Inside the GOP’s Plans to Overhaul Medicaid

Guthrie thinks Medicaid expansion is here to stay. (Rob Kunzig/Morning Consult)

There’s a lot of uncertainty about what will happen to the health care system under a new president, but Rep. Brett Guthrie is convinced that the country can’t go another four years without some changes to Medicaid.

While many Republican leaders are focusing on how to can fully replace Obamacare in a partisan way, the Kentucky Republican is thinking about the changes to the low-income health insurance program could actually pass as soon as next year. As chairman of the Energy and Commerce Committee’s task force on Medicaid, he is thinking about what policies could actually get Democratic support.

One of Guthrie’s big ideas is making it easier for people to transition from Medicaid to some type of individual insurance plan as they begin to earn more money. It’s a moderate concept that could attract some Democrats, in part, because it doesn’t automatically assume that Obamacare exchanges are going away. It’s tough, though, because it would require some Medicaid beneficiaries to pay more as they inch up beyond the federal poverty line.

“No matter what happens next November, even if it’s all Republican government, you’re probably not going to have 60 votes in the Senate. If it’s a mixed government, we got to find things we can agree on. And I think it’s going to have to be fixed,” Guthrie said in an interview with Morning Consult.

“The question is can you go another four years without addressing it? I didn’t think when I first got here you could go eight, but we’ve gone eight without really addressing it, and no matter who the president is,” he said, “I think we’re going to have to address our debt and the debt we’re handing to our children, and Medicaid is a big driver of it.”

The Medicaid task force is currently all-Republican and has eight appointed members. Guthrie said the task force is currently focused on learning as much as they can and becoming “experts” on Medicaid. Members are trying to plan for at least two scenarios: A Hillary Clinton presidency, which would mean the continuance of Obamacare, and a Donald Trump presidency, which is admittedly less predictable but would potentially open the door to broader health care overhauls.

Medicaid has been around for more than 50 years and was created to give health insurance to the country’s poorest people. It has changed several times, most recently under the Affordable Care Act, which expanded the program to include low-income people making up to 138 percent of the federal poverty line. Medicaid now covers more than 70 million people and is the nation’s largest health insurance program.

The Supreme Court made the Medicaid expansion optional in 2012, and only 32 states (including the District of Columbia) have taken up the expansion. Even though not all states go up to the 138 percent eligibility mark, the face of the program has changed enormously over the past six years. An influx of poor adults has been added to the risk pool, joining more traditional populations such as the disabled and the elderly that are dually eligible for Medicaid and Medicare.

The federal government is currently picking up the tab for the entire expansion, but that will change after this year and eventually decrease to 90 percent of the cost of covering more people. State budgets are increasingly strained by the cost of Medicaid, forcing cuts to other programs in order to keep paying for it.

For these reasons and others, Guthrie said, it’s time for the federal government to act.

“I’ve learned you can do things to save money and make it better. And that’s the key to it. And we need to learn more about how this exactly is going to work, but I think that’s the bottom line and what we’re excited about is you can do things that make it better,” he said.

While he has several decidedly conservative ideas about how reform should look, he also breaks from Republicans’ refusal to budge on health care.

Kentucky’s Medicaid experience has shaped a lot of his ideas about reform. The state expanded the program under Democratic Gov. Steve Beshear, but when Republican Gov. Matt Bevin, elected last fall, was campaigning, he ran on the promise to repeal the Medicaid expansion and dismantle the state’s Obamacare exchange, Kynect.

Now repealing Medicaid expansion has become a less appealing option, and Bevin has walked back on his threat to scale back the program to pre-ACA coverage.

While many Republicans include the repeal of the Medicaid expansion in their talk of repealing Obamacare entirely, Guthrie largely accepts that the expanded program is here to stay. It is important to him to change what the expansion looks like.

“The thing is, it doesn’t even have to be Medicaid as we know it,” he said of expansion. For example, he said he supports giving states flexibility to manage their own expansion coverage.

“My understanding is … they want to keep it in place, if they can make it sustainable,” he said of officials in his home state. “And I always like to add the word ‘transitional,’ because they want people to work themselves off of it. Because if you’re working yourself off Medicaid, it means you’re making more money.”

This idea is big to Guthrie. He says the program currently creates a “cliff” that disincentivizes work. The program currently covers people with very small cost-sharing requirements. Co-pays are minimal and premiums are prohibited for people under 150 percent of the poverty line. That means people on Medicaid are largely isolated from the cost of their health care.

This kind of isolation from health care costs is not consistent with other insurance markets. If beneficiaries suddenly get a pay increase that bumps them to 139 percent of the poverty line, they become ineligible for Medicaid and then must enroll in the individual insurance market. That means they are suddenly faced with the costs of premiums, co-pays, deductibles and other out-of-pocket costs. The sudden imposition of these expenses could be crippling and more than negate their pay bump.

For this reason, Guthrie would like to see the system made more transitional. Although he’s still in a learning phase, he said he imagines slowly introducing more cost-sharing in Medicaid as a person approaches the program’s eligibility cutoff.

He realizes this may not be as popular with low-income people (or Democrats) as nearly free health insurance, but he says it creates more incentive for work, and that’s better for them — and the program — down the road.

“Of course, if you’re going to charge somebody 137 percent of poverty some kind of co-pay or deductible, that’s not as good as ‘free.’ I get it,” Guthrie said. “But I think it’s better for people in the long run because they will transition hopefully onto regular insurance and be in the system instead of having a cliff.”

In a less dramatic shift from conservative orthodoxy, Guthrie said an idea of per capita caps is generating a lot of interest among his colleagues. This would give states a set amount of money per beneficiary. Per capita caps are different from both the current system — a fee-for-service system in which the federal contribution is determined based on a formula. But it’s also different from block grants, which would give states a set amount of Medicaid money to work with.

A key detail when it comes to per capita caps is whether all beneficiaries would have the same funding cap or if different funding caps apply to different populations.

Per capita caps likely aren’t a magic bullet, but they may offer a way to advance the conversation. While the idea has had Democratic support in the past, things have changed since states have unevenly expanded Medicaid. Liberal groups such as the Center on Budget and Policy Priorities have warned that caps would shift the burden of paying for Medicaid to states and thus result in reduced coverage and benefits for enrollees.

Still, it’s a policy shift closer to the center than other conservative proposals. Many GOP leaders have endorsed block grants, including Trump. But Guthrie knows that block grants would go nowhere with Democrats and is thus supportive of what he says could be a compromise option.

“The question you gotta get to, ‘Do you wanna hold out for block grants, even if it’s President Clinton?’ Or do you want to get some things done that reform the system and make it better?” he said. “On our side, we’ve got to make sure we’re not just always holding out for the perfect when we can really make some changes.”

Morning Consult