Republicans in Congress recently released the plan they hope will replace the Affordable Care Act. Steps began almost immediately after the current Congress took office to begin repealing the ACA, commonly known as Obamacare. On March 13, the nonpartisan Congressional Budget Office, along with the Joint Committee on Taxes, announced that as many as 14 million people could lose insurance by next year. At least 5 million of those would no longer be covered by Medicaid with 14 million fewer enrolled in the program by 2026. Throughout the campaign, President Trump stated that there would be no cuts to Medicaid. However, the American Health Care Act, a plan created by Republicans, ends expansion of the program and restructures funding.
AHCA and Medicaid
Under the ACA, 31 states as well as the District of Columbia expanded Medicaid, allowing people who earned up to 138 percent of the poverty level to enroll. Approximately 11 million people took advantage of the expansion. Under the AHCA, expansion would be phased out, but the plan allows those who are already in the program to keep coverage.
The GOP plan also changes the way that states are paid for the Medicaid program. Currently, states are paid based on a formula in which the federal government pays a portion of each state’s Medicaid costs. Under the GOP plan, state payments would be capped with different amounts allotted to different categories. The AHCA would see more funding toward children, the elderly and those with disabilities and less to those on the plan who are healthy and able to work.
Under the Republican plan, anyone who signed up for Medicaid under the ACA would keep their coverage, leading GOP leaders to claim that the predictions of 14 million people losing coverage have been grossly exaggerated. But starting in 2020, enrollment in Medicaid would freeze and states would not be provided additional funding for signing up new enrollees. In addition, there would be a cap on state funding, limiting how much each state is provided for Medicaid enrollees. This is a change from the open-ended entitlement that exists under Obamacare.
Reason for Changes
Republicans have long been opposed to the expansion of Medicaid. Prior to the ACA, Medicaid eligibility depended on more than being poor. Enrollees also had to belong to a specific group: children, pregnant women, the elderly or disabled. Republicans claim that ACA eligibility expansion allowed able-bodied people to join the Medicaid program, which is not what the program was designed to do.
Republicans point to the fact that Medicaid is often the largest, or close to the largest, portion of most state budgets. They also claim that there is significant fraud and abuse in the program that states do not address because they’re paying for the expansion using federal dollars rather than state dollars. GOP leaders believe that states will reign in fraud and abuse if they know the amount they will receive is finite and not based on enrollment. They also believe that able-bodied people will be encouraged to seek jobs with healthcare benefits if they no longer qualify for government-subsidized insurance.
Medicaid Funding Cuts
The CBO estimates that cuts to state funding proposed by the AHCA would be as high as $370 billion over 10 years. States have the option of making up the difference through their own revenues, but many would be unable to do so, which is why the estimates for Medicaid recipients losing coverage are so high. Under the AHCA, the federal government would continue paying 90 percent of the cost of each state’s Medicaid costs, including for those who sign up between now and 2020. But as of January 1, 2020, no one would be permitted to enroll in an expanded program, and those who may suffer an economic loss after that date will not be able to join the program.
Larger states like California and New York may be able to continue offering an expanded Medicaid program and absorb the cost into their own budget, but most states have indicated they will not. Some states, namely Arkansas, Arizona, Indiana, Michigan, New Hampshire, New Mexico and Washington, already have laws in place that would eliminate expansion if federal support is removed. If these states follow through on their promise to repeal expansion absent federal support, then over 3 million people in those states would lose Medicaid coverage. The AHCA also prevents anyone from returning to Medicaid if they lose eligibility for more than two months.
One of the negative aspects of the GOP plan is the denial of coverage under Medicaid if an individual becomes ineligible for more than two months. It’s possible that a family could earn enough to leave Medicaid and then suffer an economic hardship that lowers their income. If this occurs after the passage of the bill, the family would likely not be able to reapply for Medicaid, leaving them without insurance. This is because states will not receive federal money after 2020 to support the expanded program under Obamacare. A study conducted by Harvard found that fewer than half of those who currently qualify under expanded Medicaid parameters remain eligible over an entire year, and only 20 percent remain continuously eligible over four years.
Even more confusing to many people is the per-capita cap that will be implemented under the AHCA. Under this plan, each state would be given a set amount per person and that amount would adjust each year based on the Consumer Price Index. Because the CPI measures consumer spending, the medical component will be based on what households spend out of their own pocket on healthcare. However, the medical component measured by the CPI is growing more slowly than Medicaid costs are expected to grow, adding to concerns that federal subsidies will be far less than actual costs. There are also different caps for different categories, but even within those categories there are fluctuations. A state like Florida with a higher number of elderly sees a difference between a 67-year-old on Medicaid and an 85-year-old on the same program. There are concerns that the GOP plan would encourage states to drop older seniors and focus on enrolling younger ones with fewer health issues.
Even some Republicans are not pleased with the AHCA as it is written, and there is no Democrat support for the plan. GOP leaders say that they are willing to compromise to be sure that those currently on Medicaid can remain there, but they stress that it is important to move healthy, able-bodied people from the Medicaid rolls and onto traditional insurance through economic development and job creation.