seniors, he said.

Losing Planning Ability

In neighboring Oregon, 183,000 people would lose Medicaid coverage by 2020, with that number rising to 375,000 by 2026. An additional 80,000 people would drop out of the individual and group markets next year, with that number rising to 90,000 by 2026.

Oregon’s top insurance regulator, Patrick Allen (D), pronounced himself worried in a press briefing March 16 that insurance companies will choose to leave the market.

An added injury, Castro said, is that states may find it impossible to do any long-range planning because of the indexing of the per capita cap on federal funding to states. The federal government could decrease the caps at any time, he said.

“With federal Medicaid funding uncertain, states would likely spend less to stay within the caps, or cut services and/or reimbursement rates when the caps are exceeded,” he wrote.

Prototype State Would Be Strained

Managing the budget and maintaining services under MassHealth would be impossible, Republican Gov. Charlie Baker told Bloomberg BNA.

Massachusetts created its own health plan in 2006, aimed at universal coverage, and it served as a model for the ACA. The state has among the highest percentage of its residents insured, 97 percent, Baker said.

“Our analysis indicates that the AHCA would increasingly strain the fiscal resources necessary to support the Commonwealth’s continued commitment to universal health care coverage,” Baker told Bloomberg BNA.

Massachusetts would lose $1 billion in federal funds in 2020 if the Affordable Care Act were repealed, and it would lose more in later years, including $1.3 billion in 2021 and $1.5 billion in 2022, Baker said.

The 1.5 billion reduction in 2022 includes a $1.3 billion reduction in federal Medicaid dollars and $200 million reduction in the amount of federal subsidies now available under the ACA for people who purchase private insurance through the state’s health care exchange, Baker said.

Cuts in Various Forms

States can expect fewer federal dollars under the American Health Care Act in several ways, according to the Colorado Health Institute, a Denver-based health policy think tank.

The bill calls for ending the Medicaid expansion in 2020, making people who cycle out of eligibility ineligible for extra federal money, and it converts Medicaid funding to per capital allotments, the institute said.

Colorado would see losses of $14 billion and a reduction of 600,000 in covered individuals, Joe Hanel, the institute’s manager of public policy outreach, told Bloomberg BNA.

Rural counties in southern Colorado have the highest proportion of its population on the ACA expansion, Hanel said.

“Presumably, the hospitals in these counties would be at the most financial risk under an expansion rollback,” he said.

Warning About Hospitals

The Illinois Health and Hospital Association is warning state lawmakers there to prepare for budget challenges if the American Health Care Act is enacted.

Even conservative estimates, based on scoring by the Congressional Budget Office, suggest Illinois will lose $40 billion in federal Medicaid funding over 10 years, David Gross, the association’s vice president of government relations, said at a March 16 hearing at the state House.

The reductions will “seriously” impact the state’s “budget and economy,” he said.

“Lost coverage would be a major step backwards, with more uninsured people delaying or not seeking needed treatment, and as a last resort, going to the hospital ER, with worse outcomes, and higher costs for everyone,” he said.

Non-Expansion States

Even states that didn’t elect to expand Medicaid under the ACA would see less federal funding as a result of the Republican health plan.

In Alabama, lawmakers in the state House have taken steps to help prepare. They passed a 2017-18 budget that sets aside a $97 million reserve for 2018-19. The funds could be used to cover unknown costs related to health care or the state’s perennial Medicaid funding shortfall, lawmakers said during floor debate March 14.

The budget still needs approval by the state Senate and governor.

For neighboring Florida, the biggest budget impacts would likely come in the area of Medicaid, including that program’s supplemental hospital funding streams, state Sen. Anitere Flores (R), vice chair of the Florida Senate’s appropriations committee, told Bloomberg BNA.

The extent of those funding impacts isn’t yet known and probably won’t be factored into the state’s budget for fiscal 2017-18, which the Legislature is working to finalize in the next few weeks, she said.

Slow Tax Cuts?

It’s also not clear yet whether Gov. Rick Scott (R) will be forced to rein in his trend of cutting taxes to cover any costs or lost funding related to the health-care overhaul.

For the 2017-18 budget, Scott has proposed more than $600 million in tax cuts, largely on commercial real estate leases, while simultaneously proposing more than $900 million in hospital funding cuts. Scott also wants to boost the amount of business income exempt from the corporate income tax.

“There’s a short-term conversation to have now,” Flores said. “The real, real conversation will probably be a year from now.”

With assistance from Adrianne Appel in Boston; Andrew Ballard in Raleigh, N.C.; Tripp Baltz in Denver; Michael J. Bologna in Chicago; Christopher Brown in St. Louis; Nushin Huq in Houston; Laura Mahoney in Sacramento, Calif.; Chris Marr in Atlanta; Leslie A. Pappas in Philadelphia; Paul Shukovsky in Seattle; Gerald B. Silverman in Albany, N.Y; and Paul Stinson in Austin, Texas

To contact the reporter on this story: Che Odom in Washington at COdom@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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