WHY MEDICAID REFORM SHOULD BE JOB #1

Posted on July 14, 2017

The legislative clock is ticking and Senate lawmakers don’t yet seem close to mustering the needed 50 votes to pass a partial ACA repeal and replace bill. While there are many issues that remained unresolved, unwinding the ill-conceived, open-ended Medicaid expansion is not only the biggest one; it is the most important one.

The proposed "ACA replace" plans on both the House and Senate sides would not only rectify the looming fiscal crisis that the Medicaid program has created for states, it would also give states the needed flexibility to better meet the needs of the most vulnerable and who are most reliant on the program for their needed care.

Despite repeated warnings, many states were lured by the “free” taxpayer money for Medicaid expansion to primarily able-bodied adults. They expanded the program without planning for how to pay for the bill when it would inevitably come due. Meanwhile, the ACA forbade the lowest-income from choosing between Medicaid and a subsidy to purchase an insurance policy on the ACA health insurance exchange.

The Medicaid program is operated and funded jointly by the federal government and the states. Its original purpose was to provide health-care services to the poor and disadvantaged, but today’s program goes far beyond that.

Private coverage, not government coverage, should be goal

Medicaid enrollment has been the primary driver in reducing the total number of uninsured, exceeding the total national decline in the uninsured. Instead of making health insurance coverage more affordable for most of the uninsured, the ACA threw millions onto the Medicaid rolls where there were already problems with long waits for needed care and, some argue, inferior care.

Since the ACA was implemented, Medicaid enrollment has increased by more than 16 million while the total number of uninsured has decreased by about 13 million.

Program costs hurt important state priorities

Medicaid now accounts for more than one-quarter of state budgets (when counting federal and state funding) compared to eleven percent in 1988. This trend is unsustainable as Medicaid threatens to squeeze out spending for other state priorities, such as education and transportation.

The federal government initially paid almost 100 percent of Medicaid costs for the expansion population and is currently scheduled to decrease to 90 percent in 2020. Meanwhile, the state picks up about half the tab for the previously eligible Medicaid population. This payment schedule is precisely why attempts to cut the Medicaid budget could have dire consequences for the state’s neediest populations.

Most vulnerable are at risk

The ACA created the perverse incentive of paying almost all the costs of the expansion enrollees while covering only about half the costs for the most vulnerable. Anytime a state should seek to cut overall Medicaid spending, it would need to cut about $2 in Medicaid spending on the traditional Medicaid population to save $1 of state spending. But because the federal government is picking up most of the tab for the expansion population, a state would need to cut up to $10 in Medicaid spending on the expansion population to save $1 in state spending.

In other words, services for the most vulnerable Medicaid populations will be first in line for budget cuts. Childless, able-bodied adults will be last.

The current proposals in both the House and Senate take an important step that would allow states to prioritize the most vulnerable, putting them at the front of the line instead of the back. It would also allow states to reign in the unchecked, escalating program costs.

Sadly, the rhetoric surrounding ACA repeal and replace has largely drowned-out the many ways in which reform would not only allow for better and higher-quality options for patient care, but would restore fidelity to taxpayers who are footing the bill for the program.

There are no silver bullets to the problems that ail the healthcare system in the U.S. but giving states the flexibility to restore the health care safety net is an important step in the right direction.