Congress is currently debating the American Health Care Act (AHCA), the “repeal and replace” legislation that calls for fundamental changes to Medicaid. As currently proposed, AHCA will cut Medicaid spending by $880 billion over the next ten years. Spending would occur on a per capita or block grant formula based on states’ Medicaid expenditures in 2016, rather than the current cost-based method. If these Medicaid proposals are finalized, how will states fill the funding gap?
One does not need a crystal ball to see that changes are already underway. On March 14, 2017, Secretary Tom Price of the Department of Health and Human Services (HHS) and Seema Verma, Administrator of the Centers for Medicare and Medicaid Services (CMS), published a joint letter to the Governors of all 50 States, where they commit to “ushering in a new era for the federal and state Medicaid partnership” and encourage states to come up with innovative ideas for the betterment of the Medicaid program. The letter promises to fast-track waiver requests and demonstration projects, especially if a similar project has been approved in another state.
The letter encourages states to implement reforms to align Medicaid with commercial insurers. Some of the suggested reforms include:
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Utilizing alternative benefit plans that operate alongside health savings accounts;
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Charging and enforcing premiums;
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Charging emergency room copayments to discourage the use of the emergency room for non-emergencies;
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Eliminating presumptive eligibility and retroactive coverage; and
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Eliminating non-emergency transportation benefits.
The letter also encourages states to propose methods to encourage adult, non-disabled Medicaid beneficiaries to obtain employment, which is a bedrock principle of conservatives. Under the prior administration, state Section 1115 Medicaid waiver applications were not approved because they entailed either mandatory or voluntary work programs. According to the joint letter, proposals for work programs will now be fast-tracked.
Many of the ideas embraced in the letter are not new to Medicaid, yet they have not been widely adopted or encouraged in the past. For example, charging and enforcing premiums can create administrative burdens on state agencies that must dis-enroll beneficiaries who are behind on premium payments and re-enroll beneficiaries. Emergency room copayments can create barriers to necessary care to vulnerable populations. For states that already utilize some or all of the above reforms, (e.g., Georgia charges premiums to certain populations above the poverty level), alternative strategies may need to be put in place—e.g. raising premiums even higher.
The letter does not discuss options that states must consider such as reduction of services covered by Medicaid, reduced payment rates, raising taxes, or reduced state spending in other areas (e.g., education) in order to fill the funding gap. The Kaiser Family Foundation issued a report evaluating these options on a state-by-state basis with an estimate of costs for each of those options. The report estimates that in Georgia, the funding gap would require between 3.3-6.5% increase in total State taxes per Resident, or a decrease in K-12 educational funding of 8.2-16.4%. The report can be found here.
The fundamental changes to Medicaid contemplated by the Trump administration and the AHCA will create substantial gaps in funding for non-expansion states like Georgia. In response, Georgia has developed the Senate Health Reform Task Force to study how the federal health reform efforts would impact Georgia. The Task Force held its first public meeting March 17, 2017. Georgia’s Governor Nathan Deal has also been very vocal about his opposition to the AHCA as long as it “punishes” Georgia for keeping its Medicaid spending so low.
Regardless of whether the AHCA passes, fundamental AHCA changes are underway - especially in the state of Georgia and other non-expansion states. The practical effects of these changes are going to be extensive.
