State Flexibility: A Trojan Horse for Weakening Medicaid

State Flexibility: A Trojan Horse for Weakening Medicaid
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Although the debate over repealing the Affordable Care Act is currently taking center stage, Medicaid’s turn in the spotlight is coming sooner than many realize – and the immediate threat to Medicaid expansion is just the beginning.

During the campaign, President-elect Trump promised that he would not cut Medicaid, differentiating himself from other Republican candidates. Yet his actions since the election have spoken louder than these words, as Vice President-elect Mike Pence, Secretary of Health and Human Services nominee Tom Price, and Speaker Paul Ryan lay the groundwork for radical changes that will gut the Medicaid program and leave millions uninsured. These attacks on our health care safety net will come on three major fronts.

First, Congressional Republicans currently plan to repeal Medicaid expansion as part of their ACA repeal efforts. In 2015, Medicaid expansion was responsible for covering nearly 11 million newly eligible enrollees. However, although they can repeal expansion through reconciliation with only 51 votes, rolling back this successful program might not be as easy as they expect.

Notably, some Republican governors have already expressed their strong opposition to repealing Medicaid expansion. Michigan Governor Rick Snyder has urged Congress to look at emulating Michigan’s modified version of Medicaid expansion rather than repealing it outright. Ohio Governor John Kasich has argued forcefully that Medicaid expansion is improving health care in his state. When asked recently about Congress’s current “repeal and delay” strategy for the ACA, he publicly worried that “Let’s just say they got rid of it, didn’t replace it with anything. What happens to drug treatment? What happens to mental health counseling? What happens to these people who have very high cholesterol and are victims of heart attacks, what happens to them?” Similarly, Nevada Governor Brian Sandoval wrote a letter to House leadership describing the success of Medicaid expansion in his state and telling them to ensure that people “are not suddenly left without the care they need to live healthy, productive lives.”

Furthermore, repealing expansion would be a huge blow to Indiana, where Vice President-elect Mike Pence’s decision to expand the program has resulted in more than 220,000 newly eligible people getting covered through Medicaid.

Second, the Congressional majority hopes to realize its longtime dream of changing Medicaid’s financing structure to a block grant. Instead of the current system of the federal government matching a certain share of state Medicaid payments, under this approach states would receive capped payments. Since the size of the block grants would grow more slowly than health cost inflation, this would increasingly shift costs onto state budgets over the years, especially during recessions.

Conservatives frame block grants as increasing state flexibility. This is technically true, in the same sense that a worker who gets laid off suddenly has much more flexibility in how they spend their time. Understandably, however, the prospect of being broke generally takes precedence.

That’s why in reality, budgetary concerns tend to be more important to state officials than “flexibility.” And in that respect, block grants represent a massive cut to state budgets over time.

For example, Louisiana Secretary of Health Rebekah Gee has sharply criticized block grant proposals for Medicaid, explaining that, “In a block grant scenario it would be a rationing – we'd have to ration care and who do we provide care to . . . when they talk about flexibility, it's flexibility to cut services. We have tremendous flexibility now. We do not need more flexibility.”

Secretary Gee isn’t bluffing about the stark math that states would face under block grants. Estimates have shown that by the tenth year of block grants, federal Medicaid funding would have been cut by one-third compared to current law, with 14 to 20 million people losing coverage. Although Speaker Ryan recently proposed giving states a choice between block grants and per capita caps, this is not a compromise. Per capita caps would be calculated as a capped amount per person rather than per state, but would still massively cut Medicaid funding.

Third, key members of the incoming administration hope to aggressively transform Medicaid’s benefits, eligibility, and cost-sharing through administrative actions and waivers – undermining the program without needing Congress’s help. Over the past few years, we’ve seen a limited preview of this in some states that have used waivers from the federal government to take more conservative approaches to expanding Medicaid, often focused around increased cost-sharing and health savings accounts. For example, Indiana requires Medicaid expansion enrollees to pay premiums to receive the full benefits plan; those below the poverty level who don’t pay are shifted to a more limited plan, while those above the poverty level who don’t pay are dropped from coverage and banned from re-enrolling for six months.

Yet while the Obama administration has compromised with several governors on these more conservative arrangements in order to encourage them to expand Medicaid, it has held the line against more harmful waiver proposals that would undermine the objectives of the Medicaid program. Most notably, it has consistently rejected proposals to add work requirements to Medicaid.

Regardless of Trump’s campaign rhetoric on Medicaid, since the election he has nominated Seema Verma, the architect of waiver proposals in Indiana and Kentucky, to lead the Centers for Medicare and Medicaid Services. Under her leadership, CMS is likely to not only approve but encourage more harmful proposals. The policy changes the Trump administration could pursue include work requirements, premiums and higher cost-sharing for low-income enrollees, dis-enrollment with a six-month lockout for beneficiaries who fail to pay premiums or meet other requirements, more limited benefit packages, and overall caps on Medicaid enrollment.

The success of these three major threats to Medicaid is not inevitable. But the first step to resisting them is recognizing that the Congressional Republican agenda for health care goes much further than repealing the ACA: President-elect Trump is entering office armed with the power to fundamentally undermine and weaken America’s health care safety net.

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