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December 17 -- The New Federalism
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HomeSpotlight Story | Bird’s Eye View | Budget & Taxes | Politics & Leadership | Governors | Hot Issues | Once Around the Statehouse Lightly
States would face demanding fiscal challenges, especially with Medicaid, if the pending Republican bill to replace the Affordable Care Act (ACA) becomes law. Proposed heavy cutbacks in Medicaid could potentially doom the American Health Care Act (AHCA) in the Senate, according to Politico and other news outlets.
The AHCA, which passed the House narrowly on May 4, would replace much of the ACA, often called Obamacare. Approved largely on party lines and supported by President Donald Trump, the bill creates a mountain of uncertainties about health care insurance coverage. But the AHCA is walking a tightrope in the Senate. Since it is unanimously opposed by Democrats, Republicans need support from 50 of 52 GOP senators to pass a health care measure (with Vice President Mike Pence breaking a tie.) At least seven Republican senators have criticized the House bill, with the Medicaid provisions receiving the most disapproval.
“Let’s face it,” said influential Sen. Orrin G. Hatch (R-Utah), chairman of the Senate Finance Committee. “The House bill isn’t going to pass over here.”
Though much of the media coverage has focused on the AHCA’s effect on people with pre-existing health conditions, its greatest impact is on Medicaid, the federal-state program providing health care for the poor and disabled. Some 74.5 million people — one in five Americans - are enrolled in Medicaid and the related Children’ Health Insurance Program. Thirty-four million of them are children.
As passed by the House, the AHCA would cut more than $800 billion from Medicaid over a 10-year period and cap its federal funding for the first time. This would cripple a substantial expansion of Medicaid that has occurred in 31 states and the District of Columbia under Obamacare. The expansion extended Medicaid coverage to nondisabled working-age adults making up to 133 percent above the poverty line ($15,800 for a single person or $32,319 for a family of four.)
Under the House bill the federal government wouldn’t pay the cost of Medicaid for these recipients after 2020. But it would impact some of them sooner because the bill requires continuous coverage as a condition of federal aid. Rachel Morgan, a health care expert with the National Conference of State Legislatures in Washington, D.C. and longtime registered nurse, observes that Medicaid rolls are not static. People continually enter and leave the program depending upon their economic circumstances.
The House bill harms Medicaid in other ways. It eliminates a 0.9 percent income tax on those with incomes exceeding $200,000, which hurts Medicaid’s long-run solvency. It permits states to be reimbursed through a “block grant” rather than a per-patient payment, which would give the states less money. It allows states to pick and choose among the 10 “essential health benefits” for which Obamacare requires coverage. Most likely to be scrapped, says Brookings Institution analyst Matthew Fiedler, are services for maternity and mental illness, as well as prescription drug coverage, features commonly not covered before the ACA. Without a requirement for covering all essential benefits, health coverage could unravel, Fielder suggests. Timothy S. Jost, another analyst, says that insurers could revert to selling “mini-med coverage with absurdly low coverage limits.”
Backers of the AHCA, the brainchild of House Speaker Paul Ryan (R-WI), say such concerns are overblown and see a need for low-cost, bare-bones insurance policies. Ryan contends that rising premiums and higher deductibles for health insurance are pricing many middle-class Americans out of the market. Many who support Obamacare acknowledge these problems and are especially concerned that insurance companies have withdrawn from several state exchanges that market ACA-approved policies. Peter Lee, executive director of Covered California, a robust state exchange, says that nearly a third of Obamacare recipients in other states have only one insurer.
But does the AHCA solve the problems of the ACA? The American Medical Association finds the House bill “critically flawed.” Numerous hospital and patient-advocacy groups have urged the Senate to revise or kill the bill. They say the winners in the House bill are higher-income Americans and healthy young people, who will no longer pay a financial penalty for not buying health insurance. Poorer, older and less healthy persons, and the uninsured would be losers.
“With Medicaid reductions and smaller tax credits, this bill would clearly result in fewer people insured than under the ACA,” said Larry Levitt, senior vice president of the Kaiser Family Foundation... “The House GOP proposal seeks to reduce what the federal government spends on health care, and that inevitably means more people uninsured.”
States could wind up the biggest losers, for they would receive substantially less federal funding for Medicaid, the second costliest item after schools in most state budgets. Total Medicaid spending in fiscal year 2016 was $554 billion with 63 per cent coming from the federal government and 37 percent from the states. California, the state that spends the most on Medicaid, had outlays of $82 billion with $52.6 billion coming from the federal government.
The prospective reduction of federal Medicaid funds provoked the Republican governors of Ohio, Michigan, Arkansas and Nevada to write House and Senate leaders before passage of the ACHA that the bill “provides almost no new flexibility for states, does not ensure the resources necessary to make sure none is left out, and shifts significant new costs to states.”
Exploring the upcoming battle over the ACHA in the Senate, Politico listed “four potential deal-breakers that could sink the GOP’s Obamacare repeal bid by siphoning support from the political center.” These issues are deep cuts in Medicaid, weakening of protections for people with pre-existing medical conditions, defunding of Planned Parenthood and the so-called “age tax” in the House bill, which allows insurers to charge older persons five times as much as young people. The ratio under Obamacare is three to one.
The Senate is considered likely to continue funding Planned Parenthood. The age tax could also be changed; several senators have discussed basing subsidies on need rather than age. The guarantee that people with pre-existing medical conditions (roughly a fourth of Americans) receive health insurance has been one of the most popular features of Obamacare. The House bill continues this requirement but with a loophole that allows states to seek a waiver allowing higher rates for persons who have not maintained continuous coverage. There would be little incentive for states to seek such an unpopular waiver, but persons with prior conditions would breathe easier if the Senate closed the loophole.
Ultimately, the fate of the AHCA probably depends on whether the Senate can reach a consensus on Medicaid. Most Republican senators are on the record as favoring some Medicaid reductions. But four GOP senators — Shelley Moore Capito of West Virginia, John McCain of Arizona, Lisa Murkowski of Alaska and Rob Portman of Ohio — have said the House cutbacks go too far. Trump carried all four of these states in the 2016 election.
There’s a tricky political calculus at work in the upcoming Senate debate. A survey this month by Quinnipiac University found a hefty majority of Democratic and independent voters disapproving of the House bill and a plurality of Republican voters favoring it. This suggests that GOP senators, nearly all of whom campaigned in favor of repealing Obamacare, could be in trouble with their partisan base if they just walk away from the House bill. The Senate is probably going to have to come up with something, not just kill the House bill.
Two timing issues create a sense of urgency. Issue No. 1 is the budget process, completed in many states and well along in others. State budget assumptions were based on current allocations, and substantial federal cuts would leave states, especially those that expanded Medicaid, in a deep hole. “Uncertainty about Medicaid funding is a huge source of anxiety,” said Lisa Waugh, a health program director of the NCSL in Denver.
Issue No. 2 is the insurance rates schedule for 2018, drawn up in most states in May and June of this year. Insurance companies also made decisions based on the current level of subsidies under the Affordable Care Act. If Congress changes the rules, insurers may seek a delay in implementation.
Whatever happens, uncertainty has now become the watchword for Medicaid recipients, states and insurers alike. This uncertainty hangs like a cloud over the Senate as it considers legislation that could turn back the clock on health care to the days before Obamacare.