Tucked inside the Republican bill to replace Obamacare is a plan to impose a radical diet on a 52-year-old program that insures nearly one in five Americans.
The bill, of course, would modify changes to the health system brought by the Affordable Care Act. But it would also permanently restructure Medicaid, which covers tens of millions of poor or disabled Americans, including millions who are living in nursing homes with conditions like Alzheimer’s or the aftereffects of a stroke.
“This is the most consequential change in 50 years for low-income people’s health care,” said Joan Alker, the executive director of the Center for Children and Families at Georgetown University. “This is a massive change that has hardly been discussed.”
Since its founding, Medicaid has operated as a partnership between the federal government and the states. Each pays a share of patients’ medical bills, with no overall limit on spending. The American Health Care Act would try to slim down the federal share of that spending, by limiting how much the federal government would pay for each person enrolled in the program. The Senate version of the legislation, expected this week, is likely to make the payments still leaner in later years.
The results, according to independent analyses, would be major reductions in federal spending on Medicaid over time. States would be left deciding whether to raise more money to make up the difference, or to cut back on medical coverage for people using the program. The Congressional Budget Office estimates that the changes would lead to a reduction in spending on Medicaid of more than $800 billion over a decade. (That figure also includes additional cuts to the Obamacare Medicaid expansion.)
Medicaid is the country’s largest government health care program, covering more Americans than its better-known sibling, Medicare.
Its reach is broad: About half of all births in the country are covered by Medicaid, and nearly 40 percent of children are covered through the program. Medicaid covers the long-term care costs of two-thirds of Americans living in nursing homes, many of them middle-class Americans who spent all of their savings on care before becoming eligible.
It covers children and adults with disabilities who require services that most commercial health insurance doesn’t include. It covers poor women who are pregnant or raising young children. Those populations were all included in the program before Obamacare became law.
It also provides insurance for poor adult Americans, and recent evidence shows that its expansion under Obamacare has given more poor people access to health care services and reduced their exposure to financial shocks.
The Republican approach would set a formula for determining a maximum payment for each person in the program. Then that cap would grow by a set rate each year. Lawmakers are negotiating about the rate to use, but all of the options are intended to grow more slowly than expected under the current system. The gap would be left for states to fill — or cut.
“While details remain elusive, this is shaping up to be the largest intergovernmental transfer of financial risk in our country’s history,” said Matt Salo, the executive director of the National Association of Medicaid Directors, in an email. Mr. Salo said that some of his directors would welcome caps if they came with more program flexibility, but said the current approach amounted to a funding cut.
The growth in medical spending tends to be uneven year over year, which means states might hit the caps in one year and fall under them in another, even without any program changes. Researchers at the Brookings Institution recently looked back at historical Medicaid spending to see what would have happened under a cap. They found that random variation was substantial.
Medicaid advocates worry particularly that a fixed growth rate doesn’t account for this varying pattern of health expenditures, which might shoot up in a year where there’s an epidemic or an important new treatment. Many Medicaid budgets increased in recent years after the introduction of expensive but effectivemedications for hepatitis C, for example. States had to pay more for the drug, but federal spending also increased to match it.
“Could you imagine tomorrow if finally we had a Zika virus vaccine, and that vaccine costs $50K a dose?” said Sara Rosenbaum, a professor of health law and policy at George Washington University. “Would you not want every woman of childbearing age to be immunized?”
Advocates for the structural change point to inefficiencies and waste in the current program. There is some evidence that Medicaid programs enroll some people who are not eligible and sometimes cover some services that are not medically necessary. James Capretta, a fellow at the conservative American Enterprise Institute, said that the current system, where the federal government matches all state spending, discourages efficiency.
But he and co-authors have also suggested a different, more generous approach than the one in the Republican legislation.
Most researchers who study the program closely say that it is already quite lean. Major savings, they say, will be hard to achieve without reducing medical benefits or cutting higher-cost patients from the program.
Trump administration officials and Republican members of Congress have argued that the Medicaid changes won’t cause anyone to lose insurance coverage directly. That statement is true in only the narrowest sense.
Because the funding cuts would fall to states, it is state officials who would decide whether to save money by raising taxes, reducing payments to nursing homes oreliminating benefits like home-based care for disabled beneficiaries, a few available options under the law.
The Congressional Budget Office estimates that enrollment in Medicaid would decline substantially over a decade, as states pursued a variety of strategies to save money, some of which would push people out of the program.
Still, the Medicaid caps have not drawn the same public outcry as other provisions of the law that would cut back on coverage more directly. Several Republican senators have expressed concerns about changes to Obamacare’s Medicaid expansion, which broadened the program to include more low-income adults in 31 states.
Others worry about changes to private insurance subsidies that would make insurance less affordable to older, middle-class Americans. Fewer have spoken out about the cuts to Medicaid’s legacy beneficiaries. That means that, as the Senate works out final details, the forced diet for Medicaid is likely to stay in the bill.