It’s Budget Time And Health Programs Are On The Table

Expect congressional Republicans to push some major health policy changes when they write a budget resolution for fiscal year 2016 in March or April. One hardy perennial that has been part of a number of House GOP plans is to restructure the Medicaid program by converting it into a block grant to the states and sharply cutting its funding. Medicaid, jointly administered by federal and state governments, is the nation’s primary health insurance program for low income individuals. According to the Kaiser Family Foundation it is in fact the largest source of health coverage in the country. In 2014, over 68 million of us were covered at some point by Medicaid. It is also a lynchpin of the Affordable Care Act, allowing states to provide coverage for most non-elderly Americans with incomes below 138% of federal poverty guidelines– the so-called Medicaid expansion population.

Representative Paul Ryan (R-WI), who is now taking over the reins of the Ways and Means Committee, one of the panels with jurisdiction over Medicaid, is a lead proponent. And there is no reason to think that the incoming chair of the Budget Committee, Representative Tom Price (R-GA), is going to see things any differently. At a January Conservative Policy Summit sponsored by Heritage Action for America he called for new “state flexibility” in how the program is run, which is code in conservative policy circles for block-granting and slashing the program.

In the House GOP’s 2015 budget plan Ryan laid out two primary justifications: first that the rate of spending in the program is financially unsustainable, increasing 9% annually through 2018; and second that Medicaid provides a substandard level of care to enrollees. With regard to the financing issue a report issued last March by the Center on Budget and Policy Priorities (CBPP) found that spending was boosted in the short term by the ACA Medicaid expansion and once fully implemented would drop the annual growth rate to 5.5%. “Moreover, the Ryan report ignores the findings that Medicaid costs per beneficiary are much lower, and are projected to grow more slowly, than costs under private health insurance.” The reality is that state Medicaid programs are very efficient, and states through Center for Medicare and Medicaid Services’ waivers already have considerable latitude in meeting the specific health care needs of their citizens.

In the House GOP budget panel report, “The War on Poverty: 50 Years Later,” Ryan is sharply critical of Medicaid and identifies problem areas, most notably the lack of access to primary care doctors for enrollees due to low provider reimbursement rates. Most progressives agree that ensuring patient access to primary care providers is a critically important goal. In fact, the Affordable Care Act included a provision which expired at the end of last year boosting Medicaid reimbursement rates to the same level of Medicare with the intended purpose of improving primary care access for Medicaid patients. A ten state study was conducted by researchers at the University of Pennsylvania and the Urban Institute and published by the New England Journal of Medicine assessed the effectiveness of the two-year increase in rate payments, and now the results are in. Researchers found that the temporary bump in reimbursements to primary care doctors resulted in an increase of 7.7% in availability of new patient appointments without longer waiting times.

Arkansas Dr. Shawn Purifoy told National Public Radio’s Marketplace Morning Report on January 22 that this simply is a matter of dollars and cents. Now that rates have returned to their lower levels he would be forced to see less Medicaid enrollees. For a standard visit Medicaid reimburses him $36, Medicare $67 and Blue Cross $88. “That doesn’t work financially,” he said. “That sounds like a horrible thing to say but the truth is you are going to get paid a certain amount, and it really doesn’t make much difference how much more time it takes to do the work.”

President Obama’s 2015 budget would have extended the policy providing higher Medicaid reimbursement payments, but the budget resolution adopted by House Republicans last year not only would have block granted Medicaid but cut the program by a staggering trillion dollars when you taking into account the plan’s proposed elimination of the Medicaid expansion as well. If such a plan was enacted, it is highly likely that states would be compelled to cut back on eligibility and provider reimbursements, slash benefits and boost cost sharing for enrollees.

In contrast to Representative Ryan’s block grant plan, the newly minted chairman of the Senate Finance panel, Orrin Hatch (R-UT), and Energy and Commerce chair Fred Upton (R-MI) want to impose a “per capita cap” on overall federal financing of Medicaid. States would receive a fixed dollar amount from the federal government based on the number of beneficiaries. Depending on how the cap is constructed– and there are many ways it could be– the federal government would likely reap substantial budgetary savings since it would no longer cover a fixed share of states’ total Medicaid costs. Over time there inevitably would be a significant cost shift to the states. As noted by CBPP researchers Edwin Park and Matthew Broaddus: “The capped amounts of federal spending per beneficiary that states would receive would be significantly below the level of Medicaid funding the federal government would otherwise provide to the states; this has to be the case if the per capita cap is to provide substantial federal budgetary federal budgetary savings, which is the primary goal of Medicaid per capita cap proposals.”

Some Democrats are on record supporting the idea of a per capita cap, believing that it is less onerous than a traditional block grant. They note that federal spending would go up if enrollment increases during bad economic times, albeit at levels much lower than under current rules. And this very well may be where congressional Republicans end up when they attempt to forge a consensus on a budget resolution. Still, the end result is much the same as with a block grant; Medicaid enrollees and their health care providers would be adversely affected if it ever was to become law. President Obama cannot use his veto pen to stop a budget resolution, but he presumably will have major concerns with any legislative vehicle that includes a block grant or a per capita cap if for no other reason that the resulting cost shift to states would make the optional Medicaid expansion far less attractive.



Chuck Loveless is a Senior Advisor at  NVG, LLC

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