We now have the first inklings of what a “replacement” bill for the Affordable Care Act (ACA) might look like. The clues are contained in the Obamacare Repeal and Replace Policy Brief released by House Republican leaders on February 16. As was the case with House Speaker Paul Ryan’s 2016 A Better Way, Medicaid is a dominant theme, and replacement goes far beyond finding an alternative means of covering those added to Medicaid under the ACA’s expansion of eligibility.
For over a half-century Medicaid has functioned as health insurance, meaning that, in a manner similar to private insurance, Medicaid establishes a legal guarantee of coverage for identifiable benefits and services. For over 70 million people today Medicaid functions in the same fashion that Medicare, employer coverage, or a policy purchased in the individual market would operate. The services Medicaid pays for are defined under the terms of coverage, and beneficiaries can use their Medicaid coverage to obtain care from participating health care providers and organizations. As with private insurance, most Medicaid beneficiaries today are enrolled in managed care plans that, like private insurance, furnish coverage through a defined provider network.
If the legislation ultimately passed in the House tracks the Policy Brief’s proposals, it would likely not only dramatically cut federal funding but also extinguish Medicaid’s guarantee of coverage for all Medicaid beneficiaries, not just the 11 million whose coverage is the direct result of the ACA Medicaid eligibility expansion. This is because the proposal would restructure all of Medicaid, not merely the ACA expansion provisions. Only about one of seven people Medicaid reaches today has gained coverage under the ACA eligibility expansion; the vast majority of beneficiaries fall into traditional eligibility categories: poor children, extremely destitute parents, pregnant women, the low-income elderly, and impoverished people with disabilities.
Under the type of program alterations contemplated in the Policy Brief, millions might continue to receive some types of Medicaid-funded services, though the details of how much discretion states would have in determining which services would be offered is still unknown. But crucially, the Policy Brief suggests that Congress might allow states to move away from traditional Medicaid coverage principles by permitting them to cut services, such as nursing home care or physician care. It might even allow states to entirely eliminate Medicaid’s basic guarantee of any coverage for people who meet program eligibility requirements. Some states might recreate Medicaid’s current federal coverage guarantee though a state law. Yet in the face of the steep federal funding losses contemplated under the House proposal, such a move is highly unlikely.
The House plan would create two options for states. Under the first option, states could elect to “keep their Medicaid program open to new enrollees” and receive federal funding at the traditional matching rate, which ranges from 50 percent to 75 percent of state spending, rather than the ACA’s enhanced rate. States choosing this approach would receive fixed per capita funding allotments subject to a growth factor linked to general inflation rather than the higher growth rate for health care. Depending on the growth factor selected, this change in policy could result in as much as a $600 billion loss of federal funding over 10 years. Where Medicaid’s guarantee of coverage is concerned, nowhere does the proposal guarantee that states would receive as many per capita allotments as there are people entitled to coverage. Indeed, it appears to suggest the contrary: state allotments would be subject to a “total,” which conceivably could function as an aggregate cap divorced from the actual number of eligible individuals. Few if any states would be able to make up the lost funds needed to not only reach an appropriate level of coverage but also cover all eligible people.
The second option would allow states to receive a “Medicaid block grant” or “global waiver” (an undefined term). As with past Medicaid block grant proposals, this option likely would eliminate virtually all current Medicaid requirements that reflect its status as insurance. Indeed, the proposal’s only obligation is that states taking this option would have to “provide required services to the most vulnerable elderly and disabled individuals who are mandatory populations under current law.” This option offers no insight as to what might be a “required” service. Furthermore, under current law, the only elderly and disabled people for whom Medicaid coverage is mandatory are those who receive Supplemental Security Income (SSI) benefits, which are restricted to the very poorest disabled people. In short, it is conceivable that under the block grant option, a state could offer no services—much less no guarantee of coverage—to anyone other than SSI recipients, who number around 10 million nationally.
The block grant option further assumes that states that choose a block grant would “transition individuals currently enrolled in the Medicaid expansion . . . into other coverage” without discussing where the funding for such “other coverage” might come from. And since, depending on the growth formula chosen, states could lose almost $700 billion over 10 years under a block grant, prospects for the availability of “other” funding for the expansion population—much less those falling in Medicaid’s traditional eligibility categories—seem dim.
Far from giving all Americans access to affordable, high-quality health care, the proposal could, in short, end the right to coverage for nearly one of five Americans.
