States Would Likely See Big Drop in Medicaid Funding Under Obamacare Repeal Plan

The interior of the rotunda in the Ohio Statehouse in Columbus.

The interior of the rotunda in the Ohio Statehouse in Columbus. Shutterstock

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GOP proposal to replace the Affordable Care Act would put state governments “under pressure to make very difficult decisions for the most vulnerable.”

WASHINGTON — A Republican plan in Congress to repeal the Affordable Care Act threatens to slash the amount of federal Medicaid dollars going to states.

The legislation would revamp a funding structure for Medicaid that has been in place for about 50 years, creating a situation where states would have to either shoulder large new costs, or curtail the program by reducing eligibility, benefits or payments to health care providers.

Combined state and federal spending totaled around $532 billion during fiscal year 2015 on Medicaid, which provides access to health care for lower income Americans. The federal government picked up roughly 62 percent of those costs.

MaryBeth Musumeci, associate director at The Henry J. Kaiser Family Foundation’s Program on Medicaid and the Uninsured, said provisions in the legislation House lawmakers unveiled Monday would lead to significant reductions in the federal funding available to states.

“This proposal right now is about much more than just repealing the ACA,” she added. “It has really substantial implications for the traditional Medicaid program as well.”

The GOP legislation calls for federal Medicaid payments to states to be capped in the years ahead per enrollee—as opposed to the currently open-ended federal funding commitment for the program.

It would also phase out beefed-up federal payments states receive for people covered through the Affordable Care Act’s Medicaid expansion.

The per enrollee caps would start in the 2020 federal fiscal year and would be adjusted based on the medical care component of the consumer price index.

“Based on recent and historical trends, within 10 years you’d basically cut Medicaid spending nationally by a third,” said Gerald Kominski, director of the Center for Health Policy Research at the University of California, Los Angeles. “The caps won’t keep up with health care spending.”

“That’s really what this is all about,” he added. “This is just a way to squeeze those programs and put states under pressure to make very difficult decisions for the most vulnerable.”

Fitch Ratings issued a notice Tuesday cautioning that the Medicaid changes in the congressional health care proposal “expose states to new fiscal and policy risks” and pointing out that Medicaid “represents approximately one-third of state budgets.”

The nonpartisan Congressional Budget Office has not yet issued estimates showing the expected repercussions of the newly proposed legislation, which is still in its early stages.

But a Kaiser Family Foundation analysis of a March 2016 House budget resolution, which included Medicaid proposals similar to those released Monday, estimated funding reductions to states could reach $2.1 trillion between 2017 and 2026, a drop of 41 percent compared to a 2016 baseline.

“This proposal would kick 600,000 Washingtonians off Medicaid unless the state can come up with $1.3 billion—a burden that would be borne entirely by the state’s taxpayers,” Washington Gov. Jay Inslee, a Democrat, said of the GOP legislation in a statement Tuesday.

At the White House, Department of Health and Human Services Secretary Tom Price threw the Trump administration’s weight behind the House GOP effort during a press briefing.

“This is about patients. This is not about money,” he said, referring to the overall push to repeal and replace the Affordable Care Act, also called Obamacare.

“Medicaid, again, is a system that doesn't work for patients,” he added later. “You’ve got folks out there who need care, who need to see particular physicians who aren’t able to see them.”

Republican Gov. John Kasich of Ohio offered a slightly different take in a statement Tuesday.

After criticizing Obamacare, he said “phasing out Medicaid coverage without a viable alternative is counterproductive and unnecessarily puts at risk our ability to treat the drug addicted, mentally ill, and working poor who now have access to a stable source of care.”

Ohio is among 31 states, along with the District of Columbia, that expanded income eligibility levels for Medicaid through the Affordable Care Act. This opened the program to more people.

For states that took this step, the federal government agreed to pay 100 percent of the expansion costs from 2014 to 2016. After that, the percentage decreases gradually until hitting 90 percent in 2020 and the years thereafter.

Under the current version of the GOP legislation, this “enhanced match rate” would be repealed on Dec. 31, 2019 for new enrollees who would now be covered by the expansion. The enhanced match would still apply for people who enroll under the expansion before then.

Ending the enhanced match would have the effect of winding down the Medicaid expansion as people cycle out of the program.

“States could choose to continue to cover expansion folks,” Musumeci explained. “But they would have to be enrolled as of the end of 2019, and not have a break in eligibility of more than a month, in order to continue to get the enhanced match.”

“Otherwise people would get the regular state match, which is significantly less,” she added.

About 74 million people nationwide late last year were covered by Medicaid and the related Children's Health Insurance Program, or CHIP. Average monthly enrollment in the program prior to the Affordable Care Act was around 57 million people.

The GOP proposal appears to rely on Medicaid cuts to offset costs tied to other parts of the Affordable Care Act repeal and replacement plan.

“What they’re doing is they’re also eliminating all of the taxes that were raised to help finance the ACA,” Kominski said. “When you get rid of all those revenue streams,” he added, “the only other thing you can do is cut spending.”

Hemi Tewarson, program director of the Health Division within the National Governors Association's Center for Best Practices, echoed that view in a conference call with reporters.

“Because they’re going to repeal all of the penalties and all the revenue raisers on the private health insurance side, one of the ways they’re paying for that, the primary way they’re paying for that, is with Medicaid dollars,” she said.

“There aren’t,” Tewarson added, “a lot of other places to go for savings.”

Bill Lucia is a Senior Reporter for Government Executive’s Route Fifty and is based in Washington, D.C.

NEXT STORY: Medicaid Proposals in GOP’s Obamacare Repeal Bill May Force States to Scramble