Tag Archives: home and community-based services

Updated Summary of Graham-Cassidy Health Care Legislation

A PDF version of the below can be found on the Texas Public Policy Foundation’s website

Summary of CBO Score

On Monday evening, the Congressional Budget Office (CBO) released a preliminary estimate of the Graham-Cassidy bill. CBO concluded that the bill would comply with reconciliation parameters—namely, that it would reduce the deficit by at least as much as the underlying reconciliation vehicle (the House-passed American Health Care Act), reduce the deficit by at least $1 billion in each of its two titles in its first ten years, and not increase the deficit overall in any of the four following decades.

Although it did not include any specific coverage or premium numbers, CBO did conclude that the bill would likely decrease coverage by millions compared to the current policy baseline. The report estimated that the bill’s block grant would spend about $230 billion less than current law—a 10 percent reduction overall (an average 30 percent reduction for Medicaid expansion states, but an average 30 percent increase for non-expansion states). Moreover, CBO believes at least $150 billion in block grant funding would not be spent by the end of the ten-year budget window.

CBO believes that “most states would eventually make changes in the regulations for their non-group market in order to stabilize it and would use some funds from the block grants to facilitate those changes.” Essentially, current insurance regulations mean that markets would become unstable without current law subsidies, such that states would use a combination of subsidies and changes in regulations to preserve market stability.

CBO believes that most Medicaid expansion states would attempt to use block grant funding to create Medicaid-like programs for their low-income residents. However, the analysis concludes that by 2026, those states’ block grants would roughly equal the projected cost of their current Medicaid expansion—forcing them to choose between “provid[ing] similar benefits to people in a [Medicaid] alternative program and extend[ing] support to others” further up the income scale. In those cases, CBO believes “most of those states would then choose to provide little support to people in the non-group market because doing so effectively would be the more difficult task.”

Overall, CBO believes that the bill would reduce insurance coverage, because of its repeal of the subsidies, Medicaid expansion, and the individual mandate. The budget office believes that states with high levels of coverage under Obamacare would not receive enough funds under the revised block grant to match their current coverage levels, while states with lower levels of coverage would spend the money slowly, in part because they lack the infrastructure (i.e., technology, etc.) to distribute subsidies easily. CBO also believes that employment-based coverage would increase under the bill, because some employers would respond to changes in the individual market by offering coverage to their workers.

With respect to the Medicaid reforms in the bill, CBO concludes that most “states would not have substantial additional flexibility” under the per capita caps. Some states with declining populations might choose the block grant option, but the grant “would not be attractive in most states experiencing population growth, as the fixed block grant would not be adjusted for such growth.” States could reduce their spending by reducing provider payment rates; optional benefit categories; limiting eligibility; improving care delivery; or some combination of the approaches.

For the individual market, CBO expresses skepticism about the timelines in the bill. Specifically, its analysis found that states’ initial options would “be limited,” because implementing new health programs by 2020 would be “difficult:”

To establish its own system of subsidies for coverage in the nongroup market related to people’s income, a state would have to enact legislation and create a new administrative infrastructure. A state would not be able to rely on any existing system for verifying eligibility or making payments. It would need to establish a new system for enrolling people in nongroup insurance, verify eligibility for tax credits or other subsidies, certify insurance as eligible for subsidies, and ultimately ensure that the payments were correct. Those steps would be challenging, particularly if the state chose to simultaneously change insurance market regulations.

While CBO believes that states that expanded Medicaid would be likely to create programs for populations currently eligible for subsidies (i.e., those households with incomes between one and four times poverty), it notes that such states “would be facing large reductions in funding compared with the amounts under current law and thus would have trouble paying for a new program or subsidies for those people.”

CBO believes that without subsidies, and with current insurance regulations in place, a “death spiral” would occur, whereby premiums would gradually increase and insurers would drop out of markets. (However, “if a state required individuals to have insurance, some healthier people would enroll, and premiums would be lower.”) To avoid this scenario, CBO believes that “most states would eventually modify various rules to help stabilize the non-group market,” thereby increasing coverage take-up when compared to not doing so. However, “coverage for people with pre-existing conditions would be much more expensive in some of those states than under current law.”

While widening age bands would “somewhat increase insurance coverage, on net,” CBO notes that “insurance covering certain services not included in the scope of benefits to become more expensive—in some cases, extremely expensive.” Moreover, some medically underwritten individuals (i.e., subject to premium changes based on health status) would become uninsured, while others would instead obtain employer coverage.

Finally, CBO estimated that the non-coverage provisions of the bill would increase the deficit by $22 billion over ten years. Specific estimates for those provisions are integrated into the summary below.

Summary of Changes Made

On Sunday evening, the bill’s sponsors released revised text of their bill. Compared to the original draft, the revised bill:

  • Strikes language repealing sections of Obamacare related to eligibility determinations (likely to comply with the Senate’s “Byrd rule” regarding budget reconciliation);
  • Changes the short-term “stability fund” to set aside 5 percent of funds for “low-density states,” which some conservatives may view as a carve-out for certain states similar to that included in July’s Better Care Reconciliation Act;
  • Re-writes waiver authority, but maintains (and arguably strengthens) language requiring states to “maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions,” which some conservatives may view as imposing limiting conditions on states that wish to reform their insurance markets;
  • Requires states to certify that they will “ensure compliance” with sections of the Public Health Service Act relating to: 1) the under-26 mandate; 2) hospital stays following births; 3) mental health parity; 4) re-constructive surgery following mastectomies; and 5) genetic non-discrimination;
  • Strikes authority given to the Health and Human Services Secretary in several sections, and replaces it with authority given to the Centers for Medicare and Medicaid Services (CMS) Administrator;
  • Includes a new requirement that at least half of funds provided under the Obamacare replacement block grant must be used “to provide assistance” to households with family income between 50 and 300 percent of the poverty level;
  • Requires CMS Administrator to adjust block grant spending upward for a “low-density state” with per capita health care spending 20 percent higher than the national average, increasing allocation levels to match the higher health costs—a provision some conservatives may consider an earmark for specific states;
  • Imposes new requirement on CMS Administrator to notify states of their 2020 block grant allocations by November 1, 2019—a timeline that some may argue will give states far too little time to prepare and plan for major changes to their health systems;
  • Slows the transition to the new Obamacare replacement block grant formula outlined in the law, which now would not fully take effect until after 2026—even though the bill does not appropriate block grant funds for years after 2026;
  • Gives the Administrator the power not to make an annual adjustment for risk in the block grant;
  • Strikes the block grant’s annual adjustment factor for coverage value;
  • Delays the block grant’s state population adjustment factor from 2020 until 2022—but retains language giving the CMS Administrator to re-write the entire funding allocation based on this factor, which some conservatives may view as an unprecedented power grab by federal bureaucrats;
  • Re-writes rules re-allocating unspent block grant allocation funds;
  • Prohibits states from receiving more than a 25 percent year-on-year increase in their block grant allocations;
  • Makes other technical changes to the block grant formula;
  • Changes the formula for the $11 billion contingency fund provided to low-density and non-expansion states—25 percent ($2.75 billion) for low-density states, 50 percent ($5.5 billion) for non-Medicaid expansion states, and 25 percent ($2.75 billion) for Medicaid expansion states;
  • Includes a $750 million fund for “late-expanding” Medicaid states (those that did not expand Medicaid under Obamacare prior to December 31, 2016), which some conservatives may consider an earmark, and one that encourages states to embrace Obamacare’s Medicaid expansion to the able-bodied;
  • Includes $500 million to allow pass-through funding under Section 1332 Obamacare waivers to continue for years 2019 through 2023 under the Obamacare replacement block grant;
  • Strikes language allowing for direct primary care to be purchased through Health Savings Accounts, and as a medical expense under the Internal Revenue Code;
  • Strikes language reducing American territories’ Medicaid match from 55 percent to 50 percent;
  • Restores language originally in BCRA allowing for “late-expanding Medicaid states” to select a shorter period for their per capita caps—a provision that some conservatives may view as an undue incentive for certain states that expanded Medicaid under Obamacare;
  • Restores language originally in BCRA regarding reporting of data related to Medicaid per capita caps;
  • Strikes language delaying Medicaid per capita caps for certain “low-density states;”
  • Includes new language perpetually increasing Medicaid match rates on the two highest states with separate poverty guidelines issued for them in 2017—a provision that by definition includes only Alaska and Hawaii, which some conservatives may view as an inappropriate earmark;
  • Strikes language allowing all individuals to purchase Obamacare catastrophic coverage beginning in 2019;
  • Strikes language clarifying enforcement provisions, particularly regarding abortion;
  • Allows states to waive certain provisions related to insurance regulations, including 1) essential health benefits; 2) cost-sharing requirements; 3) actuarial value; 4) community rating; 5) preventive health services; and 6) single risk pool;
  • Requires states to describe its new insurance rules to the federal government, “except that in no case may an issuer vary premium rates on the basis of sex or on the basis of genetic information,” a provision that some conservatives may view as less likely to subject the rules to legal challenges than the prior language; and
  • Retains language requiring each waiver participant to receive “a direct benefit” from federal funds, language that some conservatives may view as logistically problematic.

Full Summary of Bill (as Revised)

Last week, Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA) introduced a new health care bill. The legislation contains some components of the earlier Better Care Reconciliation Act (BCRA), considered by the Senate in July, with some key differences on funding streams. A full summary of the bill follows below, along with possible conservative concerns where applicable. Cost estimates are included below come from prior Congressional Budget Office (CBO) scores of similar or identical provisions in BCRA.

Of particular note: It is unclear whether this legislative language has been fully vetted with the Senate Parliamentarian. When the Senate considers budget reconciliation legislation—as it would do should the Graham-Cassidy measure receive floor consideration—the Parliamentarian advises whether provisions are budgetary in nature and can be included in the bill (which can pass with a 51-vote simple majority), and which provisions are not budgetary in nature and must be considered separately (i.e., require 60 votes to pass).

As the bill was released prior to issuance of a CBO score, it is entirely possible the Parliamentarian has not fully vetted this draft—which means provisions could change substantially, or even get stricken from the bill, due to procedural concerns as the process moves forward.

Title I

Revisions to Obamacare Subsidies:             Beginning in 2018, changes the definition of a qualified health plan, to prohibit plans from covering abortion other than in cases of rape, incest, or to save the life of the mother. Some conservatives may be concerned that this provision may eventually be eliminated under the provisions of the Senate’s “Byrd rule.” (For more information, see these two articles.)

Eliminates provisions that limit repayment of subsidies for years after 2017. Subsidy eligibility is based upon estimated income, with recipients required to reconcile their subsidies received with actual income during the year-end tax filing process. Current law limits the amount of excess subsidies households with incomes under 400 percent of the federal poverty level (FPL, $98,400 for a family of four in 2017) must pay. This provision would eliminate that limitation on repayments, which may result in fewer individuals taking up subsidies in the first place. Saves $11.7 billion over ten years—$8.5 billion in spending, and $3.2 billion in revenue.

Repeals the subsidy regime entirely after December 31, 2019.

Small Business Tax Credit:             Repeals Obamacare’s small business tax credit, effective in 2020. Disallows the small business tax credit beginning in 2018 for any plan that offers coverage of abortion, except in the case of rape, incest, or to protect the life of the mother—which, as noted above, some conservatives may believe will be stricken during the Senate’s “Byrd rule” review. Saves $6 billion over ten years.

Individual and Employer Mandates:             Sets the individual and employer mandate penalties to zero, for all years after December 31, 2015. The individual mandate provision cuts taxes by $38 billion, and the employer mandate provision cuts taxes by $171 billion, both over ten years.

Stability Fund:          Creates two state-based funds intended to stabilize insurance markets—the first giving funds directly to insurers, and the second giving funds to states. The first would appropriate $10 billion each for 2018 and 2019, and $15 billion for 2020, ($35 billion total) to the Centers for Medicare and Medicaid Services (CMS) to “fund arrangements with health insurance issuers to address coverage and access disruption and respond to urgent health care needs within States.” Instructs the CMS Administrator to “determine an appropriate procedure for providing and distributing funds.” Does not require a state match for receipt of stability funds. Some conservatives may be concerned this provision provides excessive authority to unelected bureaucrats to distribute $35 billion in federal funds as they see fit.

Includes new language setting aside 5 percent of stability fund dollars for “low-density states”—a provision which some conservatives may oppose as an earmark for Alaska and other similar states.

Market-Based Health Care Grant Program:       Creates a longer-term stability fund for states with a total of $1.176 trillion in federal funding from 2020 through 2026—$146 billion in 2020 and 2021, $157 billion in 2022, $168 billion in 2023, $179 billion in 2024, and $190 billion in 2025 and 2026. Eliminates BCRA provisions requiring a state match. States could keep their allotments for two years, but unspent funds after that point could be re-allocated to other states. However, all funds would have to be spent by December 31, 2026.

Expands BCRA criteria for appropriate use of funds by states, to include assistance for purchasing individual insurance, and “provid[ing] health insurance coverage for individuals who are eligible for” Medicaid, as well as the prior eligible uses under BCRA: to provide financial assistance to high-risk individuals, including by reducing premium costs, “help stabilize premiums and promote state health insurance market participation and choice,” provide payments to health care providers, or reduce cost-sharing.

However, states may spend no more than 15 percent of their resources on the Medicaid population (or up to 20 percent if the state applies for a waiver, and the Department of Health and Human Services concludes that the state is using its funds “to supplement, and not supplant,” the state Medicaid match). In addition, states must spend at least half of their funds on “provid[ing] assistance” to families with incomes between 50 and 300 percent of the federal poverty level. Some conservatives may believe these restrictions belie the bill’s purported goal of giving states freedom and flexibility to spend the funds as they see fit.

Some conservatives may be concerned that, by doling out nearly $1.2 trillion in spending, the bill does not repeal Obamacare, so much as it redistributes Obamacare funds from “blue states” to “red states,” per the formulae described below. Some conservatives may also be concerned that the bill creates a funding cliff—with spending dropping from $190 billion in 2026 to $0 in 2027—that will leave an impetus for future Congresses to spend massive new amounts of money in the future.

Grant Formula:         Sets a complex formula for determining state grant allocations, tied to the overall funding a state received for Medicaid expansion, the basic health program under Obamacare, and premium and cost-sharing subsidies provided to individuals in insurance Exchanges. Permits states to select any four consecutive fiscal quarters between September 30, 2013 and January 1, 2018 to establish the base period. (The bill sponsors have additional information regarding the formula calculations here.)

Intends to equalize grant amounts, with a phase-in of the new methodology for years 2021 through 2026. Ideally, the bill would set funding to a state’s number of low-income individuals when compared to the number of low-income individuals nationwide. Defines the term “low-income individuals” to include those with incomes between 50 and 138 percent of the federal poverty level (45-133% FPL, plus a 5 percent income disregard created by Obamacare). In 2017, those numbers total $12,300-$33,948 for a family of four.

Adjusts state allocations (as determined above) according to additional factors:

  1. Risk Adjustment:      The bill would phase in risk adjustment over four years (between 2023 and 2026), and limit the risk adjustment modification to no more than 10 percent of the overall allotment. Risk adjustment would be based on clinical risk factors for low-income individuals (as defined above). The Centers for Medicare and Medicaid Services (CMS) Administrator could cancel the risk adjustment factor in the absence of sufficient data.
  2. Population Adjustment:              Permits (but does not require) the Administrator to adjust allocations for years after 2022 according to a population adjustment factor. Requires CMS to “develop a state specific population adjustment factor that accounts for legitimate factors that impact the health care expenditures in a state”—such as demographics, wage rates, income levels, etc.—but as noted above, does not require CMS to adjust allocations based upon those factors.

Notwithstanding the above, states could not receive a year-on-year increase in funding of more than 25 percent.

Requires the Administrator to adjust block grant spending upward for a “low-density state” with per capita health care spending 20 percent higher than the national average, increasing allocation levels to match the higher health costs—a provision some conservatives may consider an inappropriate earmark for Alaska. Imposes new requirement on the Administrator to notify states of their 2020 block grant allocations by November 1, 2019—a timeline that some may argue will give states far too little time to prepare and plan for major changes to their health systems.

Some conservatives may be concerned that, despite the admirable intent to equalize funding between high-spending and low-spending states, the bill gives excessive discretion to unelected bureaucrats in Washington to determine the funding formulae. Some conservatives may instead support repealing all of Obamacare, and allowing states to decide for themselves what they wish to put in its place, rather than doling out federal funds from Washington. Finally, some may question why the bill’s formula criteria focus so heavily on individuals with incomes between 50-138 percent FPL, to the potential exclusion of individuals and households with slightly higher or lower incomes.

Provides $750 million for “late-expanding” Medicaid states—those that did not expand Medicaid under Obamacare prior to December 31, 2015—which some conservatives may consider an earmark, one that encourages states that have embraced Obamacare’s Medicaid expansion to the able-bodied. Also includes $500 million to allow pass-through funding under Section 1332 Obamacare waivers to continue for years 2019 through 2023.

Grant Application:  Requires states applying for grant funds to outline the intended uses of same. Specifically, the state must describe how it “shall maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions,” along with “such other information as necessary for the Administrator to carry out this subsection”—language that could be used by a future Democratic Administration, or federal courts, to undermine the waiver program’s intent.

Explicitly requires states to “ensure compliance” with several federal insurance mandates:

  1. Coverage of “dependents” under age 26;
  2. Hospital stays following deliveries;
  3. Mental health parity;
  4. Reconstructive surgery following mastectomies; and
  5. Genetic non-discrimination.

Some conservatives may note that these retained federal mandates belie the notion of state flexibility promised by the legislation.

Contingency Fund:               Appropriates a total of $11 billion—$6 billion for calendar year 2020, and $5 billion for calendar 2021—for a contingency fund for certain states. Half of the funding ($5.5 billion total) would go towards states that had not expanded Medicaid as of September 1, 2017, with the remaining one-quarter ($2.75 billion) going towards “low-density states”—those with a population density of fewer than 15 individuals per square mile—and another one-quarter ($2.75 billion) going towards states that did expand Medicaid.

Implementation Fund:        Provides $2 billion to implement programs under the bill. Costs $2 billion over ten years.

Repeal of Some Obamacare Taxes:             Repeals some Obamacare taxes:

  • Restrictions on use of Health Savings Accounts and Flexible Spending Arrangements to pay for over-the-counter medications, effective January 1, 2017, lowering revenues by $5.6 billion;
  • Increased penalties on non-health care uses of Health Savings Account dollars, effective January 1, 2017, lowering revenues by $100 million;
  • Medical device tax, effective January 1, 2018, lowering revenues by $19.6 billion; and
  • Elimination of deduction for employers who receive a subsidy from Medicare for offering retiree prescription drug coverage, effective January 1, 2017, lowering revenues by $1.8 billion.

Some conservatives may be concerned that the bill barely attempts to reduce revenues, repealing only the smallest taxes in Obamacare—and the ones that corporate lobbyists care most about (e.g., medical device tax and retiree prescription drug coverage provision).

Health Savings Accounts:  Increases contribution limits to HSAs, raising them from the current $3,400 for individuals and $6,750 for families in 2017 to the out-of-pocket maximum amounts (currently $6,550 for an individual and $13,100 for a family), effective January 2018. Allows both spouses to make catch-up contributions to the same Health Savings Account. Permits individuals who take up to 60 days to establish an HSA upon enrolling in HSA-eligible coverage to be reimbursed from their account for medical expenses. Lowers revenues by a total of $19.2 billion over ten years.

Allows for Health Savings Account funds to be used for the purchase of high-deductible health plans, but only to the extent that such insurance was not purchased on a tax-preferred basis (i.e., through the exclusion for employer-provided health insurance, or through Obamacare insurance subsidies).

Allows HSA dollars to be used to reimburse expenses for “dependents” under age 27, effectively extending the “under-26” provisions of Obamacare to Health Savings Accounts. Prohibits HSA-qualified high deductible health plans from covering abortions, other than in cases of rape, incest, or to save the life of the mother—an effective prohibition on the use of HSA funds to purchase plans that cover abortion, but one that the Senate Parliamentarian may advise does not comport with procedural restrictions on budget reconciliation bills. No separate cost estimate provided for the revenue reduction associated with allowing HSA dollars to be used to pay for insurance premiums.

Federal Payments to States:             Imposes a one-year ban on federal funds flowing to certain entities. This provision would have the effect of preventing Medicaid funding of certain medical providers, including Planned Parenthood, so long as Planned Parenthood provides for abortions (except in cases of rape, incest, or to save the life of the mother). CBO believes this provision would save a total of $225 million in Medicaid spending, while increasing spending by $79 million over a decade, because 15 percent of Planned Parenthood clients would lose access to services, increasing the number of births in the Medicaid program by several thousand. Saves $146 million over ten years.

Medicaid Expansion:           Phases out Obamacare’s Medicaid expansion to the able-bodied, effective January 1, 2020. After such date, only members of Indian tribes who reside in states that had expanded Medicaid—and who were eligible on December 31, 2019—would qualify for Obamacare’s Medicaid expansion. Indians could remain on the Medicaid expansion, but only if they do not have a break in eligibility (i.e., the program would be frozen to new enrollees on January 1, 2020).

Repeals the enhanced federal match (currently 95 percent, declining slightly to 90 percent) associated with Medicaid expansion, effective in 2020. Also repeals provisions regarding the Community First Choice Option, eliminating a six percent increase in the Medicaid match rate for some home and community-based services. Saves $19.3 billion over ten years.

Retroactive Eligibility:       Effective October 2017, restricts retroactive eligibility in Medicaid from three months to two months. These changes would NOT apply to aged, blind, or disabled populations, who would still qualify for three months of retroactive eligibility. Saves $800 million over ten years.

Eligibility Re-Determinations:             Permits—but unlike the House bill, does not require—states, beginning October 1, 2017, to re-determine eligibility for individuals qualifying for Medicaid on the basis of income every six months, or at shorter intervals. Provides a five percentage point increase in the federal match rate for states that elect this option. No separate budgetary impact noted; included in larger estimate of coverage provisions.

Work Requirements:           Permits (but does not require) states to, beginning October 1, 2017, impose work requirements on “non-disabled, non-elderly, non-pregnant” beneficiaries. States can determine the length of time for such work requirements. Provides a five percentage point increase in the federal match for state expenses attributable to activities implementing the work requirements.

States may not impose requirements on pregnant women (through 60 days after birth); children under age 19; the sole parent of a child under age 6, or sole parent or caretaker of a child with disabilities; or a married individual or head of household under age 20 who “maintains satisfactory attendance at secondary school or equivalent,” or participates in vocational education. Adds to existing exemptions (drafted in BCRA) provisions exempting those in inpatient or intensive outpatient substance abuse treatment and full-time students from Medicaid work requirements. No separate budgetary impact noted; included in larger estimate of coverage provisions.

Provider Taxes:        Reduces permissible Medicaid provider taxes from 6 percent under current law to 5.6 percent in fiscal year 2021, 5.2 percent in fiscal year 2022, 4.8 percent in fiscal year 2023, 4.4 percent in fiscal year 2024, and 4 percent in fiscal year 2025 and future fiscal years—a change from BCRA, which reduced provider taxes to 5 percent in 2025 (0.2 percent reduction per year, as opposed to 0.4 percent under the Graham-Cassidy bill). Some conservatives may view provider taxes as essentially “money laundering”—a game in which states engage in shell transactions solely designed to increase the federal share of Medicaid funding and reduce states’ share. More information can be found here. CBO believes states would probably reduce their spending in response to the loss of provider tax revenue, resulting in lower spending by the federal government. Saves $13 billion over ten years.

Medicaid Per Capita Caps:              Creates a system of per capita spending caps for federal spending on Medicaid, beginning in fiscal year 2020. States that exceed their caps would have their federal match reduced in the following fiscal year.

The cap would include all spending on medical care provided through the Medicaid program, with the exception of DSH payments and Medicare cost-sharing paid for dual eligibles (individuals eligible for both Medicaid and Medicare).

While the cap would take effect in fiscal year 2020, states could choose their “base period” based on any eight consecutive quarters of expenditures between October 1, 2013 and June 30, 2017. The CMS Administrator would have authority to make adjustments to relevant data if she believes a state attempted to “game” the look-back period. Late-expanding Medicaid states could choose a shorter period (but not fewer than four) quarters as their “base period” for determining per capita caps—a provision that some conservatives may view as improperly incentivizing states that decided to expand Medicaid to the able-bodied.

Creates four classes of beneficiaries for whom the caps would apply: 1) elderly individuals over age 65; 2) blind and disabled beneficiaries; 3) children under age 19; and 4) all other non-disabled, non-elderly, non-expansion adults (e.g., pregnant women, parents, etc.). Excludes State Children’s Health Insurance Plan enrollees, Indian Health Service participants, breast and cervical cancer services eligible individuals, and certain other partial benefit enrollees from the per capita caps. Exempts declared public health emergencies from the Medicaid per capita caps—based on an increase in beneficiaries’ average expenses due to such emergency—but such exemption may not exceed $5 billion.

For years before fiscal year 2025, indexes the caps to medical inflation for children and all other non-expansion enrollees, with the caps rising by medical inflation plus one percentage point for aged, blind, and disabled beneficiaries. Beginning in fiscal year 2025, indexes the caps to overall inflation for children and non-expansion enrollees, with the caps rising by medical inflation for aged, blind, and disabled beneficiaries—a change from BCRA, which set the caps at overall inflation for all enrollees beginning in 2025.

Eliminates provisions in the House bill regarding “required expenditures by certain political subdivisions,” which some had derided as a parochial New York-related provision.

Provides a provision—not included in the House bill—for effectively re-basing the per capita caps. Allows the Secretary of Health and Human Services to increase the caps by between 0.5% and 3% (a change from BCRA, which set a 2% maximum increase) for low-spending states (defined as having per capita expenditures 25% below the national median), and lower the caps by between 0.5% and 2% (unchanged from BCRA) for high-spending states (with per capita expenditures 25% above the national median). The Secretary may only implement this provision in a budget-neutral manner, i.e., one that does not increase the deficit. However, this re-basing provision shall NOT apply to any state with a population density of under 15 individuals per square mile.

Requires the Department of Health and Human Services (HHS) to reduce states’ annual growth rate by one percent for any year in which that state “fails to satisfactorily submit data” regarding its Medicaid program. Permits HHS to adjust cap amounts to reflect data errors, based on an appeal by the state, increasing cap levels by no more than two percent. Requires new state reporting on inpatient psychiatric hospital services and children with complex medical conditions. Requires the HHS Inspector General to audit each state’s spending at least every three years.

For the period including calendar quarters beginning on October 1, 2017 through October 1, 2019, increases the federal Medicaid match for certain state expenditures to improve data recording, including a 100 percent match in some instances.

Home and Community-Based Services:             Creates a four-year, $8 billion demonstration project from 2020 through 2023 to expand home- and community-based service payment adjustments in Medicaid, with such payment adjustments eligible for a 100 percent federal match. The 15 states with the lowest population density would be given priority for funds.

Medicaid Block Grants:      Creates a Medicaid block grant, called the “Medicaid Flexibility Program,” beginning in Fiscal Year 2020. Requires interested states to submit an application providing a proposed packet of services, a commitment to submit relevant data (including health quality measures and clinical data), and a statement of program goals. Requires public notice-and-comment periods at both the state and federal levels.

The amount of the block grant would total the regular federal match rate, multiplied by the target per capita spending amounts (as calculated above), multiplied by the number of expected enrollees (adjusted forward based on the estimated increase in population for the state, per Census Bureau estimates). In future years, the block grant would be increased by general inflation.

Prohibits states from increasing their base year block grant population beyond 2016 levels, adjusted for population growth, plus an additional three percentage points. This provision is likely designed to prevent states from “packing” their Medicaid programs full of beneficiaries immediately prior to a block grant’s implementation, solely to achieve higher federal payments.

In a change from BCRA, the bill removes language permitting states to roll over block grant payments from year to year—a move that some conservatives may view as antithetical to the flexibility intended by a block grant, and biasing states away from this model. Reduces federal payments for the following year in the case of states that fail to meet their maintenance of effort spending requirements, and permits the HHS Secretary to make reductions in the case of a state’s non-compliance. Requires the Secretary to publish block grant amounts for every state every year, regardless of whether or not the state elects the block grant option.

Permits block grants for a program period of five fiscal years, subject to renewal; plans with “no significant changes” would not have to re-submit an application for their block grants. Permits a state to terminate the block grant, but only if the state “has in place an appropriate transition plan approved by the Secretary.”

Imposes a series of conditions on Medicaid block grants, requiring coverage for all mandatory populations identified in the Medicaid statute, and use of the Modified Adjusted Gross Income (MAGI) standard for determining eligibility. Includes 14 separate categories of services that states must cover for mandatory populations under the block grant. Requires benefits to have an actuarial value (coverage of average health expenses) of at least 95 percent of the benchmark coverage options in place prior to Obamacare. Permits states to determine the amount, duration, and scope of benefits within the parameters listed above.

Applies mental health parity provisions to the Medicaid block grant, and extends the Medicaid rebate program to any outpatient drugs covered under same. Permits states to impose premiums, deductibles, or other cost-sharing, provided such efforts do not exceed 5 percent of a family’s income in any given year.

Requires participating states to have simplified enrollment processes, coordinate with insurance Exchanges, and “establish a fair process” for individuals to appeal adverse eligibility determinations. Allows for modification of the Medicaid block grant during declared public health emergencies—based on an increase in beneficiaries’ average expenses due to such emergency.

Exempts states from per capita caps, waivers, state plan amendments, and other provisions of Title XIX of the Social Security Act while participating in Medicaid block grants.

Performance Bonus Payments:             Provides an $8 billion pool for bonus payments to state Medicaid and SCHIP programs for Fiscal Years 2023 through 2026. Allows the Secretary to increase federal matching rates for states that 1) have lower than expected expenses under the per capita caps and 2) report applicable quality measures, and have a plan to use the additional funds on quality improvement. While noting the goal of reducing health costs through quality improvement, and incentives for same, some conservatives may be concerned that this provision—as with others in the bill—gives near-blanket authority to the HHS Secretary to control the program’s parameters, power that conservatives believe properly resides outside Washington—and power that a future Democratic Administration could use to contravene conservative objectives. CBO believes that only some states will meet the performance criteria, leading some of the money not to be spent between now and 2026. Costs $3 billion over ten years.

Inpatient Psychiatric Services:             Provides for optional state Medicaid coverage of inpatient psychiatric services for individuals over 21 and under 65 years of age. (Current law permits coverage of such services for individuals under age 21.) Such coverage would not exceed 30 days in any month or 90 days in any calendar year. In order to receive such assistance, the state must maintain its number of licensed psychiatric beds as of the date of enactment, and maintain current levels of funding for inpatient services and outpatient psychiatric services. Provides a lower (i.e., 50 percent) match for such services, furnished on or after October 1, 2018; however, in a change from BCRA, allows for higher federal match rates for certain services and individuals to continue if they were in effect prior to September 30, 2018. No separate budgetary impact noted; included in larger estimate of coverage provisions.

Medicaid and Indian Health Service:             Makes a state’s expenses on behalf of Indians eligible for a 100 percent match, irrespective of the source of those services. Current law provides for a 100 percent match only for services provided at an Indian Health Service center. Costs $3.5 billion over ten years.

Disproportionate Share Hospital (DSH) Payments:     Adjusts reductions in DSH payments to reflect shortfalls in funding for the state grant program described above. For fiscal years 2021 through 2025, states receiving grant allocations that do not keep up with medical inflation will have their DSH reductions reduced or eliminated; in fiscal year 2026, states with grant shortfalls will have their DSH payments increased. Costs $17.9 billion over ten years.

High-Poverty States:            Provides for a permanent increase in the federal Medicaid match for two states, based on poverty guidelines established for 2017. Specifically, provides for a 25 percent increase to the state with the “highest separate poverty guideline for 2017,” and a 15 percent increase to the state with the “second highest separate poverty guideline for 2017”—provisions that by definition would apply only to Alaska and Hawaii, respectively. Some conservatives may be concerned first that these provisions represent inappropriate earmarks, and further that they would change federal spending in perpetuity based on poverty determinations made for a single year. Costs $7.2 billion over ten years.

Title II

Prevention and Public Health Fund:             Eliminates funding for the Obamacare prevention “slush fund,” and rescinds all unobligated balances, beginning in Fiscal Year 2019. Saves $7.9 billion over ten years.

Community Health Centers:             Increases funding for community health centers by $422 million for Fiscal Year 2018—money intended to offset reductions in spending on Planned Parenthood affiliates (see “Federal Payments to States” above). Spends $422 million over ten years.

Cost-Sharing Subsidies:      Repeals Obamacare’s cost-sharing subsidies, effective December 31, 2019, and does not appropriate funds for cost-sharing subsidy claims for plan years through 2019. The House of Representatives filed suit against the Obama Administration (House v. Burwell) alleging the Administration acted unconstitutionally in spending funds on the cost-sharing subsidies without an explicit appropriation from Congress. The case is currently on hold pending settlement discussions between the Trump Administration and the House.

Grant Conditions:    Sets additional conditions for the grant program established in Title I of the bill. States may submit applications waiving certain provisions currently in federal statute:

  1. Essential health benefits;
  2. Cost-sharing requirements;
  3. Actuarial value requirements, including plan metal tiers (e.g., bronze, silver, gold, and platinum);
  4. Community rating—although states may not be able to vary premiums based on health status, due to contradictory language in this section;
  5. Preventive health services; and
  6. Single risk pool.

Requires states to submit their revised rules to the federal government, “except that in no case may an issuer vary premium rates on the basis of sex or on the basis of genetic information.” Some conservatives may view this language as less likely to spark new legal challenges than the prior wording, which prohibited insurance changes based on “membership in a protected class.” However, some conservatives may also find that the mutually contradictory provisions over whether and how states can vary insurance rates may spark other legal challenges.

The waivers only apply to an insurer receiving funding under the state program, and “to an individual who is receiving a direct benefit” from the grant—which does not include reinsurance. In other words, each individual must receive some direct subsidy, rather than just general benefits derived from the broader insurance pool. Some conservatives may be concerned that, by tying waiver of regulations so closely to receipt of federal grant funds, this provision would essentially provide limited regulatory relief. Furthermore, such limited relief would require states to accept federal funding largely adjudicated and doled out by unelected bureaucrats.

Some conservatives may be concerned that, while well-intentioned, these provisions do not represent a true attempt at federalism—one which would repeal all of Obamacare’s regulations and devolve health insurance oversight back to the states. It remains unclear whether any states would actually waive Obamacare regulations under the bill; if a state chooses not to do so, all of the law’s costly mandates will remain in place there, leaving Obamacare as the default option.

 

Some conservatives may view provisions requiring anyone to whom a waiver applies to receive federal grant funding as the epitome of moral hazard—ensuring that individuals who go through health underwriting will receive federal subsidies, no matter their level of wealth or personal circumstances. By requiring states to subsidize bad actors—for instance, an individual making $250,000 who knowingly went without health coverage for years—with federal taxpayer dollars, the bill could actually raise health insurance premiums, not lower them. Moreover, some conservatives may be concerned that—because the grant program funding ends in 2027, and because all individuals subject to waivers must receive grant funding—the waiver program will effectively end in 2027, absent a new infusion of taxpayer dollars.

Summary of Graham-Cassidy Legislation

A PDF of this document is available at the Texas Public Policy Foundation website

Last week, Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA) introduced a new health care bill. The legislation contains some components of the earlier Better Care Reconciliation Act (BCRA), considered by the Senate in July, with some key differences on funding streams. A full summary of the bill follows below, along with possible conservative concerns where applicable. Cost estimates are included below come from prior Congressional Budget Office (CBO) scores of similar or identical provisions in BCRA.

Of particular note: It is unclear whether this legislative language has been fully vetted with the Senate Parliamentarian. When the Senate considers budget reconciliation legislation—as it would do should the Graham-Cassidy measure receive floor consideration—the Parliamentarian advises whether provisions are budgetary in nature and can be included in the bill (which can pass with a 51-vote simple majority), and which provisions are not budgetary in nature and must be considered separately (i.e., require 60 votes to pass).

As the bill was released prior to issuance of a CBO score, it is entirely possible the Parliamentarian has not fully vetted this draft—which means provisions could change substantially, or even get stricken from the bill, due to procedural concerns as the process moves forward.

Title I

Revisions to Obamacare Subsidies:             Beginning in 2018, changes the definition of a qualified health plan, to prohibit plans from covering abortion other than in cases of rape, incest, or to save the life of the mother. Some conservatives may be concerned that this provision may eventually be eliminated under the provisions of the Senate’s “Byrd rule.” (For more information, see these two articles.)

Eliminates provisions that limit repayment of subsidies for years after 2017. Subsidy eligibility is based upon estimated income, with recipients required to reconcile their subsidies received with actual income during the year-end tax filing process. Current law limits the amount of excess subsidies households with incomes under 400 percent of the federal poverty level (FPL, $98,400 for a family of four in 2017) must pay. This provision would eliminate that limitation on repayments, which may result in fewer individuals taking up subsidies in the first place.

Repeals the subsidy regime entirely after December 31, 2019.

Small Business Tax Credit:             Repeals Obamacare’s small business tax credit, effective in 2020. Disallows the small business tax credit beginning in 2018 for any plan that offers coverage of abortion, except in the case of rape, incest, or to protect the life of the mother—which, as noted above, some conservatives may believe will be stricken during the Senate’s “Byrd rule” review. Saves $6 billion over ten years.

Individual and Employer Mandates:             Sets the individual and employer mandate penalties to zero, for all years after December 31, 2015. The individual mandate provision cuts taxes by $38 billion, and the employer mandate provision cuts taxes by $171 billion, both over ten years.

Stability Fund:          Creates two state-based funds intended to stabilize insurance markets—the first giving funds directly to insurers, and the second giving funds to states. The first would appropriate $10 billion each for 2018 and 2019, and $15 billion for 2020, ($35 billion total) to the Centers for Medicare and Medicaid Services (CMS) to “fund arrangements with health insurance issuers to address coverage and access disruption and respond to urgent health care needs within States.” Instructs the CMS Administrator to “determine an appropriate procedure for providing and distributing funds.” Does not require a state match for receipt of stability funds. Some conservatives may be concerned this provision provides excessive authority to unelected bureaucrats to distribute $35 billion in federal funds as they see fit.

Eliminates language in BCRA requiring CMS to reserve one percent of fund monies “for providing and distributing funds to health insurance issuers in states where the cost of insurance premiums are at least 75 percent higher than the national average”—a provision which some conservatives opposed as an earmark for Alaska.

Market-Based Health Care Grant Program:       Creates a longer-term stability fund for states with a total of $1.176 trillion in federal funding from 2020 through 2026—$146 billion in 2020 and 2021, $157 billion in 2022, $168 billion in 2023, $179 billion in 2024, and $190 billion in 2025 and 2026. Eliminates BCRA provisions requiring a state match. States could keep their allotments for two years, but unspent funds after that point could be re-allocated to other states. However, all funds would have to be spent by December 31, 2026.

Expands BCRA criteria for appropriate use of funds by states, to include assistance for purchasing individual insurance, and “provid[ing] health insurance coverage for individuals who are eligible for” Medicaid, as well as the prior eligible uses under BCRA: to provide financial assistance to high-risk individuals, including by reducing premium costs, “help stabilize premiums and promote state health insurance market participation and choice,” provide payments to health care providers, or reduce cost-sharing. However, states may spend no more than 15 percent of their resources on the Medicaid population (or up to 20 percent if the state applies for a waiver, and the Department of Health and Human Services concludes that the state is using its funds “to supplement, and not supplant,” the state Medicaid match)—a restriction that some may believe belies the bill’s purported goal of giving states freedom and flexibility to spend the funds as they see fit.

Some conservatives may be concerned that, by doling out nearly $1.2 trillion in spending, the bill does not repeal Obamacare, so much as it redistributes Obamacare funds from “blue states” to “red states,” per the formulae described below. Some conservatives may also be concerned that the bill creates a funding cliff—with spending dropping from $190 billion in 2026 to $0 in 2027—that will leave an impetus for future Congresses to spend massive new amounts of money in the future.

Grant Formula:         Sets a complex formula for determining state grant allocations, tied to the overall funding a state received for Medicaid expansion, the basic health program under Obamacare, and premium and cost-sharing subsidies provided to individuals in insurance Exchanges. Permits states to select any four consecutive fiscal quarters between September 30, 2013 and January 1, 2018 to establish the base period. (The bill sponsors have additional information regarding the formula calculations here.)

Intends to equalize grant amounts by 2026, with a phase-in of the new methodology for years 2021 and 2025. Specifically, the bill would by 2026 set funding to a state’s number of low-income individuals when compared to the number of low-income individuals nationwide. Defines the term “low-income individuals” to include those with incomes between 50 and 138 percent of the federal poverty level (45-133% FPL, plus a 5 percent income disregard created by Obamacare). In 2017, those numbers total $12,300-$33,948 for a family of four.

Adjusts state allocations (as determined above) according to three additional factors:

  1. Risk Adjustment:      The bill would phase in risk adjustment over four years (between 2021 and 2024), and limit the risk adjustment modification to no more than 10 percent of the overall allotment. Risk adjustment would be based on clinical risk factors for low-income individuals (as defined above).
  2. Coverage Value:        The coverage value adjustment would phase in over four years (between 2024 and 2027), based on whether the average actuarial value (percentage of expected health expenses paid) of coverage for low-income individuals (as defined above) in a given state exceeded the “lowest possible actuarial value of health benefits” satisfying State Children’s Health Insurance Program benefit requirements.
  3. Population Adjustment:              Permits (but does not require) the Secretary of Health and Human Services (HHS) to adjust allocations according to a population adjustment factor. Requires HHS to “develop a state specific population adjustment factor that accounts for legitimate factors that impact the health care expenditures in a state”—such as demographics, wage rates, income levels, etc.—but as noted above, does not require HHS to adjust allocations based upon those factors.

Some conservatives may be concerned that, despite the admirable intent to equalize funding between high-spending and low-spending states, the bill gives excessive discretion to unelected bureaucrats in Washington to determine the funding formulae. Some conservatives may instead support repealing all of Obamacare, and allowing states to decide for themselves what they wish to put in its place, rather than doling out federal funds from Washington. Finally, some may question why the bill’s formula criteria focus so heavily on individuals with incomes between 50-138 percent FPL, to the potential exclusion of individuals and households with slightly higher or lower incomes.

Waivers:         In conjunction with the health care grant program above, allows (but does not require) states to waive certain regulatory requirements. Specifically, states could waive any provision that:

  1. Restricts criteria for insurers to vary premiums on the individual and small group markets, “except that a health insurance issuer may not vary premium rates based on an individual’s sex or membership in a protected class under the Constitution of the United States;”
  2. Prevents premium contributions from varying “on the basis of any health status-related factor” in the individual and small group markets;
  3. Requires coverage of certain benefits in the individual and small group markets; and
  4. Requires insurers in the individual and small group markets to offer rebates to enrollees if their spending fails to meet certain limits (i.e., a medical loss ratio requirement).

To receive the waiver, the state must describe how it “intends to maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions,” along with “such other information as necessary for the Administrator to carry out this subsection”—language that could be used by a future Democratic Administration to undermine the waiver program’s intent. States can only waive federal statutory requirements enacted after January 1, 2009—i.e., under the Obama Administration.

Moreover, any provision waived “shall only be waived with respect to health insurance coverage” provided by an insurer receiving funding under the state program—and “to an individual who is receiving a direct benefit (including reduced premium costs or reduced out-of-pocket costs) under a state program that is funded by a grant under this subsection.” Some conservatives may be concerned that, by tying waiver of regulations so closely to receipt of federal grant funds, this provision would essentially provide limited regulatory relief. Furthermore, such limited relief would require states to accept federal funding largely adjudicated and doled out by unelected bureaucrats.

Some conservatives may be concerned that, while well-intentioned, these provisions do not represent a true attempt at federalism—one which would repeal all of Obamacare’s regulations and devolve health insurance oversight back to the states. It remains unclear whether any states would actually waive Obamacare regulations under the bill; if a state chooses not to do so, all of the law’s costly mandates will remain in place there, leaving Obamacare as the default option. Moreover, the language requiring states “to maintain adequate and affordable health insurance coverage for individuals with pre-existing conditions” could lead to a private right of action against states utilizing the waivers—and judicial rulings that either undermine, or eliminate, the regulatory relief the waivers intend to provide.

Some conservatives may view provisions requiring anyone to whom a waiver applies to receive federal grant funding as the epitome of moral hazard—ensuring that individuals who go through health underwriting will receive federal subsidies, no matter their level of wealth or personal circumstances. By requiring states to subsidize bad actors—for instance, an individual making $250,000 who knowingly went without health coverage for years—with federal taxpayer dollars, the bill could actually raise health insurance premiums, not lower them.

Some may note that the bill could allow a future Democratic Administration—or, through its reference to “membership in a protected class under the Constitution,” activist judges—to inhibit future waiver applications, and/or impose undue and counter-productive restrictions on the supposed state “flexibility” in the bill. Finally, some conservatives may be concerned that—because the grant program funding ends in 2027, and because all individuals subject to waivers must receive grant funding—the waiver program will effectively end in 2027, absent a new infusion of taxpayer dollars.

Contingency Fund:               Appropriates a total of $11 billion—$6 billion for calendar year 2020, and $5 billion for calendar 2021—for a contingency fund for certain states. Three-quarters of the funding ($8.25 billion total) would go towards states that had not expanded Medicaid as of September 1, 2017, with the remaining one-quarter ($2.75 billion) going towards “low-density states”—those with a population density of fewer than 15 individuals per square mile.

Implementation Fund:        Provides $500 million to implement programs under the bill. Costs $500 million over ten years.

Repeal of Some Obamacare Taxes:             Repeals some Obamacare taxes:

  • Restrictions on use of Health Savings Accounts and Flexible Spending Arrangements to pay for over-the-counter medications, effective January 1, 2017, lowering revenues by $5.6 billion;
  • Increased penalties on non-health care uses of Health Savings Account dollars, effective January 1, 2017, lowering revenues by $100 million;
  • Medical device tax, effective January 1, 2018, lowering revenues by $19.6 billion; and
  • Elimination of deduction for employers who receive a subsidy from Medicare for offering retiree prescription drug coverage, effective January 1, 2017, lowering revenues by $1.8 billion.

Some conservatives may be concerned that the bill barely attempts to reduce revenues, repealing only the smallest taxes in Obamacare—and the ones that corporate lobbyists care most about (e.g., medical device tax and retiree prescription drug coverage provision).

Health Savings Accounts:  Increases contribution limits to HSAs, raising them from the current $3,400 for individuals and $6,750 for families in 2017 to the out-of-pocket maximum amounts (currently $6,550 for an individual and $13,100 for a family), effective January 2018. Allows both spouses to make catch-up contributions to the same Health Savings Account. Permits individuals who take up to 60 days to establish an HSA upon enrolling in HSA-eligible coverage to be reimbursed from their account for medical expenses. Lowers revenues by a total of $19.2 billion over ten years.

Allows for Health Savings Account funds to be used for the purchase of high-deductible health plans, but only to the extent that such insurance was not purchased on a tax-preferred basis (i.e., through the exclusion for employer-provided health insurance, or through Obamacare insurance subsidies).

Allows HSA dollars to be used to reimburse expenses for “dependents” under age 27, effectively extending the “under-26” provisions of Obamacare to Health Savings Accounts. Prohibits HSA-qualified high deductible health plans from covering abortions, other than in cases of rape, incest, or to save the life of the mother—an effective prohibition on the use of HSA funds to purchase plans that cover abortion, but one that the Senate Parliamentarian may advise does not comport with procedural restrictions on budget reconciliation bills. No separate cost estimate provided for the revenue reduction associated with allowing HSA dollars to be used to pay for insurance premiums.

In an addition from BCRA, permits periodic fees for direct primary care to physicians to be 1) reimbursed from a Health Savings Account without being considered “insurance” and 2) considered a form of “medical care” under the Internal Revenue Code.

Federal Payments to States:             Imposes a one-year ban on federal funds flowing to certain entities. This provision would have the effect of preventing Medicaid funding of certain medical providers, including Planned Parenthood, so long as Planned Parenthood provides for abortions (except in cases of rape, incest, or to save the life of the mother). CBO believes this provision would save a total of $225 million in Medicaid spending, while increasing spending by $79 million over a decade, because 15 percent of Planned Parenthood clients would lose access to services, increasing the number of births in the Medicaid program by several thousand. Saves $146 million over ten years.

Medicaid Expansion:           Phases out Obamacare’s Medicaid expansion to the able-bodied, effective January 1, 2020. After such date, only members of Indian tribes who reside in states that had expanded Medicaid—and who were eligible on December 31, 2019—would qualify for Obamacare’s Medicaid expansion. Indians could remain on the Medicaid expansion, but only if they do not have a break in eligibility (i.e., the program would be frozen to new enrollees on January 1, 2020).

Repeals the enhanced federal match (currently 95 percent, declining slightly to 90 percent) associated with Medicaid expansion, effective in 2020. Also reduces the federal Medicaid match for Puerto Rico and U.S. territories from 55 percent to 50 percent. (The federal Medicaid match for the District of Columbia would remain at 70 percent.)

The bill repeals provisions regarding the Community First Choice Option, eliminating a six percent increase in the Medicaid match rate for some home and community-based services.

Retroactive Eligibility:       Effective October 2017, restricts retroactive eligibility in Medicaid from three months to two months. These changes would NOT apply to aged, blind, or disabled populations, who would still qualify for three months of retroactive eligibility.

Eligibility Re-Determinations:             Permits—but unlike the House bill, does not require—states, beginning October 1, 2017, to re-determine eligibility for individuals qualifying for Medicaid on the basis of income every six months, or at shorter intervals. Provides a five percentage point increase in the federal match rate for states that elect this option. No separate budgetary impact noted; included in larger estimate of coverage provisions.

Work Requirements:           Permits (but does not require) states to, beginning October 1, 2017, impose work requirements on “non-disabled, non-elderly, non-pregnant” beneficiaries. States can determine the length of time for such work requirements. Provides a five percentage point increase in the federal match for state expenses attributable to activities implementing the work requirements.

States may not impose requirements on pregnant women (through 60 days after birth); children under age 19; the sole parent of a child under age 6, or sole parent or caretaker of a child with disabilities; or a married individual or head of household under age 20 who “maintains satisfactory attendance at secondary school or equivalent,” or participates in vocational education. Adds to existing exemptions (drafted in BCRA) provisions exempting those in inpatient or intensive outpatient substance abuse treatment and full-time students from Medicaid work requirements. No separate budgetary impact noted; included in larger estimate of coverage provisions.

Provider Taxes
:        Reduces permissible Medicaid provider taxes from 6 percent under current law to 5.6 percent in fiscal year 2021, 5.2 percent in fiscal year 2022, 4.8 percent in fiscal year 2023, 4.4 percent in fiscal year 2024, and 4 percent in fiscal year 2025 and future fiscal years—a change from BCRA, which reduced provider taxes to 5 percent in 2025 (0.2 percent reduction per year, as opposed to 0.4 percent under the Graham-Cassidy bill). Some conservatives may view provider taxes as essentially “money laundering”—a game in which states engage in shell transactions solely designed to increase the federal share of Medicaid funding and reduce states’ share. More information can be found here. CBO believes states would probably reduce their spending in response to the loss of provider tax revenue, resulting in lower spending by the federal government.

Medicaid Per Capita Caps:              Creates a system of per capita spending caps for federal spending on Medicaid, beginning in fiscal year 2020. States that exceed their caps would have their federal match reduced in the following fiscal year.

The cap would include all spending on medical care provided through the Medicaid program, with the exception of DSH payments and Medicare cost-sharing paid for dual eligibles (individuals eligible for both Medicaid and Medicare).

While the cap would take effect in fiscal year 2020, states could choose their “base period” based on any eight consecutive quarters of expenditures between October 1, 2013 and June 30, 2017. The CMS Administrator would have authority to make adjustments to relevant data if she believes a state attempted to “game” the look-back period. Removes provisions in BCRA allowing late-expanding Medicaid states to choose a shorter period as their “base period” for determining per capita caps, which may have improperly incentivized states that decided to expand Medicaid to the able-bodied.

Creates four classes of beneficiaries for whom the caps would apply: 1) elderly individuals over age 65; 2) blind and disabled beneficiaries; 3) children under age 19; and 4) all other non-disabled, non-elderly, non-expansion adults (e.g., pregnant women, parents, etc.). Excludes State Children’s Health Insurance Plan enrollees, Indian Health Service participants, breast and cervical cancer services eligible individuals, and certain other partial benefit enrollees from the per capita caps. Exempts declared public health emergencies from the Medicaid per capita caps—based on an increase in beneficiaries’ average expenses due to such emergency—but such exemption may not exceed $5 billion.

For years before fiscal year 2025, indexes the caps to medical inflation for children and all other non-expansion enrollees, with the caps rising by medical inflation plus one percentage point for aged, blind, and disabled beneficiaries. Beginning in fiscal year 2025, indexes the caps to overall inflation for children and non-expansion enrollees, with the caps rising by medical inflation for aged, blind, and disabled beneficiaries—a change from BCRA, which set the caps at overall inflation for all enrollees beginning in 2025.

Eliminates provisions in the House bill regarding “required expenditures by certain political subdivisions,” which some had derided as a parochial New York-related provision.

Provides a provision—not included in the House bill—for effectively re-basing the per capita caps. Allows the Secretary of Health and Human Services to increase the caps by between 0.5% and 3% (a change from BCRA, which set a 2% maximum increase) for low-spending states (defined as having per capita expenditures 25% below the national median), and lower the caps by between 0.5% and 2% (unchanged from BCRA) for high-spending states (with per capita expenditures 25% above the national median). The Secretary may only implement this provision in a budget-neutral manner, i.e., one that does not increase the deficit. However, this re-basing provision shall NOT apply to any state with a population density of under 15 individuals per square mile.

Requires the Department of Health and Human Services (HHS) to reduce states’ annual growth rate by one percent for any year in which that state “fails to satisfactorily submit data” regarding its Medicaid program. Permits HHS to adjust cap amounts to reflect data errors, based on an appeal by the state, increasing cap levels by no more than two percent. Requires new state reporting on inpatient psychiatric hospital services and children with complex medical conditions. Requires the HHS Inspector General to audit each state’s spending at least every three years.

For the period including calendar quarters beginning on October 1, 2017 through October 1, 2019, increases the federal Medicaid match for certain state expenditures to improve data recording, including a 100 percent match in some instances.

Exempts low-density states (those with a population density of fewer than 15 individuals per square mile) from the caps, if that state’s grant program allocation (as described above) fails to increase with medical inflation, or if the Secretary determines the allotment “is insufficient…to provide comprehensive and adequate assistance to individuals in the state” under the grant program described above. Some conservatives may question the need for this carve-out for low density states—which the Secretary of HHS can apparently use at will—and why a small allocation for a program designed to “replace” Obamacare should have an impact on whether or not states reform their Medicaid programs.

Home and Community-Based Services:             Creates a four year, $8 billion demonstration project from 2020 through 2023 to expand home- and community-based service payment adjustments in Medicaid, with such payment adjustments eligible for a 100 percent federal match. The 15 states with the lowest population density would be given priority for funds.

Medicaid Block Grants:      Creates a Medicaid block grant, called the “Medicaid Flexibility Program,” beginning in Fiscal Year 2020. Requires interested states to submit an application providing a proposed packet of services, a commitment to submit relevant data (including health quality measures and clinical data), and a statement of program goals. Requires public notice-and-comment periods at both the state and federal levels.

The amount of the block grant would total the regular federal match rate, multiplied by the target per capita spending amounts (as calculated above), multiplied by the number of expected enrollees (adjusted forward based on the estimated increase in population for the state, per Census Bureau estimates). In future years, the block grant would be increased by general inflation.

Prohibits states from increasing their base year block grant population beyond 2016 levels, adjusted for population growth, plus an additional three percentage points. This provision is likely designed to prevent states from “packing” their Medicaid programs full of beneficiaries immediately prior to a block grant’s implementation, solely to achieve higher federal payments.

In a change from BCRA, the bill removes language permitting states to roll over block grant payments from year to year—a move that some conservatives may view as antithetical to the flexibility intended by a block grant, and biasing states away from this model. Reduces federal payments for the following year in the case of states that fail to meet their maintenance of effort spending requirements, and permits the HHS Secretary to make reductions in the case of a state’s non-compliance. Requires the Secretary to publish block grant amounts for every state every year, regardless of whether or not the state elects the block grant option.

Permits block grants for a program period of five fiscal years, subject to renewal; plans with “no significant changes” would not have to re-submit an application for their block grants. Permits a state to terminate the block grant, but only if the state “has in place an appropriate transition plan approved by the Secretary.”

Imposes a series of conditions on Medicaid block grants, requiring coverage for all mandatory populations identified in the Medicaid statute, and use of the Modified Adjusted Gross Income (MAGI) standard for determining eligibility. Includes 14 separate categories of services that states must cover for mandatory populations under the block grant. Requires benefits to have an actuarial value (coverage of average health expenses) of at least 95 percent of the benchmark coverage options in place prior to Obamacare. Permits states to determine the amount, duration, and scope of benefits within the parameters listed above.

Applies mental health parity provisions to the Medicaid block grant, and extends the Medicaid rebate program to any outpatient drugs covered under same. Permits states to impose premiums, deductibles, or other cost-sharing, provided such efforts do not exceed 5 percent of a family’s income in any given year.

Requires participating states to have simplified enrollment processes, coordinate with insurance Exchanges, and “establish a fair process” for individuals to appeal adverse eligibility determinations. Allows for modification of the Medicaid block grant during declared public health emergencies—based on an increase in beneficiaries’ average expenses due to such emergency.

Exempts states from per capita caps, waivers, state plan amendments, and other provisions of Title XIX of the Social Security Act while participating in Medicaid block grants.

Performance Bonus Payments:             Provides an $8 billion pool for bonus payments to state Medicaid and SCHIP programs for Fiscal Years 2023 through 2026. Allows the Secretary to increase federal matching rates for states that 1) have lower than expected expenses under the per capita caps and 2) report applicable quality measures, and have a plan to use the additional funds on quality improvement. While noting the goal of reducing health costs through quality improvement, and incentives for same, some conservatives may be concerned that this provision—as with others in the bill—gives near-blanket authority to the HHS Secretary to control the program’s parameters, power that conservatives believe properly resides outside Washington—and power that a future Democratic Administration could use to contravene conservative objectives. CBO believes that only some states will meet the performance criteria, leading some of the money not to be spent between now and 2026. Costs $3 billion over ten years.

Inpatient Psychiatric Services:             Provides for optional state Medicaid coverage of inpatient psychiatric services for individuals over 21 and under 65 years of age. (Current law permits coverage of such services for individuals under age 21.) Such coverage would not exceed 30 days in any month or 90 days in any calendar year. In order to receive such assistance, the state must maintain its number of licensed psychiatric beds as of the date of enactment, and maintain current levels of funding for inpatient services and outpatient psychiatric services. Provides a lower (i.e., 50 percent) match for such services, furnished on or after October 1, 2018; however, in a change from BCRA, allows for higher federal match rates for certain services and individuals to continue if they were in effect prior to September 30, 2018. No separate budgetary impact noted; included in larger estimate of coverage provisions.

Medicaid and Indian Health Service:             Makes a state’s expenses on behalf of Indians eligible for a 100 percent match, irrespective of the source of those services. Current law provides for a 100 percent match only for services provided at an Indian Health Service center. Costs $3.5 billion over ten years.

Disproportionate Share Hospital (DSH) Payments:     Adjusts reductions in DSH payments to reflect shortfalls in funding for the state grant program described above. For fiscal years 2021 through 2025, states receiving grant allocations that do not keep up with medical inflation will have their DSH reductions reduced or eliminated; in fiscal year 2026, states with grant shortfalls will have their DSH payments increased.

Title II

Prevention and Public Health Fund:             Eliminates funding for the Obamacare prevention “slush fund,” and rescinds all unobligated balances, beginning in Fiscal Year 2019. Saves $7.9 billion over ten years.

Community Health Centers:             Increases funding for community health centers by $422 million for Fiscal Year 2018—money intended to offset reductions in spending on Planned Parenthood affiliates (see “Federal Payments to States” above). Spends $422 million over ten years.

Catastrophic Coverage:      Allows all individuals to buy Obamacare catastrophic plans, currently only available to those under 30, beginning on January 1, 2019.

Enforcement:            Clarifies existing law to specify that states may require that plans comply with relevant laws, including Section 1303 of Obamacare, which permits states to prohibit coverage of abortion in qualified health plans. While supporting this provision’s intent, some conservatives may be concerned that this provision may ultimately not comply with the Senate’s Byrd rule regarding the inclusion of non-fiscal matters on a budget reconciliation bill.

Cost-Sharing Subsidies:      Repeals Obamacare’s cost-sharing subsidies, effective December 31, 2019, and does not appropriate funds for cost-sharing subsidy claims for plan years through 2019. The House of Representatives filed suit against the Obama Administration (House v. Burwell) alleging the Administration acted unconstitutionally in spending funds on the cost-sharing subsidies without an explicit appropriation from Congress. The case is currently on hold pending settlement discussions between the Trump Administration and the House.

Reforming Medicaid to Serve Wyoming Better

A PDF copy of this report is available on the Wyoming Liberty Group website.

Reforming Medicaid to Serve Wyoming Better

              In the past several years, Wyoming has accomplished several key changes to its Medicaid program. A series of reforms regarding long-term care, and other methods to improve care delivery and coordination, have stabilized the overall spending on Medicaid—and reduced expenditures on a per-beneficiary basis.

However, the commitment by both the new Administration and Congressional leaders to examine Medicaid reform closely presents Wyoming with the possibility to accelerate its current reform efforts. Seema Verma, the new head of the Centers for Medicare and Medicaid Services (CMS) and a former Medicaid consultant, has publicly committed to provide states with greater flexibility and freedom to innovate.[1] Likewise, legislation advancing fundamental Medicaid reform has begun to advance in Congress.

Whether through a block grant, per capita allotments, or enhanced waiver authority from the federal government, states like Wyoming can and should receive greater freedom to manage their programs, in exchange for a series of fixed federal payments. Upon receiving this flexibility, Wyoming can put into place additional reforms that will improve care for beneficiaries, encourage transitions to employment and employer-based health coverage where appropriate, reduce health costs, and save taxpayer funds. These reforms would modernize Medicaid to incorporate the best of 21st century medicine, help Baby Boomers as that generation ages into retirement, and alleviate the fiscal challenges Wyoming faces in managing its Medicaid program.

The Problem

Enacted into law in 1965, the Medicaid program as originally designed provided federal matching funds to states to cover discrete populations, including the blind, needy seniors, and individuals with disabilities. Over time, expansions of the program to new populations, and changes in the delivery of health care, have made the Medicaid program large, costly, and unwieldy for states to manage. A significant body of evidence demonstrates that, after more than a half-century, Medicaid is long overdue for a modernization.

Cost:    According to government-provided data, Medicaid now approaches Medicare for the title of largest taxpayer-funded health care program. According to non-partisan government actuaries, state and federal taxpayers combined will spend an estimated $595.5 billion on Medicaid in the current fiscal year—$368.9 billion by the federal government, and $226.6billion by states.[2] By comparison, the Congressional Budget Office projects that this fiscal year, Medicare will spend a net of $598 billion, excluding premium payments by enrollees.[3] Even as the Baby Boomers retire in the coming decade, Medicaid will stay on pace with Medicare when it comes to total expenditures—Medicaid spending will total an estimated $57.5 billion in fiscal year 2025, compared to an estimated $1.005 trillion in net Medicare spending the same fiscal year.[4]

On the state level, rising spending on Medicaid has crowded out other key state priorities like education, transportation, and law enforcement. While states often cut back on those other programs during recessions, Medicaid spending continues to grow in both good economic times and bad. For instance, for fiscal year 2017, states adopted a total of $7.7 billion in spending increases on Medicaid when compared to fiscal 2016—less than the growth of K-12 education spending ($8.9 billion increase), but more than spending on higher education or corrections (both $1.1 billion increases).[5] But in fiscal year 2012—as states recovered from the last recession—states sharply cut K-12 education ($2.5 billion decrease) and higher education ($5 billion decrease) to finance a massive increase in Medicaid spending ($15 billion increase).[6]

With program spending growing at a near-constant pace, Medicaid has grown substantially over the past several decades to become the largest line-item in most state budgets. In fiscal year 2016, Medicaid consumed an average of 29.0 percent of state spending from all fund sources, and 20.3 percent of general fund expenditures.[7] By comparison, in fiscal year 1996, Medicaid consumed 20.3 percent of state spending, and 14.8 percent of general fund spending—and in fiscal year 1987, Medicaid consumed only 10.2 percent of state spending, and 8.1 percent of general fund spending.[8] With program spending nearly tripling as a size of their overall budgets from 1987 through 2016, Medicaid growth has limited states’ ability to provide for other critical state priorities—or return some of taxpayers’ hard-earned cash back into their pockets.

Quality:            Unfortunately, many Medicaid programs suffer from poor access to physicians, high rates of emergency room usage, and poor quality outcomes. A New England Journal of Medicine survey using “secret shopper” methods found that two-thirds of Medicaid children were denied appointments with specialty physicians, compared to only 11% of patients with private insurance coverage. Moreover, those Medicaid patients that did receive appointments had to wait an average of more than three weeks longer than privately insured children.[9] Perhaps unsurprisingly, beneficiaries themselves think much less of Medicaid coverage due to their lack of access:

You feel so helpless thinking, something’s wrong with this child and I can’t even get her into a doctor….When we had real insurance, we could call and come in at the drop of a hat.[10]

Even supporters of Medicaid call an enrollment card nothing more than a “hunting license”—a card that grants beneficiaries the ability to go try to find a physician that will actually treat them.[11]

Because of the difficulties beneficiaries face in obtaining timely access to physicians, Medicaid patients often end up with worse outcomes than the general population as a whole. The Oregon Health Insurance Experiment—which compared outcomes for identically situated groups of uninsured individuals, some of whom enrolled in Medicaid and some of whom did not—concluded that patients who enrolled in Medicaid received no measurable improvements in their physical health than those that remained uninsured.[12] Moreover, the newly enrolled Medicaid patients increased their emergency room usage by 40 percent when compared to those who did not obtain coverage—and those disparities persisted over time.[13] Such results tend to bolster previous findings that patients with Medicaid coverage may end up with worse outcomes than uninsured patients.[14]

Impact in Wyoming:  A January 2015 brief by the Kaiser Family Foundation, and a 2014 Government Accountability Office (GAO) report on Medicaid variations by state, provide helpful metrics comparing Wyoming’s Medicaid program to its peers. The Kaiser brief analyzed per-beneficiary spending in Medicaid for “full-benefit” patients—that is, excluding any partial benefit enrollees.[15] As the table below shows, as of 2011, Wyoming’s spending on aged beneficiaries led the nation—nearly double the national average—and its spending on individuals with disabilities ranked high as well.

Moreover, per-beneficiary spending in Wyoming grew at a rapid, above-average pace for the aged and disabled populations. During the years 2000 to 2011, costs per beneficiary nationally grew by an average of 3.7% for aged beneficiaries and 4.5% for individuals with disabilities. By comparison, in Wyoming spending rose an average of 6.8%—again, nearly twice the national average—for aged beneficiaries, and an above-average 5.45% for individuals with disabilities during the same 2000-2011 period.[16]

   

Aged

Individuals with Disabilities  

Adults

 

Children

United States $17,522 $18,518 $4,141 $2,492
Wyoming $32,199 $25,346 $3,986 $1,967
Difference $14,677 $6,828 -$155 -$525
Wyoming Rank Highest 7th Highest 31st Highest 46th Highest

The 2014 GAO report provides additional context as to why Wyoming has relatively high levels of spending on aged and disabled populations.[17] Whereas the Kaiser report studied spending for the years 2000 through 2011, GAO analyzed spending for federal fiscal year 2008 only. However, like Kaiser, GAO also found that Wyoming’s per-enrollee spending on aged ($21,662) and disabled ($24,644) beneficiaries significantly exceeded national averages ($17,609 and $19,135, respectively).[18]

In addition to analyzing per-beneficiary spending by state, the GAO study also examined factors known to influence spending—and on these, Wyoming and its rural neighbors also ranked high. Wyoming ranked more than ten percentage points above the national average for the percentage of aged beneficiaries receiving long-term care services (48.7% in Wyoming vs. 37.7% nationally), and for the percentage of aged Medicaid enrollees ever institutionalized during the year (35.7% in Wyoming vs. 24.5% nationally).[19] Crucially, most of Wyoming’s neighbors—North Dakota, South Dakota, Montana, and Colorado—also have percentages of aged seniors receiving long-term care services, and receiving institutional care, well above national averages, and in some cases higher than Wyoming. These data suggest that the difficulties of life in rural and frontier communities may result in above-average rates of institutionalization, as aged or disabled individuals cannot live far from care support structures.

The prior reports indicating high levels of spending on Wyoming’s Medicaid program do not consider the significant reforms the state has implemented to date. Efforts to increase the percentage of beneficiaries receiving home and community-based services, rather than institutional care, have driven the percentage of members receiving long-term care in the home above 50%.[20] As a result, spending on Medicaid has remained relatively flat from fiscal years 2010 through 2015. Per enrollee costs have actually declined over that period, particularly for the aged population.[21]

However, the Kaiser and GAO studies illustrate the challenges and the opportunities the Medicaid program faces in Wyoming. Despite the reforms put in place to date, spending on the aged and disabled population remains at comparatively high levels. While spending on aged beneficiaries has declined from $32,199 per enrollee in 2011 to $26,222 in fiscal 2015, even that lower level remains higher than the national per-beneficiary average in 2011 ($17,522).

But if Wyoming can build upon its existing Medicaid reforms to improve care for the aged and vulnerable population—coordinating care better, and ensuring that individuals who can be treated at home are not inappropriately diverted into institutional settings—then beneficiaries will benefit, as will taxpayers. If Medicaid enrollees receive better care, their lives will improve in both measurable and immeasurable ways. Likewise, simply bringing spending on aged and disabled beneficiaries down to national averages will drive millions of dollars in savings to the Medicaid program.

The Vision

Ultimately, the Medicaid program would work best if transformed into a block grant or per capita allotment to states. Under either of these proposals, states would receive additional flexibility from the federal government to manage their health care programs, in exchange for a series of fixed payments from Washington. The American Health Care Act, passed by the House of Representatives on May 4, contains both options, creating a new system of per capita spending caps for Medicaid, while allowing states to choose a block grant for some of their Medicaid populations.[22]

While fundamental changes to Medicaid’s funding formulae must pass through Congress, the incoming Administration can work from its first days to give states more freedom and flexibility to manage their Medicaid programs. Specifically, Section 1115 of the Social Security Act gives the Secretary of Health and Human Services the power to waive certain requirements under Medicaid and the State Children’s Health Insurance Program (SCHIP) for “any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives” of the programs.[23]

Unfortunately, the Obama Administration  often refused or watered down Section 1115 waiver requests from Republican governors. For instance, the last Administration repeatedly refused requests from governors to impose work requirements for able-bodied adults as a condition of participation in the Medicaid program.[24] Ironically, Obamacare actually made the process of obtaining waivers more difficult; one section of the law imposed new requirements, including a series of hearings, that states must undertake when applying for a waiver.[25] In the years since, federal legislative changes have sought to streamline the process for states requesting extensions of waivers already granted.[26]

In the hands of the right Administration, waiver authority could provide states with a significant amount of flexibility to reform their Medicaid programs. Among the finest examples of such reform is the Rhode Island Global Compact Waiver, approved in the waning days of the George W. Bush Administration on January 16, 2009. The waiver combined and consolidated myriad Medicaid waivers into one comprehensive waiver, with a capped allotment on overall spending. Rather than considering the silos of various program requirements, or specific waivers on discrete issues, Rhode Island was able to examine Medicaid reform holistically—focusing on the big picture, rather than specific bureaucratic dictates from Washington.[27]

Given flexibility from Washington, Rhode Island succeeded in controlling Medicaid expenditures—indeed, in reducing them on a per beneficiary basis. Overall spending remained roughly constant from 2010 through 2013, while enrollment grew by 6.6%.[28] Per beneficiary costs declined by 5.2% over that four-year period—a decline in absolute terms, even before factoring in inflation.[29] Perhaps most importantly, an independent report from the Lewin Group found that the Global Compact was “highly effective in controlling Medicaid costs,” while “improving members’ access to more appropriate services.”[30] In other words, Rhode Island reduced its Medicaid costs not by providing less care to beneficiaries—but providing more, and more appropriate, care to them.

The Rhode Island example has particular applicability to Wyoming’s Medicaid program. Just as Wyoming spends above national averages on Medicaid care for the aged and individuals with disabilities, so too did Rhode Island have a highly institutionalized population prior to implementing its Global Compact. Moreover, Wyoming’s current system of discrete waivers—two (including one pending with CMS) under Section 1115, and seven separate long-term care waivers under Section 1915 of the Social Security Act—lends itself towards potential care silos and unnecessary duplication. Consolidating these myriad waivers into one global waiver would allow Wyoming to “see the forest for the trees”—focusing on overall changes that will improve the quality of care. Implementing a global waiver will also give Wyoming the flexibility to accelerate reforms regarding delivery of long-term supports and services to the aged and disabled population, while introducing new consumer-oriented options for non-disabled beneficiaries.

Specific Solutions

A block grant, per capita allotment, or waiver along the lines of Rhode Island’s Global Compact provides the vision that will give states the tools needed to reform Medicaid for the 21st century. Fortunately, states have experimented with several specific reforms that can provide more granular details regarding how a reformed Medicaid program might look. Proposals in documents such as House Republicans’ “Better Way” plan, released last year, and a report issued by Republican governors in 2011, provide good sources of ideas.[31] Both individually and collectively, these solutions can 1) improve the quality of care beneficiaries receive; 2) better engage beneficiaries with the health care system, and where appropriate, provide a transition to employment and employer-sponsored coverage; 3) reduce health costs overall; and 4) provide sound stewardship of the taxpayer dollars funding the Medicaid program.

Delivery System Reform

With a Medicaid program based around fee-for-service medicine—which pays doctors and hospitals for every service they perform—Wyoming in particular would benefit from reforms that encourage greater value and coordination in health care delivery. As explained above, the state’s above-average spending on aged and disabled beneficiaries speaks to the way in which uncoordinated care can result in health problems for patients—and ultimately, greater expenses for taxpayers.

Promote Home and Community-Based Services (HCBS):         The Lewin Group’s analysis of Rhode Island’s Global Compact Waiver delineated many of the ways in which that state reformed its Medicaid program to de-institutionalize aged and disabled beneficiaries. Between the January 2009 approval of the waiver and the December 2011 report, Rhode Island achieved impressive savings from providing more coordinated, and “right-sized,” care to patients:

  • Shifting nursing home services into the community saved $35.7 million during the period examined by the study;
  • More accurate rate setting in nursing homes saved an additional $15 million in 2010 alone;
  • Better care management for adults with disabilities and special needs children saved between $4.5 and $11.9 million; and
  • Enrollment in managed care significantly increased the access of adults with disabilities to physician services.[32]

The results from the Rhode Island waiver demonstrate the possible savings to Wyoming associated with reform of long-term services and supports (LTSS)—savings that the Lewin report confirms came not from denying care to beneficiaries, but by improving it.

Other states have also taken actions to promote HCBS. Testifying before the Congressionally-chartered Commission on Long-Term Care in 2013, Tennessee’s head of Long-Term Supports and Services proposed several solutions, focused largely on turning the bias in favor of nursing home care toward a bias in favor of HCBS—to use nursing homes as a last resort, rather than a first resort.[33] Her proposals included a possible limit on nursing home capacity; converting nursing home “slots” into HCBS care “slots;” and requiring patients to try HCBS as the default option before moving to a more intense (i.e., institutional) setting.[34] Integrating these proposals into a comprehensive waiver would not only provide Wyoming residents with more appropriate care, it could also save taxpayers money.

Managed Care:            Wyoming could benefit by exploring the use of managed care plans to deliver Medicaid services to beneficiaries. Providing plans with a capitated payment—that is, a flat payment per beneficiary per month—would give them an incentive to streamline care. Moreover, a transition to managed care would provide more fiscal certainty to the state, as payment levels would not change during a fiscal or contract year.

In June 2014, a report commissioned by the Wyoming Legislature and prepared for the Wyoming Department of Health recommended against pursuing full-risk managed care, despite an admitted high level of vendor interest in doing so.[35] Three years later, Wyoming should explore the issue again, as both the Department of Health and medical providers in Wyoming have additional experience implementing other forms of coordinated care. The 2014 report notes that managed care plans have numerous tools available that could help reduce costs, particularly for high-cost patients, including data analytics, case managers, and quality metric incentives. Given the unique capacities that managed care plans bring to the table, it is worth exploring again the issue of whether full-risk plans could improve care to Wyoming beneficiaries while providing fiscal stability to the state.

While managed care could provide significant benefits to Wyoming, the state may be hamstrung by Medicaid’s current requirement that beneficiaries have the choice of at least two managed care plans. Given that Wyoming has only one insurer participating on its insurance Exchange this year, and a heavily rural population, this requirement may not be realistic or feasible. If approved by CMS, a waiver application could enable only one managed care plan to deliver care to rural Wyomingites.

Provider-Led Groups:              In addition to managed care products organized and sold by insurance companies, Wyoming could also explore the possibility of creating groups led by teams of providers to manage care delivery. Similar to the accountable care organization (ACO) model promoted through the Medicare program, these provider-led groups could provide coordinated care to patients, either on a fully- or partially-capitated payment model.

In recent years, at least 18 state Medicaid programs have either adopted or studied the creation of various provider-led organizations.[36] Adopters include neighboring states like Utah and Colorado, as well as southern states like Louisiana and Alabama. Whether a hospital-led ACO, or a group of doctors providing direct primary care to patients, these provider-led organizations would have greater incentives to coordinate care for patients, hopefully resulting in better health outcomes, and reduced spending for the Medicaid program.

Payment Bundling:     One other option for reforming delivery systems lies in bundled payments, which would see Medicaid providing a lump-sum payment for all the costs of a procedure (e.g., a hip replacement and associated post-operative therapy). Such concepts date back more than a quarter-century; a Medicare demonstration that began in the summer of 1991 reduced spending on heart bypass patients by $42.3 million—a savings of nearly 10 percent.[37] More recently, Pennsylvania’s Geisinger Health System helped bring the payment bundle model into the national lexicon, implementing a 90-day “warranty” on heart bypass patients beginning in February 2006.[38]

In recent years, government payers have increasingly adopted the payment bundle as a means to improve care quality and limit spending increases. Beginning in 2011, Arkansas’ Medicaid program worked with its local Blue Cross affiliate to improve health care delivery through payment improvement, and has implemented an episode-of-care payment model (i.e., a payment bundle) as one of its efforts.[39] Likewise, Medicare has moved ahead with efforts to embrace bundled payments—offering providers the option of a retrospective or prospective lump-sum payment for an inpatient stay, post-acute care provided after the stay, or both.[40]

A reformed Medicaid program in Wyoming could offer providers the opportunity to utilize bundled payment models as one vehicle to deliver better care. Ideally, Medicaid need not mandate participation from providers, as Medicare has done for some payment bundles, but instead help to encourage broader trends in the industry.[41] While not as dramatic a change as a move toward managed care, the bundled payment option may appeal to some providers as a “middle ground” for those not yet ready to embrace a fully capitated payment model.

De-Identified Patient Data:   In a bid to harness the power of “big data,” the federal government has made de-identified Medicare patient claims information available to companies that can analyze the information for patterns of care usage. Those initiatives have recently expanded to Medicaid, with one start-up compiling a database of 74 million Medicaid patients.[42] Wyoming could ask outside vendors or consultants to analyze its claims data for relevant patterns and trends—yielding valuable insights into the delivery of care, and potentially improving outcomes for beneficiaries. By releasing its own Medicaid data and encouraging companies to analyze it, Wyoming will encourage the development of Wyoming-specific solutions to the state’s unique health care needs.

Consumer-Directed Options

As part of a move towards modernizing Medicaid, Wyoming should adopt several different consumer-directed elements for its health coverage. These provisions would give beneficiaries incentives to act as smart shoppers, using ideas proven to lower the growth of health care costs. Providing appropriate incentives to beneficiaries will also make Medicaid coverage more closely resemble private health insurance plans—providing an easy transition for beneficiaries who move into employer-based coverage as their income rises.

Health Opportunity Accounts:            In 2005, provisions in the Deficit Reduction Act created Health Opportunity Accounts.[43] The language in the statute called for several demonstration projects by states, who could offer non-elderly and non-disabled beneficiaries the choice to enroll in Health Opportunity Accounts on a voluntary basis. The Opportunity Accounts would be used to pay for medical expenses up to a deductible, at which point traditional insurance coverage would take over. While the Opportunity Accounts under the demonstration would function in many respects like a Health Savings Account (HSA)—the state and/or charities would fund the accounts, and beneficiaries could build up savings within them—they included a twist. Upon becoming ineligible for Medicaid, beneficiaries could access most of their remaining Opportunity Account balance for a period of up to three years, to purchase either health insurance coverage or “job training and tuition expenses.”[44]

By creating an HSA-like account mechanism, and giving beneficiaries the flexibility to use their Opportunity Account funds on job training or health insurance expenses upon becoming ineligible for Medicaid, the Opportunity Account demonstration promoted both smart health care shopping and employment opportunities for Medicaid beneficiaries. Unfortunately, in 2009 a Democratic Congress and President Obama passed legislation prohibiting the approval of any new Health Opportunity Account demonstrations— effectively killing this innovative program before it had a chance to take root.[45]

Thankfully, some states have continued to incorporate HSA-like incentives into their Medicaid programs. In the non-Medicaid space, HSAs and consumer-directed options have demonstrated their ability to reduce health care costs. A 2012 study in the prestigious journal Health Affairs found that broader adoption of the HSA model could reduce health care costs by more than $57 billion annually.[46] If extended into the Medicaid realm, slower growth of health costs would save taxpayers—in Wyoming and elsewhere.

The upcoming reauthorization of the State Children’s Health Insurance Program (SCHIP)—currently due to expire on September 30, 2017—gives Congress an opportunity to re-examine Health Opportunity Accounts. Regardless of whether lawmakers in Washington reinstate this particular model, however, account-based health coverage in Medicaid deserves a close look in Wyoming as part of a comprehensive reform waiver. Although the Opportunity Account mechanism was somewhat prescriptive in its approach, allowing beneficiaries to keep some portion of remaining account balances upon becoming ineligible for Medicaid represents an innovative and sound concept. Such a program could represent a true win-win: Both the state and beneficiaries receive a portion of the benefits from lower health spending—cash which the beneficiary can use to help adjust to life after Medicaid.

Right to Shop:              Thanks to several states’ reform of transparency laws, patients can now engage in a “right to shop” in many locations across the country.[47] The movement centers around the basic principle that consumers should share in the benefits of savings from choosing less expensive locations for medical and health procedures. Particularly for non-urgent care—for instance, medical tests or radiological procedures—variations among medical facilities provide patients with the opportunity to achieve significant savings by choosing a less costly provider.

Results from large employers illustrate how price transparency and competition have yielded savings for payers and consumers alike. A California Public Employees’ Retirement System (CalPERS) program of reference pricing—in which CalPERS set a maximum price of $30,000 for hip and knee replacements—led to savings of $2.8 million ($7,000 per patient) to CalPERS, and $300,000 (nearly $700 per patient) in lower cost-sharing, in its first year alone. The program led hospitals to renegotiate their rates with CalPERS, which expanded its reference pricing program to other procedures the very next year.[48]

Other estimates suggest that the potential savings from transparency and competition could range into the tens of billions of dollars. One study concluded that reference pricing for a handful of specific procedures could reduce health spending by 1.6 percent—or nearly $10 billion, if applied to all individuals with employer-sponsored health coverage.[49] A separate estimate found that eliminating variation in “shoppable” (i.e., high-cost and known in advance) health services could reduce spending on individuals with employer health coverage by $36 billion.[50]

A reformed Medicaid program should look to bring these positive effects of “patient power” to Medicaid—by allowing consumers to share in the savings from choosing wisely among providers. The right to shop could work particularly well in conjunction with an account-based model for Medicaid reform, which provides a ready vehicle for the state to deposit a portion of savings to beneficiaries. Citizens have literally saved millions of dollars using the right to shop; tapping into those savings for the Medicaid program would benefit taxpayers significantly.[51] Moreover, by incentivizing all providers to price their services more competitively, right to shop will exert downward pressure on health costs—an important goal for our nation’s health care system.

Wellness Incentives:   Over the past several years, successful employers have used incentives for healthy behaviors to help control the skyrocketing growth in health care costs. For instance, Safeway used such incentives to keep overall health costs flat over four years—at a time when costs for the average employer plan grew by 38 percent.[52]

Many large employers have increasingly embraced the results of the “Safeway model,” offering employees incentives for participating in healthy behaviors. According to the most recent annual survey of employer-provided health plans, approximately one-third of large employers (those with over 200 workers) offer employees incentives to complete a health risk assessment (32%), undergo biometric screening (31%), or participate or complete a wellness program (35%).[53] Among the largest employers—those with over 5,000 workers—nearly half offer incentives for risk assessments (50%), biometric screening (44%), and wellness programs (48%).[54] The trend of employer wellness incentives suggests Wyoming should bring this innovation to its Medicaid program.

Even though Obamacare passed on a straight party-line vote, expanding employer wellness incentives represented one of the few areas of bipartisan agreement. Language in the law permitted employers to increase the permitted variation for participation in wellness programs from 20 percent of premiums to 30 percent.[55] Medicaid programs should have the flexibility to implement such changes to their programs without requesting permission from Washington—and Wyoming should incorporate incentives for healthy behaviors into its revised Medicaid program as part of a comprehensive waiver.

Premiums and Co-Payments:              In addition to more innovative models discussed above, a revised Medicaid program in Wyoming could look to impose modest cost-sharing on beneficiaries through a combination of premiums and co-payments. Applying cost-sharing to specific services—for instance, unnecessary use of the emergency room for non-urgent care—should encourage beneficiaries to find the most appropriate source of care. Reasonable, enforceable cost-sharing would encourage beneficiaries to take responsibility for their care, making them partners in the road to better health.

Transition to Employment and Employer-Based Health Insurance

In many cases, individuals on Medicaid can, and ultimately should, make the transition to employment, and to the employer-based health insurance that comes with many quality jobs. However, the benefits currently provided by Medicaid bear little resemblance to most forms of employer-based coverage. In conjunction with the consumer-directed options discussed above, Wyoming should implement other steps to encourage beneficiaries to make the transition into work, and encourage the adoption of employer-based health insurance.

Work Requirements:               Fortunately, the Trump Administration has indicated a willingness to embrace state flexibility in Medicaid—which with respect to work requirements in particular would represent a welcome change from the Obama Administration.[56] A requirement that able-bodied Medicaid beneficiaries either work, look for work, or prepare for work through enrollment in job-training programs would help transform state economies, as even voluntary job-referral programs have led to some impressive success stories. In the neighboring state of Montana, one participant obtained skills that helped her find not just a job, but a new career:

“I think it’s a success story,” [Ruth] McCafferty says about the [Medicaid] jobs program. “I love this. I’m the poster child!”

McCafferty is a 53-year-old single mom with three kids living at home. Seven months ago, she lost her job in banking, and interviews for new jobs weren’t panning out.…

The jobs component of [her Medicaid coverage] means she also got a phone call from her local Job Service office, saying they might be able to hook her up with a grant to pay for training to help her get a better job than the one she lost. She was pretty skeptical, but came in anyway…

Job Service ended up paying not just for online training, but a trip to Helena to take a certification exam. Now, they’re funding an apprenticeship at a local business until she can start bringing in her own clients and get paid on commission.

“I’m able to support my family,” [McCafferty] says. “I’ve got a career opportunity that’s more than just a job.”[57]

Ruth McCafferty is not the only success story associated with Montana’s Medicaid Job Service program. Five in six individuals who participated in the program are now employed, and with an average 50 percent increase in pay, to about $40,000 per year—enough in some cases to transition off of Medicaid.[58] Unfortunately, however, because the program is not mandatory for beneficiaries, only a few thousand out of 53,000 Medicaid enrollees have embraced this life-changing opportunity.[59]

In December 2015, the Congressional Budget Office noted that Obamacare’s Medicaid expansion will reduce beneficiaries’ labor force participation by about 4 percent, “creat[ing] a tax on additional earnings for those considering job changes” that would raise their income above the threshold for eligibility.[60] Rather than discouraging work, as under Obamacare, Medicaid should encourage work, and a transition into working life. Imposing a work requirement for Medicaid recipients, coupled with appropriate resources for job training and education, would help beneficiaries, taxpayers—and ultimately, Wyoming’s economy.

Flexible Benefits:         Particularly for non-disabled adults and optional coverage populations, Wyoming should consider offering a more flexible and limited set of insurance benefits than the standard Medicaid package. Congress moved down this route in 2005, using a section of the Deficit Reduction Act to create a set of “benchmark” benefits that certain populations could receive.[61] However, the “benchmark” plan section limits eligibility to certain populations, and excludes provisions permitting states to impose modest cost-sharing for beneficiaries.

As part of a comprehensive waiver, Wyoming should request the ability to shift non-disabled beneficiaries into “benchmark” plans. Moreover, the waiver application should include provisions for modest cost-sharing for beneficiaries, and make those cost-sharing payments enforceable. Receiving authority from Washington to customize health coverage options for non-traditional beneficiaries would give the state the ability to innovate, and tailor benefit packages to beneficiary needs and fiscal realities.

Premium Assistance:               Premium assistance—in which Medicaid helps subsidize premiums for employer-sponsored health coverage—could play an important role in encouraging the use of private insurance where available, while also keeping all members of a family on the same health insurance policy. Unfortunately, however, current regulatory requirements for premium assistance have proven ineffective and unduly burdensome. All current premium assistance programs require Medicaid programs to provide wrap-around benefits to beneficiaries.[62] In addition, two premium assistance options created by Congress in 2009 explicitly prohibit states from using high-deductible health plans—regardless of whether or not the state funds an HSA to subsidize beneficiaries’ medical expenses in conjunction with the high-deductible plan.[63]

As part of its comprehensive waiver application, Wyoming should ask for more flexibility to use Medicaid dollars to subsidize employer coverage, without providing additional wrap-around benefits. In addition, the state’s application should require non-disabled adults to utilize premium assistance where available—another policy consistent with maximizing the use of private health coverage.

Preventing “Crowd-Out”:        Many government-run health programs face the problem of “crowd-out”—individuals purposefully dropping their private health coverage to enroll in taxpayer-funded insurance. Prior studies have estimated the “crowd-out” rate for certain coverage expansions at around 60 percent.[64] In these cases, coverage expansions enrolled more people who dropped their private coverage than previously uninsured individuals—a poor use of taxpayers’ hard-earned dollars.

States like Wyoming should have the ability to impose reasonable restrictions on enrollment as one way to prevent “crowd-out.” For instance, ensuring enrollees do not have an available offer of employer coverage, or only enrolling persistently uninsured individuals (e.g., those uninsured for at least 90-180 days prior to enrollment), would prevent individuals from attempting to “game the system” and ensure efficient use of taxpayer dollars.

Program Integrity

Estimates suggest that health care fraud represents an industry of massive proportions, with tens of billions in taxpayer dollars lost every year to fraudulent activities.[65] Medicaid has remained on the Government Accountability Office (GAO) list of “high-risk” programs since 2003 “due to its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight.”[66] In its most recent update, GAO noted that improper payments—whether erroneous or fraudulent in nature—increased from a total of $29.1 billion in fiscal year 2015 to $36.3 billion in fiscal 2016—an increase of nearly 25 percent.[67]

A reformed Medicaid program in Wyoming would use flexibility provided by the federal government to strengthen programs and methods ensuring proper use of taxpayer dollars. Because any dollar stolen by a fraudster represents one dollar not used to help the patients—many of them aged and vulnerable—that Medicaid treats, policy-makers should work diligently to ensure that scarce taxpayer funds are used solely by the populations for whom Medicaid was designed.

Verify Eligibility and Identity:            A 2015 report by the Foundation for Government Accountability provides numerous cases of ineligible—or in some cases deceased—beneficiaries remaining on state Medicaid rolls:

  • Arkansas identified thousands of individuals not qualified for Medicaid benefits in 2014, including 495 deceased beneficiaries;
  • Pennsylvania removed over 160,000 individuals from benefit rolls in 2011, including individuals in prison and million-dollar lottery winners; and
  • In Illinois, state officials removed over 400,000 ineligible beneficiaries in one year alone, saving taxpayers approximately $400 million annually.[68]

In the past two years, Wyoming has taken decisive action to crack down on fraud. The eligibility checks begun in mid-2015 removed several thousand ineligible individuals from the Medicaid rolls.[69] Moreover, Act 57, passed by the state legislature last year, introduced a new comprehensive program to stop fraud.[70] By verifying eligibility and identity upon enrollment, monitoring eligibility through quarterly database checks, and prosecuting offenders where found, Act 57 should save Wyoming taxpayers, while ensuring that eligible beneficiaries can continue to receive the health services they need.[71]

Asset Recovery:            A 2015 Government Accountability Office (GAO) report raised concerns about whether Wyoming’s Medicaid program is appropriately protecting taxpayer dollars. GAO concluded that Wyoming ranks second in the percentage of Medicaid beneficiaries (20.6%) with additional private health insurance coverage, and third in the percentage of Medicaid beneficiaries (26.02%) with additional public health insurance coverage.[72] By comparison, GAO concluded that only 13.4% of Medicaid beneficiaries nationwide had an additional source of private insurance coverage—meaning Wyoming has a rate of additional private coverage among Medicaid beneficiaries roughly 50 percent higher than the national average.[73]

As with the concept of crowd-out—individuals dropping private coverage entirely to enroll in Medicaid—discussed above, Medicaid should serve as the payer of last resort, not of first instance. If another payer has liability with respect to a Medicaid beneficiary’s claims, the state has the duty—both a statutory obligation under the federal Medicaid law, and a moral obligation to its taxpayers—to avoid incurring those claims, and seek to recover payments already made when it is cost-effective to do so.

Asset recovery can take several forms. Improving recovery for third-party liability claims could involve participation in electronic data matching between Medicaid enrollment files and private insurer files; empowering any managed care organizations contracted to the Medicaid program to adjudicate third-party liability claims; and prohibiting insurers from denying third-party liability claims for purely procedural reasons, such as failure to obtain prior authorization.[74] As part of these efforts, Wyoming should have the freedom to hire contingency fee-based contractors as one means to stem the flow of improper payments to health care providers.

Long-term services and supports represent another area where Wyoming can take steps to ensure taxpayer dollars are spent on the vulnerable populations for whom Medicaid was designed. The state can and should utilize existing authority to recover funds from estates, or impose sanctions on individuals who transferred assets at below-market rates in their efforts to qualify for Medicaid.[75]

Conclusion

             In the past decade, Wyoming has made numerous reforms to its Medicaid program. The state has begun to re-balance care away from institutional settings where possible, and has implemented several programs to improve care coordination. These changes have helped stabilize Medicaid spending as a share of the budget, and reduce spending on a per-beneficiary basis.

However, given freedom and flexibility from Washington—flexibility which should be forthcoming under the new Administration—Wyoming can go further. This vision would see additional reforms designed to keep patients out of intensive and costly settings—whether the hospital or a nursing home—and an exploration of managed care options. Beyond the aged population, Wyoming would implement consumer-driven principles into Medicaid, giving beneficiaries greater incentives to take responsibility for their own care, and the tools to do so. And many recipients would ultimately transition out of Medicaid entirely, using skills they learned through Medicaid-sponsored job training programs to build a better life.

This vision stands within Wyoming’s reach—indeed, it stands within every state’s reach. All it takes is flexibility from Washington, and the desire on the part of policy-makers to embrace the vision for a modern Medicaid system. With a comprehensive waiver, Wyoming can transform and revitalize Medicaid. It’s time to embrace the opportunity and do just that.

 


[1] Letter by Health and Human Services Secretary Tom Price and Centers for Medicare and Medicaid Services Administrator Seema Verma to state governors regarding Medicaid reform, March 14, 2017, https://www.hhs.gov/sites/default/files/sec-price-admin-verma-ltr.pdf.

[2] Office of the Actuary, Centers for Medicare and Medicaid Services, “2016 Actuarial Report on the Financial Outlook for Medicaid,” https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2016.pdf, Table 3, p. 15.

[3] Congressional Budget Office, January 2017 Medicare baseline, https://www.cbo.gov/sites/default/files/recurringdata/51302-2017-01-medicare.pdf.

[4] 2016 Actuarial Report, Table 3, p. 15; CBO January 2017 Medicare baseline.

[5] National Association of State Budget Officers, Fiscal Survey of States: Spring 2016, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Reports/Spring%202016%20Fiscal%20Survey%20of%20States-S.pdf, Table 11: Fiscal Year 2017 Recommended Program Area Adjustments by Value, p. 16.

[6] National Association of State Budget Officers, Fiscal Survey of States: Spring 2011, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Fiscal%20Survey/Spring%202011%20Fiscal%20Survey.pdf, Table 11: Fiscal Year 2012 Recommended Program Area Adjustments by Value, p. 13.

[8] National Association of State Budget Officers, 1996 State Expenditure Report, April 1997, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/ER_1996.PDF, Table 3, p. 11.

[9] Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine June 16, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285.

[10] Vanessa Fuhrmans, “Note to Patients: The Doctor Won’t See You,” Wall Street Journal July 19, 2007, http://www.wsj.com/articles/SB118480165648770935.

[11] Statement by DeAnn Friedholm, Consumers Union, at Alliance for Health Reform Briefing on “Affordability and Health Reform: If We Mandate, Will They (and Can They) Pay?” November 20, 2009, http://www.allhealth.org/briefingmaterials/TranscriptFINAL-1685.pdf, p. 40.

[12] Katherine Baicker, et al., “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine May 2, 2013, http://www.nejm.org/doi/full/10.1056/NEJMsa1212321.

[13] Amy Finklestein et al., “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment,” New England Journal of Medicine October 20, 2016, http://www.nejm.org/doi/full/10.1056/NEJMp1609533.

[14] Scott Gottlieb, “Medicaid Is Worse than No Coverage at All,” Wall Street Journal March 10, 2011, http://www.wsj.com/articles/SB10001424052748704758904576188280858303612.

[15] Katherine Young et al., “Medicaid Per Enrollee Spending: Variation Across States,” http://files.kff.org/attachment/issue-brief-medicaid-per-enrollee-spending-variation-across-states-2, Appendix Table 1, p. 9.

[16] Ibid., Appendix Table 2, p. 11.

[17] Government Accountability Office, “Medicaid: Assessment of Variation among States in Per-Enrollee Spending,” Report GAO-14-456, June 16, 2014, http://www.gao.gov/assets/670/664115.pdf.

[18] Ibid., Appendix II, pp. 40-41.

[19] Ibid., Appendix VII, pp. 53-54.

[20] Wyoming Department of Health, “Introduction to Wyoming Medicaid,” p. 31.

[21] Ibid., pp. 11, 14.

[22] Section 121 of H.R. 1628, the American Health Care Act, as passed by the U.S. House of Representatives on May 4, 2017.

[23] Section 1115 of the Social Security Act, codified at 42 U.S.C. 1315.

[24] Mattie Quinn, “On Medicaid, States Won’t Take Feds’ No for an Answer,” Governing October 11, 2016, http://www.governing.com/topics/health-human-services/gov-medicaid-waivers-arizona-ohio-cms.html.

[25] Section 10201 of the Patient Protection and Affordable Care Act, P.L. 111-148, created a new Section 1115(d) of the Social Security Act (42 U.S.C. 1315(d)) imposing such requirements.

[26] Section 1115 (e) and (f) of the Social Security Act, codified at 42 U.S.C. 1315(e) and (f).

[27] Testimony of Gary Alexander, former Rhode Island Secretary of Health and Human Services, on “Strengthening Medicaid Long-Term Supports and Services” before the Commission on Long Term Care, August 1, 2013, http://ltccommission.org/ltccommission/wp-content/uploads/2013/12/Garo-Alexander.pdf.

[28] Ibid., p. 4.

[29] Ibid., p. 4.

[30] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf, p. 3.

[31] House of Representatives Republican Task Force, “A Better Way—Our Vision for a Confident America: Health Care,” June 22, 2016, http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf, pp. 23-28; Republican Governors Public Policy Committee, “A New Medicaid: A Flexible, Innovative, and Accountable Future,” August 30, 2011, https://www.scribd.com/document/63596104/RGPPC-Medicaid-Report.

[32] Lewin Group, “An Independent Evaluation.”

[33] The author served as a member of the commission, whose work can be found at www.ltccommission.org.

[34] Testimony of Patti Killingsworth, TennCare Chief of Long-Term Supports and Services, before the Commission on Long-Term Care on “What Would Strengthen Medicaid LTSS?” August 1, 2013, http://ltccommission.org/ltccommission/wp-content/uploads/2013/12/Patti-Killingsworth-Testimony.pdf.

[35] Health Management Associates, “Wyoming Coordinated Care Study,” June 27, 2014, http://legisweb.state.wy.us/InterimCommittee/2014/WyoCoordinatedCareReportAppendices.pdf.

[36] National Academy for State Health Policy, “State ‘Accountable Care’ Activity Map,” http://nashp.org/state-accountable-care-activity-map/.

[37] Health Care Financing Administration, “Medicare Participating Heart Bypass Demonstration,” Extramural Research Report, September 1998, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/downloads/oregon2_1998_3.pdf.

[38] Reed Abelson, “In Bid for Better Care, Surgery with a Warranty,” New York Times May 17, 2007, http://www.nytimes.com/2007/05/17/business/17quality.html?pagewanted=all.

[39] State of Arkansas, “Health Care Payment Improvement Initiative—Episodes of Care,” http://www.paymentinitiative.org/episodesOfCare/Pages/default.aspx.

[40] Centers for Medicare and Medicaid Services, “Bundled Payments for Care Improvement Initiative: General Information,” https://innovation.cms.gov/initiatives/Bundled-Payments/.

[41] On December 20, 2016, the Centers for Medicare and Medicaid Services (CMS) announced that participation in new cardiac and orthopedic bundles would be mandatory for all hospitals in selected metropolitan statistical areas beginning July 1, 2017; see https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-12-20.html. Both lawmakers and provider groups have suggested that CMS is imposing too many mandates on providers and exceeding its statutory and constitutional authority; see http://tomprice.house.gov/sites/tomprice.house.gov/files/assets/September%2029%2C%202016%20CMMI%20Letter.pdf.

[42] Steve Lohr, “Medicaid’s Data Gets an Internet-Era Makeover,” New York Times January 9, 2017, https://www.nytimes.com/2017/01/09/technology/medicaids-data-gets-an-internet-era-makeover.html.

[43] Section 6082 of the Deficit Reduction Act of 2005, P.L. 109-171, which created a new Section 1938 of the Social Security Act (42 U.S.C. 1396u-8).

[44] The statute provided that, upon a beneficiary becoming ineligible for Medicaid, 25 percent of state contributions to the Opportunity Account would be returned to the state, but the beneficiary would retain 100 percent of any other contributions to the account, along with 75 percent of state contributions.

[45] Section 613 of the Children’s Health Insurance Program Reauthorization Act of 2009, P.L. 111-2.

[46] Amelia Haviland et al., “Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually,” Health Affairs May 2012, http://content.healthaffairs.org/content/31/5/1009.full.

[47] Josh Archambault and Nic Horton, “Right to Shop: The Next Big Thing in Health Care,” Forbes August 5, 2016, http://www.forbes.com/sites/theapothecary/2016/08/05/right-to-shop-the-next-big-thing-in-health-care/#6f0ebcd91f75.

[48] Amanda Lechner et al., “The Potential of Reference Pricing to Generate Savings: Lessons from a California Pioneer,” Center for Studying Health System Change Issue Brief No. 30, December 2013, http://hschange.org/CONTENT/1397/1397.pdf.

[49] Paul Fronstin and Christopher Roebuck, “Reference Pricing for Health Care Services: A New Twist on the Defined Contribution Concept in Employment-Based Health Benefits,” Employee Benefit Research Institute Issue Brief No. 398, April 2014, https://www.ebri.org/pdf/briefspdf/EBRI_IB_398_Apr14.RefPrcng.pdf.

[50] Bobbi Coluni, “Save $36 Billion in U.S. Health Care Spending through Price Transparency,” Thomson Reuters, February 2012, https://www.scribd.com/document/83286153/Health-Plan-Price-Transparency.

[51] Archambault and Horton, “Right to Shop.”

[52] Steven Burd, “How Safeway is Cutting Health Care Costs,” Wall Street Journal June 12, 2009, http://www.wsj.com/articles/SB124476804026308603.

[53] Kaiser Family Foundation and Health Research and Educational Trust, “Employer Health Benefits: 2016 Annual Survey,” September 14, 2016, http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-Annual-Survey, Exhibit 12.20, p. 227.

[54] Ibid.

[55] PPACA Section 1201, which re-wrote Section 2705 of the Public Health Service Act (42 U.S.C. 300gg-4).

[56] Quinn, “States Won’t Take Feds’ No.”

[57] Eric Whitney, “Montana’s Medicaid Expansion Jobs Program Facing Scrutiny,” Montana Public Radio November 21, 2016, http://mtpr.org/post/montanas-medicaid-expansion-jobs-program-facing-scrutiny.

[58] Ibid.

[59] Ibid.

[60] Edward Harris and Shannon Mok, “How CBO Estimates Effects of the Affordable Care Act on the Labor Market,” Congressional Budget Office Working Paper 2015-09, December 2015, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51065-ACA_Labor_Market_Effects_WP.pdf, p. 12.

[61] Section 6044 of the Deficit Reduction Act, P.L. 109-171, codified at Section 1937 of the Social Security Act, 42 U.S.C. 1396u-7.

[62] Joan Aiker et al., “Medicaid Premium Assistance Programs: What Information Is Available about Benefit and Cost-Sharing Wrap-Around Coverage?” Kaiser Commission on Medicaid and the Uninsured Issue Brief, December 2015, http://files.kff.org/attachment/issue-brief-medicaid-premium-assistance-programs-what-information-is-available-about-benefit-and-cost-sharing-wrap-around-coverage; Joan Aiker, “Premium Assistance in Medicaid and CHIP: An Overview of Current Options and Implications of the Affordable Care Act,” Kaiser Commission on Medicaid and the Uninsured Issue Brief, March 2013, https://kaiserfamilyfoundation.files.wordpress.com/2013/03/8422.pdf.

[63] Section 301 of the Children’s Health Insurance Program Reauthorization Act of 2009, P.L. 111-3, codified at 42 U.S.C. 1397ee(c)(10)(B)(ii)(II) and 42 U.S.C. 1396e-1(b)(2)(B).

[64] Jonathan Gruber and Kosali Simon, “Crowd-Out 10 Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?” Journal of Health Economics February 21, 2008, http://economics.mit.edu/files/6422.

[65] “Medicare Fraud: A $60 Billion Crime,” 60 Minutes October 23, 2009, http://www.cbsnews.com/news/medicare-fraud-a-60-billion-crime-23-10-2009/.

[66] Government Accountability Office, “High-Risk Series: An Update,” Report GAO-15-290, February 2015, http://www.gao.gov/assets/670/668415.pdf, p. 366.

[67] Government Accountability Office, “High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others,” Report GAO-17-317, February 2017,  http://www.gao.gov/assets/690/682765.pdf, p. 579.

[68] Jonathan Ingram, “Stop the Scam: How to Prevent Welfare Fraud in Your State,” Foundation for Government Accountability, April 2, 2015.

[69] Wyoming Department of Health, “Introduction to Wyoming Medicaid,” p. 13.

[70] Enrolled Act 57, Wyoming Legislature, 63rd Session.

[71] Ibid.

[72] Government Accountability Office, “Medicaid: Additional Federal Action Needed to Further Improve Third Party Liability Efforts,” GAO Report GAO-15-208, January 2015, http://gao.gov/assets/670/668134.pdf, Appendix II, Table 3, pp. 27-28.

[73] Ibid., Figure 1, p. 10.

[74] Ibid.

[75] Kirsten Colello, “Medicaid Financial Eligibility for Long-Term Services and Supports,” Congressional Research Service Report R43506, April 24, 2014, https://fas.org/sgp/crs/misc/R43506.pdf.

A PDF copy of this report is available on the Wyoming Liberty Group website.

Obamacare Really Does Disadvantage Americans with Disabilities

My article last week regarding disability groups’ political and policy views prompted some comments and criticisms on Twitter. Rather than trying to explain detailed subjects in bursts of 140-character tweets, I considered it best to compile them into a longer-form article.

To summarize my prior work: Obamacare provides states with a greater incentive to expand Medicaid to able-bodied adults than to cover services for individuals with disabilities. States receive a 95 percent match this year (declining to 90 percent in 2020 and all future years) to cover the able-bodied, but a match ranging from 50-75 percent to cover individuals with disabilities, while more than half a million are on waiting lists to receive home or attendant care.

My article raised this disparity—essentially discrimination against individuals with disabilities—pointing out that the major disability advocacy consortium failed to object to it when Obamacare passed, and questioned why the groups were so silent on this issue then, but so vocal in their opposition to Republican legislative proposals to slow the growth of Medicaid spending now.

Many of the responses I discuss in greater detail below attempt to obscure two separate and distinct issues: The question of the amount of funding for programs versus the priorities within those programs.

As a conservative, I’m likely to disagree with liberals on the ideal size of many government programs, but I thought I would at least agree with them that individuals with disabilities should receive precedence within those programs. However, Obamacare actually tilted Medicaid’s preference away from individuals with disabilities, which makes disability groups’ silence on that front surprising.

There Is No Correlation Between Waiting Lists and Medicaid Expansion

The timeliest rebuttal comes from a story on a long-term care report none other than AARP released yesterday. Susan Reinhard with that organization—no right-wing conservative group, by any stretch—said that

Many states have struggled to expand home- and community-based options for Medicaid enrollees needing long-term care because that is an optional benefit. Nursing homes are mandatory under federal law. While states focus on Medicaid coverage for children and families — as well as non-disabled adults covered by the Medicaid expansion under the Affordable Care Act — adults with disabilities have received less attention. ‘Long-term care is a stepchild of the program and not a top focus for states,’ she said. (emphasis mine.)

That statement notwithstanding, several people cited two different analyses that compare states’ decisions on expansion to the able-bodied and their waiting lists for home-based care for individuals with disabilities. But each of those “studies” (based on only one year of data available) take an overly simplistic approach, and therefore don’t get at the core issue of the extent to which the skewed incentives Obamacare created have encouraged states to prioritize the able-bodied over those with disabilities.

A state’s decision to expand Medicaid to the able-bodied, or reduce its waiting lists for individuals with disabilities, depends on myriad factors. For instance:

  • A wealthy state with a greater tax base would have more resources both to expand Medicaid to the able-bodied and to reduce its waiting list of individuals with disabilities, while a poorer state with a smaller tax base might not have resources to do either;
  • A state with “bad” demographics (e.g., an older and sicker population), or higher costs for health and personal care services, might have more difficulty reducing their Medicaid waiting lists;
  • A state may face other fiscal pressures—controversy over school funding, a natural disaster, a pension crisis—that could affect overall Medicaid spending.

Numerous variables affect states’ budget choices, and therefore their Medicaid waiting lists. The “studies” controlled for exactly none of them. They examined whether a state expanded Medicaid and the total number of people on a state’s waiting list, and that’s it.

It’s not entirely surprising that wealthy states like California (2015 median income: $64,500) could both reduce disability waiting lists and expand Medicaid to the able-bodied, while poorer states like Alabama (2015 median income: $44,765) could afford neither, seeing their waiting lists grow while not expanding Medicaid. In general, non-expansion states are poorer than expansion states; the latter therefore have more resources to spend on Medicaid.

Moreover, under Obamacare, all states receive the same (higher) federal match to cover able-bodied adults—another change in policy (prior to Obamacare, all Medicaid match rates were based on states’ relative income) skewing the balance in favor of wealthier expansion states. Yet, as noted above, the analyses claiming no correlation between expansion and Medicaid waiting lists didn’t even attempt to control for these variables—or any other.

Therefore, in the absence of a quality study examining the issue, I’ll go with something far simpler: Common sense. If you’re a state that wants to spend more money on Medicaid, and you can do something (i.e., cover the able-bodied) that gives you 95 cents on the dollar, or something (i.e., reduce waiting lists for individuals with disabilities) that gives you 50 cents on the dollar, which are you going to do first?

I thought so. The incentives in Obamacare strongly favor coverage of the able-bodied over coverage for individuals with disabilities. And no number of crude analyses attempting to provide retroactive justification for this bad policy can hide that fact.

Waiting Lists Are Worst In Two Non-Expansion States

This comment reinforces the crudeness of the analysis being cited. All else being equal, as the second- and third-largest states in the Union, Texas and Florida would be expected to have a larger number of people on its waiting lists for home- and community-based services than a smaller expansion state like Connecticut. All else isn’t equal, of course, but did the analysts attempt to control for these kinds of factors? Nope. They examined raw waiting list numbers, rather than waiting lists as a percentage of the population.

But just suppose for a second that the commenters above are correct, and there is no correlation between expansion to the able-bodied and waiting lists for home-based care. That means that the greater incentives Obamacare gives to states to cover the able-bodied—and while the advocacy community might not want to admit it, Obamacare clearly does give states greater incentives to cover the able-bodied—didn’t affect state behavior, or decisions about whether to reduce disability waiting lists at all.

In that case, why has the disability community expressed such outrage about the impact of per capita caps or block grants on Medicaid beneficiaries with disabilities? If states make decisions without considering federal incentives—the point of the claims that there is no correlation between expanding Medicaid to the able-bodied and longer waiting lists for individuals with disabilities—then why also claim that “cost-shifting to states will force massive cuts in Medicaid services?” Why wouldn’t states shift around resources to protect individuals with disabilities—what the disability community claims that states did to reduce waiting lists even while expanding Medicaid under Obamacare?

There are really only two credible possibilities:

  • States are affected by incentives, therefore Obamacare—by giving states a higher match to cover the able-bodied—encouraged discrimination against individuals with disabilities; or
  • States are not affected by incentives, and therefore the per capita caps—which generate a comparatively small amount of savings in the House repeal bill—will have little impact, because states will re-prioritize their budgets to protect the most vulnerable.

It’s therefore worth asking why some appear to be trying to argue both sides of this question, and doing so in a way that neatly lines up with partisan lines—trying to ignore Obamacare’s skewed incentives, while roundly castigating the House Republican bill for incentives that will “force massive cuts in Medicaid.”

Republicans’ Bill Would Cut Program Helping People Live at Home

This is a true statement: Section 111(2) of the American Health Care Act, House Republicans’ “repeal-and-replace” bill, would sunset the enhanced match for the Community First Choice program on January 1, 2020. That option provides states with a 6 percent increase in their federal match for home- and community-based services, including to individuals with disabilities. But here again, raising this issue demonstrates the inherent disconnect between the incentives being offered to states, and the disability community’s responses to those incentives.

  • Obamacare provides states with a match ranging from 20-45 percentage points higher to cover the able-bodied than individuals with disabilities: “No correlation between expansion and waiting lists for individuals with disabilities!”
  • Obamacare provides states with a 6 percentage point increase for home-based services: A “huge change to improve HCBS [home and community-based services] care.”
  • The Republican alternative to Obamacare would reduce Medicaid spending for traditional (i.e., non-expansion) populations by a comparatively small amount: “Massive cuts to Medicaid services.”

Isn’t there a slight contradiction in these responses—both in their tone and in their logic? And isn’t it worth noting that these contradictions all happen to align perfectly with the natural partisan response to each of these issues?

This Is A Political Problem, Not a Policy Problem

Claiming that the greater federal match to cover able-bodied adults than individuals with disabilities stems from a “political history problem” deliberately obscures its roots. This “history” did not take place half a century ago, at Medicaid’s creation, it took place in the past few years, as part of Obamacare.

When crafting that legislation, Democrats could have come up with other policy solutions that expanded Medicaid to the able-bodied without discriminating against individuals with disabilities in the process. They could have proposed increasing the federal match for coverage of individuals with disabilities, in exchange for states covering the able-bodied at the existing federal match rates. Congress enacted a similar type of “swap” in the Medicare Modernization Act. The federal government took over the prescription drug cost of Medicare-Medicaid “dual eligibles” in exchange for a series of “clawback” payments from states.

Democrats in Congress could have considered other ways to expand Medicaid without giving states a greater match to cover the able-bodied than individuals with disabilities. To the best of my knowledge, they chose not to do so. President Obama could have insisted on a more equitable Medicaid formula, but he chose not to do so. And the disability community could have pointed out this disparity to the president and leaders in Congress, but chose not to do so.

Agree or disagree with them, these were deliberate policy choices, not a mere historical accident.

How Can You Support Lower Funding While Complaining About Access?

The argument about lower funding levels misses several points. First, while the Congressional Budget Office has not released estimates of how much the per capita caps (as opposed to changes associated with scaling back Obamacare’s Medicaid expansion) will reduce federal spending, multiple estimates suggest a comparatively small amount of savings from this particular change—at most 1 or 2 percent of spending on traditional Medicaid populations over the coming decade.

Second, if given sufficient flexibility from Washington, states can reduce their Medicaid spending, rendering the discussion of “cuts” under the caps moot. Rhode Island’s Global Compact Waiver, approved in January 2009, actually resulted in a year-on-year decline of Medicaid spending per beneficiary. Moreover, the non-partisan Lewin Group concluded that Rhode Island’s waiver reduced that spending by improving beneficiary access and care, not by denying medical services.

Third, if caps on Medicaid are so harmful and damaging, then why did Obamacare cap spending on Medicare—and why did disability groups remain silent about it? Current law imposes a per capita cap on Medicare spending, one enforced by Obamacare’s Independent Payment Advisory Board (IPAB) of unelected bureaucrats.

What’s more, Obamacare imposes an annual inflation adjustment (gross domestic product growth plus 1 percent) likely to be lower than the inflation adjustment for disabled populations included in the House-passed bill (medical inflation plus 1 percent). Yet a critique of the Medicare payment caps or IPAB appears nowhere in the disability community’s 14 pages of comments regarding the bill that became Obamacare.

So the question to the disability community is obvious: Why does a Democratic proposal to impose per capita caps on Medicare raise no objections, but a Republican proposal to impose (potentially higher) per capita caps on Medicaid guaranteed to prompt “massive cuts in Medicaid services?”

Let’s Just Pay More for Everyone

This comment attempts to obscure the distinction between the amount of funding and the priorities for that funding. I might disagree with liberals about the overall level of funding for the program—not least because efforts like that in Rhode Island demonstrate the potential for Medicaid to become more efficient—but I should agree with them about the need to prioritize care for the most vulnerable. Unfortunately, Obamacare’s Medicaid expansion goes in the opposite direction.

In thinking about the important distinction between overall program funding and priorities within a program, I’m often reminded of a speech that former House Majority Leader Steny Hoyer (D-MD) gave on the House floor in September 2009: “At some point in time, my friends, we have to buck up our courage and our judgment and say, if we take care of everybody, we won’t be able to take care of those who need us most. That’s my concern. If we take care of everybody…then we will not be able to take care of those most in need in America.”

Yes, Hoyer’s speech discussed Medicare, not Medicaid, and he voted for Obamacare (and its Medicaid expansion) six months after giving it. But the speech raises an important point about the need to prioritize entitlements, one that the notion of giving higher reimbursement rates to all populations ignores.

That’s what’s wrong with focusing solely on the question on the amount of funding for a program. Reasonable people can (and will) disagree about where to draw the funding line, but it has to be drawn somewhere. “Solving” the question of funding priorities by increasing reimbursements for all populations—the equivalent of promising everyone a pony—will, by failing to choose wisely now, cause even tougher fiscal choices for generations to come.

Disability Groups Have More Important Priorities

Yes, I have. For one, in 2013, I served on the Commission on Long-Term Care Congress created in the wake of the CLASS Act’s failure and repeal. We took many hours of public testimony from disability groups and others, and received dozens of other written comments—many from dedicated and passionate parents or caregivers of individuals with disabilities, and all of which I made a point to read. I won’t claim to have made disability policy my life’s work, but my jobs over the years have intersected with the disability community on several occasions.

By claiming that disability groups have “way more priorities than comparing their FMAP [i.e., their federal match rate],” this comment actually makes my point for me. The January 2010 letter by the Consortium of Citizens with Disabilities (CCD) setting out priorities for what became Obamacare was 14 pages in length, amounted to over 5,500 words, and included (by my count) 73 separate bulleted recommendations regarding the legislation. All that, and yet not one word on the bill prioritizing coverage of the able-bodied over individuals with disabilities? Frankly, the issue seems quite conspicuous by its absence.

Just Interview Someone From This Consortium

I received a series of tweets—culminating in a dramatic “Shame on you”—attacking me for not having contacted any members of the Consortium for Citizens with Disabilities (CCD) prior to writing my piece. It is correct that I didn’t reach out to any CCD member groups before printing the article. I didn’t need to because I had already spent years working with them.

The charge that I never spoke to “ONE SINGLE CCD MEMBER” is false—and demonstrably so. For nearly four years, from the spring of 2004 until the end of 2007, I worked as a lobbyist for the National Association of Disability Representatives (NADR). During that time, I spent many hours in CCD task force meetings, interacting both directly and indirectly with CCD members. The commenter’s accusation that if I had reached out to CCD members, I would know about the lengthy adjudication process for many Social Security disability claims holds no small amount of irony—I handled those issues over a decade ago.

In reality, my time working with CCD members while representing the disability representatives prompted me to write my article last week. While attending CCD meetings, I saw firsthand how some meeting participants—several of which remain in their current positions and active in CCD activities—made offhand comments of a rather partisan nature. Not everyone joined in the political commentary, but several felt comfortable enough to make clear their partisan affiliations in open discussions, even if I and others did not.

Similarly, I recall how the disability community fought against George W. Bush’s idea for personal accounts within Social Security almost uniformly, and even before Congress and the administration had an opportunity to fully develop their proposals. At the time, my client, the National Association of Disability Representatives, took an agnostic view towards the personal account concept, focusing more on the specifics of whether and how it could work for the disability community.

For instance, NADR wanted to ensure that any personal account proposal would hold the Social Security Disability Trust Fund (separate from the Old Age and Survivors Trust Fund) harmless, and that people who spent time receiving disability benefits would not be financially harmed (e.g., lack the opportunity to save wage earnings in a personal account, yet have their retirement benefits reduced) for having done so.

By contrast, most CCD members opposed the proposal from the get-go, often coordinating with Nancy Pelosi, Sander Levin, and other Democrats for events and strategy meetings. Archives on the disability coalition’s website from that era appear incomplete, but a 2005 August recess “Action Alert: Efforts to Privatize Social Security Continue!” gives a sense of the message coming from most CCD members, and the organization as a whole.

At this point any liberals still reading might applaud the disability community for having come out so strongly against the Bush proposal. But that idea focused on the Social Security retirement system, not the disability program, and the Bush administration and Republicans in Congress wanted to engage with disability groups to ensure any reforms held the disability community harmless. So how did failing to engage them—choosing instead to oppose from the outset—help the disability community?

In truth, early and vocal opposition to personal accounts may have put the disability community at greater risk had the personal account proposal been enacted without disability groups’ technical expertise on how best to structure it. And given both the partisan comments I heard from at least some CCD members at CCD meetings, it’s worth asking whether partisan or ideological concerns—separate and distinct from the interests of the disability community—unduly or improperly influenced the organization’s collective judgment back then.

Their inherent contradictions in the current debate—remaining silent about Obamacare’s unfair Medicaid match rate disparity and Medicare payment caps, while strenuously objecting to Republican attempts to impose payment caps on Medicaid—reinforce those concerns about undue partisanship.

It isn’t always easy stating inconvenient truths—pointing out that laws one doesn’t like should be enforced along with every other law, or where policies proposed by lawmakers with whom one might ordinarily be aligned fall woefully short. But such truth-telling remains an essential ingredient to authenticity and credibility. As I argued last week, I don’t think the disability community has done that in this case. I wish they had.

This post was originally published at The Federalist.

Obamacare and Disability Groups

On Tuesday, a series of groups representing individuals with disabilities organized a series of rallies protesting the House health-care bill and its proposed changes to Medicaid. The rallies, supervised by the Consortium of Citizens with Disabilities (CCD), encouraged advocates to “stand up for people with disabilities” and “join us in saying ‘no’ to over $800 billion in [Medicaid] cuts that will leave 10 million individuals at risk.”

However, the CCD version of events omits several inconvenient truths.

First, the CCD talking points claim that the House’s health care bill would “decimate Medicaid,” in ways that have “nothing to do with” Obamacare. But the Congressional Budget Office (CBO) estimate of the House bill, released late last month, found that over the coming decade, the legislation would reduce Medicaid spending by less ($834 billion) than if Obamacare’s Medicaid expansion had been repealed outright ($903 billion).

Unfortunately, the CBO estimate did not specifically delineate the spending reductions due to the phase-out of the Obamacare expansion versus the other Medicaid reforms (a block grant or per capita spending caps) in the bill. But the idea that repealing just some of the spending associated with Obamacare’s expansion would “decimate” the program seems hyperbolic in extremis.

How Expanding Medicaid Hurts Those with Disabilities

Second, repealing Obamacare’s Medicaid expansion would actually eliminate a major source of discrimination against individuals with disabilities. As I have previously written, the Medicaid expansion gives states a greater incentive to cover able-bodied adults under expansion than individuals with disabilities previously eligible for Medicaid. And states have done just that: Illinois cut medication funding for special needs-children on the same day it voted to expand Medicaid under Obamacare, and Ohio Gov. John Kasich cut eligibility for 34,000 individuals with disabilities, even while expanding the Medicaid program to the able-bodied.

Third, CCD did not speak out against Obamacare’s discrimination against individuals with disabilities prior to the bill’s passage. In a 14-page, single-spaced letter dated January 8, 2010, this coalition of disability groups said not one word about the fact that the proposed legislation gave state Medicaid programs a greater federal match to cover able-bodied adults than individuals with disabilities.

In fact, CCD not only did not object to the way Obamacare discriminates against individuals with disabilities, it wanted to expand that discrimination. The coalition called on Congress to expand Medicaid further up the income scale than the legislation signed into law. Had Congress done so, even more able-bodied adults would have qualified for a higher Medicaid match rate than individuals with disabilities—further entrenching Obamacare’s perverse incentives.

Let’s Be Clear: People’s Lives Are At Stake

Given this history, it’s more than a bit rich for CCD to be calling on Americans to “stand up for people with disabilities,” as it said nothing about an issue of critical importance to those individuals seven years ago. On the one hand, it might be unsurprising that individuals working for disability rights groups—with generally leftist political leanings—did not point out a key flaw in a bill that sought to accomplish the liberal dream of universal health insurance coverage for Americans.

But on the other hand, at least hundreds of individuals with disabilities have died awaiting access to Medicaid services since Obamacare’s enactment. These are just some of the more than half a million individuals with disabilities still on waiting lists for home-based personal care, even as millions of able-bodied adults obtain coverage under Medicaid expansion.

Those individuals might not think that living—or dying—on a Medicaid waiting list was a price worth paying to achieve liberal advocates’ shibboleth. And those advocates might rightly find their own political motivations questioned when they can muster all manner of self-righteous indignation over Republican Medicaid reforms yet say not a word when a Democratic president signs a bill that encourages states to discriminate against individuals with disabilities.

Earlier this year, one of my articles on this topic prompted the mother of an autistic child to e-mail me. Her son had just gotten off of a Medicaid waiting list. Having received messages from one CCD member organization, she worried about what might happen to his care if Congress repealed Obamacare. I told her that repeal would actually help her son—it would prevent states from prioritizing the able-bodied over special-needs children—and then concluded:

My personal view is that some disability groups have chosen to prioritize the general liberal goal of ‘universal health care’ rather than the specific needs of individuals with disabilities they’re supposed to represent. And I think that ultimately does a disservice to individuals like you and your son.

If CCD wants to represent its actual constituents—as opposed to the general wishes of the Left—then it should stop scaring individuals like this mother, and apologize for having stood by while Obamacare created an insidious form of discrimination against individuals with disabilities on Medicaid discrimination. That truly would be “standing up for people with disabilities”—a welcome change indeed.

This post was originally published at The Federalist.

Unwinding Obamacare: Why Congress Must Rescind the Massive Medicaid Expansion

This report was originally published by the Palmetto Promise Institute, and is available in PDF form on their website here.

As Congress prepares to consider legislation repealing and replacing Obamacare in 2017, unwinding that law’s massive expansion of Medicaid should stand at the top of the Congressional agenda. The source of most of the law’s spending, Medicaid expansion has resulted in exploding enrollment, creating state budget shortfalls that legislatures will need to remedy in 2017.

Moreover, Obamacare’s expansion of Medicaid to the able-bodied has undermined Medicaid’s original mission to provide services to the most vulnerable in society—including seniors and individuals with disabilities. The law effectively discriminates against vulnerable populations, providing states with more federal funding to cover the able-bodied than individuals with disabilities. Sadly, even as able-bodied beneficiaries have flooded into Medicaid, hundreds of thousands of individuals with disabilities continue to suffer long waits for needed care.

Congressional Republicans have put forward proposals seeking to reform Medicaid, transforming the program into a system of block grants or per capita allotments that will provide greater flexibility to states in exchange for a fixed federal spending commitment. However, such reforms are necessary—but not sufficient—in reforming the Medicaid program. First and foremost, Congress should take immediate action to unwind Obamacare’s Medicaid expansion, re-orienting the program to serve the most vulnerable populations for which it was originally designed.

History of Medicaid and Obamacare

As originally enacted into law in 1965, the Medicaid program provided federal matching funds to states to cover certain discrete populations, including the blind, seniors, individuals with disabilities, and needy parents. Obamacare changed the program fundamentally by expanding the program to all low-income adults; under Section 2001 of the law, all those with incomes under 138 percent of the federal poverty level (FPL) qualified for Medicaid coverage.[1] The statute as written made expansion mandatory for all states participating in Medicaid. States could decline to expand Medicaid, but in so doing, they would have had to forfeit all federal Medicaid funds, including funds for their existing aged, blind, and disabled populations.

In June 2012, the Supreme Court struck down the mandatory nature of Medicaid expansion as unconstitutionally coercive. Speaking for a seven-member majority, Chief Justice John Roberts concluded that “the threatened loss of 10 percent of a state’s overall budget [i.e., the federal share of Medicaid spending]…is economic dragooning that leaves states with no real option but to acquiesce in the Medicaid expansion.”[2] The Court left the expansion, and the rest of the law, intact, but prohibited the federal government from withholding all Medicaid funds from any states that chose not to pursue the categorical expansion to all adults with incomes under 138 percent FPL.

Because the Supreme Court ruling gave them a free choice about whether or not to embrace Obamacare’s Medicaid expansion, states—the “laboratories of democracy”—have taken different approaches. Some states, fearing that the federal government will renege on its promised high levels of funding, declined to expand. Some states passed a traditional Medicaid expansion, ratifying Obamacare’s massive new entitlement as its authors intended. Other states have utilized a system of premium assistance—also called the “private option”—that uses Medicaid dollars to subsidize private Exchange insurance coverage for individuals qualified for Medicaid under the Obamacare expansion.

Whether through the “private option” or traditional Medicaid, outcomes for states embracing Obamacare’s massive expansion of Medicaid to the able-bodied have been little different. States that have embraced Obamacare’s expansion have faced spiking enrollment and skyrocketing costs, all while perpetuating a system that encourages discrimination against the most vulnerable. Policy-makers should closely examine these cautionary tales as they look to rescind and replace Obamacare.

Exploding Enrollment, Skyrocketing Spending

The evidence among those states that have expended Medicaid demonstrates the massive effects on state budgets—due in large part to skyrocketing enrollment. A recent report by the Foundation for Government Accountability showed how the Medicaid rolls exploded in states that chose to expand the program under Obamacare. In a whopping 24 states that decided to expand, state Medicaid programs exceeded the highest enrollment projections:

  • Arizona predicted a maximum enrollment of 297,000; by September 2016, 397,879 had enrolled in Medicaid;
  • Arkansas predicted a maximum enrollment of 215,000; by October 2016, enrollment had reached 324,318;
  • California predicted a maximum enrollment of 910,000; by May 2016, enrollment had more than quadrupled prior maximum projections, reaching 3,842,200;
  • Colorado predicted a maximum enrollment of 187,000; by October 2016, enrollment hit 446,135;
  • Connecticut predicted a maximum enrollment of 113,000; by December 2015, 186,967 had enrolled;
  • Hawaii predicted a maximum enrollment of 35,000; by June 2015, enrollment had exceeded that projection, reaching 35,622;
  • Illinois predicted a maximum enrollment of 342,000; by April 2016, nearly double that amount—650,653—were enrolled;
  • Iowa predicted a maximum enrollment of 122,900; by February 2016, enrollment had reached 139,119;
  • Kentucky predicted a maximum enrollment of 188,000; by December 2015, enrollment more than doubled the initial expectation, reaching 439,044;
  • Maryland predicted a maximum enrollment of 143,000; by December 2015, enrollment reached 231,484;
  • Michigan predicted a maximum enrollment of 477,000; by October 2016, enrollment exceeded that projection, reaching 630,609;
  • Minnesota predicted a maximum enrollment of 141,000; by December 2015, enrollment hit 207,683;
  • Nevada predicted a maximum enrollment of 78,000; enrollment more than doubled those maximum projections, reaching 187,110 by September 2015;
  • New Hampshire predicted a maximum of enrollment of 45,500; by August 2016, enrollment reached 50,150;
  • New Jersey predicted a maximum enrollment of 300,000; twelve months after expansion began, in January 2015, enrollment totaled 532,917;
  • New Mexico predicted a maximum enrollment of 140,095; by December 2015, enrollment had reached 235,425;
  • New York predicted a maximum enrollment of 76,000; by December 2015, nearly four times as many had enrolled—a grand total of 285,564;
  • North Dakota predicted a maximum enrollment of 13,591; by March 2016, a total of 19,389 had enrolled;
  • Ohio predicted a maximum enrollment of 447,000; by August 2016, enrollment hit 714,595;
  • Oregon predicted a maximum enrollment of 245,000; by December 2015, enrollment hit 452,269;
  • Pennsylvania predicted a maximum enrollment of 531,000; by April 2016, enrollment had hit 625,970;
  • Rhode Island predicted a maximum enrollment of 39,756; in December 2015, enrollment reached 59,280;
  • Washington state predicted a maximum enrollment of 262,000; by July 2016, enrollment had more than doubled the highest enrollment projections, reaching 596,873; and
  • West Virginia predicted a maximum enrollment of 95,000; enrollment in December 2015 hit 174,999.[3]

While Medicaid is considered a counter-cyclical program—one in which enrollment typically rises during recessions, as household incomes shrink and individuals lose access to employer-sponsored coverage—Obamacare’s Medicaid expansion went into effect at a time of steady, albeit slight, economic growth. In other words, Medicaid enrollment under the Obamacare expansion could eventually exceed these figures—even as the actual enrollment numbers themselves exceeded projections prior to implementation, in some cases by several multiples.

By contrast, enrollment in health insurance Exchanges remains far below expectations set at the time of the law’s passage. Just before Obamacare passed in March 2010, the Congressional Budget Office (CBO) concluded that in 2016, the Exchanges would enroll a total of 21 million Americans.[4] For the first half of 2016, the Exchanges averaged enrollment of only 10.4 million—less than half the original CBO projection.[5]

Moreover, an analysis of Exchange enrollees shows enrollment concentrated largely among the individuals who qualify for the largest subsidies. According to an analysis conducted by the consulting firm Avalere Health, 81% of eligible individuals with income below 150 percent FPL—who are eligible for both subsidized premiums and reduced cost-sharing—have selected an Exchange plan.[6] On the other hand, only 16% of those with incomes between 300 and 400 percent FPL—who qualify for modest premium subsidies, but not reduced cost-sharing—have enrolled in Exchange coverage, while only 2% of individuals with incomes above 400 percent FPL—who do not qualify for subsidies at all—have signed up.[7] When it comes to both Medicaid expansion and Exchange coverage, the evidence suggests that only those individuals who receive free, or heavily subsidized, insurance have signed up in great numbers.

Just as enrollment for subsidized Medicaid under Obamacare dramatically exceeded expectations, so too have per-enrollee health costs for Medicaid participants. In the official 2014 report on the state of Medicaid’s finances, government actuaries acknowledged for the first time that per-enrollee costs for Obamacare’s newly eligible Medicaid enrollees ($5,488) exceeded those of previously eligible Medicaid participants ($4,914).[8] Actuaries had previously assumed that per-enrollee costs for the newly eligible population would be 30 percent lower than spending on existing populations—but the actual data suggested otherwise.[9] At the time, the actuaries believed some of the higher Medicaid spending arose because of pent-up demand—newly insured individuals requesting care for long-ignored medical conditions—a phenomenon they suggested might fade over time.[10]

But contrary to the expectations of government actuaries, costs for newly eligible beneficiaries continued to increase for a second straight year in 2015. Whereas the gap between per-enrollee costs for newly eligible beneficiaries and existing beneficiaries stood at approximately $500 in 2014, in the following year the gap grew to over $1,000—an average cost of $6,366 for every newly enrolled adult, versus $5,159 for every adult previously eligible for Medicaid.[11] As a result, the Congressional Budget Office likewise increased their estimates of per-enrollee spending on Obamacare’s Medicaid expansion—at least in the short term.[12] CBO still believes that per-enrollee spending on Obamacare’s Medicaid expansion will stabilize at lower levels over time, despite the evidence that actual costs continue to exceed prior assumptions by sizable margins.

The combination of higher-than-expected enrollment and higher-than-expected enrollee costs has created a “double whammy” for state budgets. While the federal government paid 100 percent of the cost to cover Obamacare’s Medicaid expansion population for the law’s first three years, states must contribute 5 percent of costs for the newly eligible beginning in 2017, rising to 10 percent by 2020—a share proving larger than expected, and one placing fiscal strains on states.

With the new entitlement costing much more than expected, states may have to cut other critically important spending priorities to continue funding Obamacare’s expansion of Medicaid to able-bodied adults. In Kentucky, costs for fiscal years 2017 and 2018 are now estimated at $257 million—more than double the original estimate of $107 million.[13] As a result, education, transportation, corrections, and other priorities will receive $150 million less from the state budget. Ohio’s budget for Medicaid expansion more than doubled from the $55.5 million originally projected, likewise robbing other important state spending programs.[14]

Even Democrats serving in state legislatures have expressed alarm at the rising tide of spending associated with Obamacare’s Medicaid expansion, and the other programs being cannibalized to pay for this new entitlement. In Oregon, facing a $500 million Medicaid-imposed budgetary shortfall over the next three years, Democratic state Senator Richard Devlin noted that “the only way to keep this [budget situation] manageable is to keep those costs under control, get people off Medicaid.”[15] In New Mexico, also facing pressures due to higher-than-expected enrollment, Democratic state Senator Howie Morales expressed anguish over the fiscal choices:

When you’re looking at a state budget and there are only so many dollars to go around, obviously it’s a concern. The most vulnerable of our citizens—the children, our senior citizens, our veterans, individuals with disabilities—I get concerned that those could be areas that get hit.[16]

Sen. Morales’ comments eloquently describe the plight that legislators face. States that expand Medicaid may have to cut important programs for individuals with disabilities, seniors, and the most vulnerable—to provide additional taxpayer funds for an expansion of Medicaid to able-bodied adults.

Undermining the Most Vulnerable

Supporters’ claims to the contrary, Medicaid expansion actually undermines principles of social justice and fairness—in which our society focuses the safety net first and foremost on those unable to provide for themselves. Expanding Medicaid under Obamacare serves only to endorse a horrifically unfair system created by the law, which effectively discriminates against individuals with disabilities—prioritizing coverage of able-bodied adults over protecting the most vulnerable in society.[17]

How does this happen in practice?

In 2013, the congressionally-appointed Commission on Long-Term Care heard testimony about the significant numbers of individuals with disabilities on waiting lists for home- and community-based services (HCBS).[18] Because coverage of HCBS—as opposed to institutional care in a nursing home—remains an optional service for state Medicaid programs, Americans in 42 states remain on lists waiting for access to home-based care.[19] More than 582,000 individuals—including nearly 350,000 with intellectual and developmental disabilities, over 155,000 aged and/or disabled individuals, over 58,000 children, more than 14,000 individuals with physical disabilities, and more than 4,000 Americans with traumatic brain injuries—remain on Medicaid waiting lists.[20] All these individuals could benefit from home-based care that would improve their quality of life, and could keep them from requiring more costly nursing home care in the future—yet they must wait in the Medicaid queue, in many cases for years on end.

Yet even as more than half a million Americans with disabilities wait for service, Obamacare prioritizes coverage of able-bodied adults over treating the most vulnerable—providing states as much as 45 cents on the dollar more to cover the able-bodied than individuals with disabilities. In 2017, the law provides a federal match for expansion populations—that is, individuals with incomes under 138 percent of the federal poverty level—of 95 percent, dipping slightly to 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and future years.[21] Conversely, states wishing to expand coverage to individuals with disabilities—to eliminate their Medicaid waiting lists—will receive only the normal Medicaid matching rate, which for the current fiscal year ranges from 50 percent to 75 percent, based on states’ relative income.[22] In other words, in 2017, states will receive at least 20 cents, and as much as 45 cents, more on the dollar for covering able-bodied adults than they will ending waiting lists for individuals with disabilities seeking care.

Sadly, some states have responded to Obamacare’s perverse incentives in predictable ways. In the few years since the law took effect, the most vulnerable in society have suffered, while able-bodied adults received a new, taxpayer-funded entitlement:

  • A recent report from Illinois found that 752 individuals with disabilities died while awaiting access to home- and community-based services since Obamacare’s expansion took effect. Ironically enough, on the very day that Illinois voted to expand Medicaid to the able-bodied early, it also cut funding for medication and services provided to special needs children.[23]
  • In Arkansas, while Gov. Asa Hutchison pledged to cut his state’s waiting list for individuals with disabilities in half, instead it has grown by 25 percent—even as Hutchison has embraced Medicaid expansion to the able-bodied. The individuals waiting for care include ten-year-old Skylar Overman, whose mother worries she will die before she ever receives access to the in-home care she needs.[24]
  • In Ohio, Gov. John Kasich’s administration cut Medicaid eligibility for 34,000 individuals with disabilities, even while expanding the program to the able-bodied.[25]

Any law that results in these types of inequities—the most vulnerable cast aside to hasten access to care for the able-bodied—cannot be considered compassionate or just.

The disparities and perverse incentives present in Obamacare apply to South Carolina just as much as they do in other states. The law provides massive incentives for South Carolina to expand Medicaid to these able-bodied adults—many of whom may be unemployed or under-employed—rather than ending waiting lists for individuals with disabilities. In fiscal year 2017, South Carolina will receive a 71.3 percent match from the federal government for the traditional Medicaid program—including coverage for individuals with disabilities.[26] Yet Obamacare will provide a 95 percent match should the state choose to expand Medicaid to able-bodied adults. Effectively, the law provides South Carolina with nearly 25 cents more on the dollar should the state discriminate against the most vulnerable in our society.

South Carolina has rightly rejected the effective discrimination perpetuated by Obamacare, for multiple reasons. The state has a list of 5,656 individuals with disabilities waiting to receive HCBS.[27] Providing enough funding to end the Medicaid waiting list should stand as the state’s pressing health care priority—not expanding health coverage to able-bodied adults, many of whom would exceed the income limits to qualify for Medicaid if they pursued full-time employment. The fact that Washington does not agree with South Carolina’s decision to prioritize the most vulnerable—because federal officials want the state to put the able-bodied, rather than individuals with disabilities, at the head of the Medicaid line—is a reason for Washington to change its priorities, not South Carolina.

Not a Panacea for Hospitals

In many states debating the future of Medicaid under Obamacare, hospital associations have served as the biggest supporters of expansion. Hospitals claim that expanding Medicaid will result in substantial improvements to their bottom line, making the difference between facilities remaining open or shutting their doors. Unfortunately, however, Medicaid expansion will not make a meaningful impact on hospitals’ bottom line.

In September 2016, staff at the non-partisan Congressional Budget Office (CBO) released a report illustrating the minimal impact of Medicaid expansion on hospitals’ profitability.[28] The paper analyzed the effects of several changes associated with Obamacare on two variables: hospitals’ aggregate profit margin nationwide, and the percentage of hospitals with negative margins. The analysis estimated these two factors in 2025, and compared hospital profitability with 2011, before most of Obamacare’s major provisions took effect.

The CBO analysis found that, under the best possible scenario, hospitals will fare no better in 2025 than they did prior to Obamacare’s major provisions taking effect—and they could fare much worse. A scenario that coupled the law’s Medicare payment reductions with its coverage expansions yielded a best-case scenario similar to the status quo ante: about one quarter of hospitals with negative profit margins (26% in 2025, versus 27% in 2011), and an aggregate margin of 6.0% in both cases.[29] However, should hospitals fail to achieve the productivity gains contemplated under Obamacare, margins will fall significantly—with as many as half of all hospitals having a negative profit margin by 2025, and the industry as a whole barely profitable.[30] Thanks to Obamacare, hospitals will struggle mightily just to tread water—and many may end up sinking financially.

The CBO paper also specifically examined whether all states expanding Medicaid would make a material impact on its analysis. Would a broader expansion of insurance coverage overcome the damaging fiscal effects of Obamacare’s Medicare payment reductions? CBO concluded that broader Medicaid expansion would have a minor impact:

Differing assumptions about the number of states that expand Medicaid coverage have a small effect on our projections of aggregate hospitals’ margins. That is in part because the hospitals that would receive the greatest benefit from the expansion of Medicaid coverage in additional states are more likely to have negative margins, and because in most cases the additional revenue from the Medicaid expansion is not sufficient to change those hospitals’ margins from negative to positive. Moreover, the total additional revenue that hospitals as a group would receive from the newly covered Medicaid beneficiaries…is not large enough relative to their revenues from other sources to substantially alter the projected aggregate margins.[31]

Despite claims from some hospital executives that Medicaid expansion represents a make-or-break financial decision for their industry, non-partisan experts disagree.

The real problem for hospitals lies elsewhere within Obamacare, in the Medicare productivity adjustments that will affect hospitals each and every year. The Medicare actuary, along with other non-partisan experts, has made annual warnings every year since the law’s passage concluding the productivity reductions are unsustainable, and will make most hospitals, skilled nursing facilities, and home health agencies unprofitable in the coming decades.[32] The September CBO report confirms, and further validates, the Medicare actuary’s work highlighting the unrealistic nature of the payment reductions used to fund Obamacare.

As has been explained elsewhere, hospitals made a terribly unwise bargain when negotiating behind closed doors with the Obama Administration: They agreed to annual reductions in their Medicare payments forever in exchange for a one-time increase in the number of insured Americans.[33] Hospital lobbyists themselves know full well that the agreement they negotiated will ultimately destroy the industry.

At a televised event in August 2010, months after the law passed, Chip Kahn—the CEO of the Federation of American Hospitals, which represents the for-profit hospital industry—admitted his knowledge of Obamacare’s long-term effects on the hospital sector.[34] Then-Medicare actuary Richard Foster asked Kahn why hospitals agreed to what appears on its face to be a bad deal: Perpetual Medicare payment reductions in exchange for a one-time increase in insured Americans. Mr. Kahn first claimed that “from the hospital industry standpoint, there never was any kind of illusion that this was some kind of standard that we could meet in terms of improving quality”—even though the law itself assumes that hospitals will become more productive year-over-year, and reduces their Medicare payments accordingly.[35] When pressed on this issue—what will happen to the hospital industry when these year-on-year reductions cascade over time—Mr. Kahn eventually threw up his hands: “Now, you could say, did you make a bad deal? And fortunately, I don’t think I’ll probably be working after 2020. [Laughter.]…I’m glad my contract only goes another six years. [Laughter.]”[36]

The candid comments by the head of the Federation of American Hospitals months after the law passed say it all. In endorsing Obamacare, hospital lobbyists knew they were agreeing to provisions that would decimate their industry in the long run—but didn’t care, because those devastating provisions would only take effect well after they had retired. These incredibly cynical comments provide two additional reasons for legislators not to embrace Medicaid expansion. As both the CBO analysis and Mr. Kahn’s comments indicate, expanding Medicaid will not solve hospitals’ financial difficulties, which arise from a self-inflicted blow—namely, agreeing to massive Medicare payment reductions that overwhelm the comparatively small revenue gain associated with Medicaid expansion. But while expanding Medicaid will not save hospitals in the long term, it will serve to sink state budgets, leaving them with the worst of both worlds on the fiscal front.

Work Disincentives

Supporters of Medicaid expansion claim that the additional federal funds generated by expansion have created jobs and economic growth. In reality, expanding Medicaid has only created additional disincentives for work, according to non-partisan economic experts.

Many studies claiming Medicaid expansion will create jobs represent one-sided—and therefore highly biased—analysis, examining the federal revenue flowing into states as a result of expansion without studying the impact of the tax increases necessary to generate said revenue. However, many studies—including a seminal analysis undertaken by President Obama’s former chief economic adviser, Christina Romer—find that the economic damage—in technical terms, the deadweight losses associated with Obamacare’s tax increases—will vastly outweigh any job gains associated with Medicaid expansion.[37]

Ironically, one of the architects of Obamacare disputes the economic theories put forward by Medicaid expansion proponents. In a New York Times op-ed, former Obama Administration advisor Zeke Emanuel stated that “Health care is about keeping people healthy or fixing them up when they get sick. It is not a jobs program.”[38] Likewise, two Harvard economists note that viewing the health system as a jobs program will ultimately increase spending and raise health costs, limiting access for the poor: “Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.”[39]

Rather than creating jobs, the Congressional Budget Office (CBO) believes that Medicaid expansion will discourage work. In part of its 2014 update on Obamacare’s effects on the labor supply—in which CBO asserted that the law as a whole will reduce the supply of labor provided by the equivalent of 2.5 million jobs by 2024—the budget office noted that “expanded Medicaid eligibility under [the law] will, on balance, reduce incentives to work.”[40] For instance, individuals who exceed Medicaid eligibility limits by even one dollar could face hundreds, or thousands, of dollars in premiums and co-payments to obtain subsidized Exchange coverage; such workers will likely work fewer hours to keep their income below eligibility caps.

Medicaid expansion will discourage work precisely because most of the participants in the expansion are able-bodied adults of working age. According to analysis conducted by the liberal-leaning Urban Institute, nearly nine in ten individuals (88.1%) who would benefit from Medicaid expansion in South Carolina represent adults without dependent children.[41] Moreover, the vast majority of South Carolinians to be covered under expansion would come within the ages of 19-55—prime working ages for most Americans. More than one-quarter (27.6%) of would-be beneficiaries of expansion are aged 19-24, with a further 21.9% aged 25-34, and more than one-third (35.5%) aged 35-54.[42]

The Urban Institute data strongly suggest that the vast majority of the potential beneficiaries from Medicaid expansion in South Carolina constitute individuals who could be in work, or preparing for work. Indeed, many South Carolinians working full-time would generate enough income not to qualify for benefits under Medicaid expansion. In 2016, 138 percent of the federal poverty level represents an income of just under $16,400 for an individual.[43] A South Carolinian working a full-time job (40 hours per week, 50 weeks per year) at a wage of $8.25 per hour would earn $16,500 annually, thereby exceeding the limit to qualify for Medicaid benefits.

However, CBO believes the Medicaid “benefit cliff” will discourage individuals from working, precisely because they wish to remain eligible for benefits. A December 2015 CBO paper quantified this impact: Analysts concluded that Obamacare’s Medicaid expansion will reduce beneficiaries’ labor force participation by about 4 percent, by “creat[ing] a tax on additional earnings for those considering job changes” that would raise their income above the threshold for eligibility.[44]

While Obamacare’s massive expansion of Medicaid to the able-bodied discourages work and will reduce the labor supply, unwinding the expansion will produce salutary economic effects. Tennessee’s decision to roll back a Medicaid coverage expansion in 2005 encouraged more individuals to join the labor force, in order to obtain employer-sponsored health coverage.[45] If states wish to grow their economies and encourage work, unwinding Obamacare provides a better approach to achieving those objectives.

“Private Option” Results in Greater Public Spending

While some supporters of Medicaid expansion believe that the so-called “private option”—using Medicaid dollars to purchase Exchange coverage for beneficiaries—represents an efficient use of taxpayer dollars, evidence suggests otherwise. In 2012, immediately following the Supreme Court ruling that made Medicaid expansion optional for states, the Congressional Budget Office (CBO) considered expansion through health insurance Exchanges significantly more costly than expansion through traditional Medicaid:

For the average person who does not enroll in Medicaid as a result of the [Supreme] Court’s decision and enrolls in an Exchange instead, estimated federal spending will rise by roughly $3,000 in 2022—the difference between estimated additional Exchange [premium and cost-sharing] subsidies of about $9,000 and estimated Medicaid savings of roughly $6,000.[46]

Providing Medicaid beneficiaries private coverage through the insurance Exchanges could cost approximately 50% more, according to CBO’s 2012 estimate—a concern other non-partisan experts have flagged.

Government auditors have raised significant concerns that the “private option” waiver method of providing coverage improperly wastes taxpayer funds. In an August 2014 report, the Government Accountability Office (GAO) noted that, when approving the first instance of this “private option” model in Arkansas, the federal Department of Health and Human Services (HHS) “did not ensure budget neutrality,” which is required under federal law, in three key areas:

  • “HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs—significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program—without requesting any data to support the state’s assumptions.” GAO concluded that these higher payment assumptions increased the program’s budget caps by $778 million—or nearly 20% of the approximately $4.0 billion, three-year budget for the program.
  • “HHS gave Arkansas the flexibility to adjust the spending limit if actual costs under the demonstration proved higher than expected…one which HHS has not provided in the past.”
  • “HHS in effect waived its cost-effectiveness requirement that providing premium assistance to purchase individual coverage on the private market prove comparable to the cost of providing direct coverage under the state’s Medicaid plan—further increasing the risk that the demonstration will not be budget-neutral.”[47]

The GAO report illustrates how, in order to ensure that Arkansas endorsed Obamacare’s massive new entitlement, federal officials raised the budgetary caps required under law so high that they became nearly meaningless—and then gave Arkansas officials discretion to raise them even higher. Such actions represent a disservice to taxpayers in all states, including South Carolina. The GAO report demonstrates why unwinding the law’s Medicaid expansion—in all its forms, including the “private option”—represents the wisest way to protect taxpayer funds.

How to Unwind Obamacare’s Medicaid Expansion: Congress

As Congress considers legislation to repeal Obamacare in January 2017, it should embark on a three-step approach to unwind the law’s massive Medicaid expansion:

  • First, Congress should take action to freeze enrollment in the Medicaid expansion immediately after enactment of the repeal bill. Freezing enrollment will hold those currently on Medicaid harmless, while beginning a process to roll back the higher levels of spending associated with Medicaid expansion.
  • Second, Congress should roll back the enhanced federal match for expansion populations, consistent with budget reconciliation legislation that Congress passed, and President Obama vetoed, during the 114th Congress.[48] Ending the enhanced federal match by 2019 will eliminate the discrimination inherent in Obamacare—whereby states receive a higher match to cover able-bodied adults than individuals with disabilities.
  • Third, Congress and states should reorient Medicaid towards the vulnerable populations for which the program was originally designed. Added flexibility from Congress, and the incoming Trump Administration, will allow states to achieve additional savings in their Medicaid programs—savings that will permit states to achieve other important priorities, like reducing waiting lists for individuals with disabilities seeking access to home-based care.

While proposals to transform Medicaid into a block grant or per capita allotment would give states welcome flexibility from Washington’s dictates, lawmakers must focus first on unwinding Obamacare’s Medicaid expansion—and eliminating distortions to the program caused by same. Any block grant or Medicaid funding formula that uses the years 2014 through 2017 as a “base year” will perpetuate the inequities caused by the Obamacare expansion—the massive enrollment of able-bodied adults, and the increased spending by states that used the prospect of a 100% federal match to increase Medicaid reimbursements. States that made the policy choice to keep Medicaid focused on the most vulnerable in society should not be penalized by a block grant formula that rewards those states who embraced Obamacare’s expansion of Medicaid to the able-bodied.

How to Unwind Obamacare’s Medicaid Expansion: The States

The states also have a role, albeit a limited one, in the undoing of Obamacare’s massive Medicaid expansion. As state legislatures reconvene, they can:

  • Continue to resist calls for expanding Medicaid to able-bodied adults. No state is expected to expand or choose a “private option” scheme in their new legislative terms, but fiscally responsible legislators should nevertheless arm themselves with the facts of this paper and prepare for misguided calls for subjecting more states to the excessive costs of Medicaid expansion.
  • Pass resolutions memorializing Congress to resist attempts to retain any of the core principles of Obamacare, including Medicaid expansion, as having a negative impact on state budgets and state policies. Both with respect to the costs of Medicaid expansion, and with respect to skyrocketing premiums in health insurance Exchanges, states and consumers alike are begging for relief from Obamacare. If enough states call for a top to bottom repeal and replace of Obamacare, including Medicaid expansion, consumers will win.
  • Prepare for possible common sense solutions, formerly known as “Obamacare off-ramps,” that will insure freedom for the insured without bullying businesses or individuals into plans they don’t like and doctors they don’t want. Members of both the United States House and Senate previously introduced such plans in the last Congress.[49] The new Trump Department of Health & Human Services, and specifically the Centers for Medicare and Medicaid Services (CMS), should provide guidance on blanket waivers designed to maximize flexibility for state Medicaid programs immediately upon taking office.[50]

Need for Reform

Even prior to Obamacare, Medicaid stood as a program in need of significant reform. The program has nearly tripled as a share of state budgets since 1987, yet provides beneficiaries with care of questionable quality.[51] Results from Oregon suggest that newly enrolled individuals in Medicaid used the emergency room at rates 40 percent higher than the uninsured—a disparity that persisted over time—yet did not achieve measureable improvement in their physical health outcomes.[52] With high (and growing) levels of spending coupled with subpar outcomes, states should use the flexibility promised from the Trump Administration to rethink their approach to Medicaid.

However, such efforts should come only after Congress has first backed down Obamacare’s massive expansion of Medicaid to the able-bodied. Restoring Medicaid as a safety net program for the most vulnerable in society would unwind more than $1 trillion in projected spending over the coming decade providing coverage to the able-bodied.[53] Just as important, it would remove the inequities created by Obamacare, and put all states on a level playing field for the reformed Medicaid program that should follow.

Mr. Jacobs is the Founder and CEO of Juniper Research Group, a policy research and consulting firm.



[1] Patient Protection and Affordable Care Act, Public Law 111-148, as amended by the Health Care and Education Reconciliation Act, Public Law 111-152, http://housedocs.house.gov/energycommerce/ppacacon.pdf, Section 2001(a).

[2] NFIB v. Sebelius, 567 U.S. __ (2012).

[3] Jonathan Ingram and Nicholas Horton, “Obamacare Expansion Enrollment Is Shattering Projections,” Foundation for Government Accountability, November 16, 2016, https://thefga.org/download/ObamaCare-Expansion-is-Shattering-Projections.PDF, p. 5.

[4] Congressional Budget Office, estimate of H.R. 4872, Health Care and Education Reconciliation Act, in concert with H.R. 3590, Patient Protection and Affordable Care Act, March 20, 2010, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf, Table 4, p. 21.

[5] Centers for Medicare and Medicaid Services, “First Half of 2016 Effectuated Enrollment Snapshot,” October 19, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-10-19.html.

[6] Avalere Health, “The State of Exchanges: A Review of Trends and Opportunities to Grow and Stabilize the Market,” report funded by Aetna, October 2016, http://go.avalere.com/acton/attachment/12909/f-0352/1/-/-/-/-/20161005_Avalere_State%20of%20Exchanges_Final_.pdf, Figure 3, p. 6.

[7] Ibid.

[8] The numbers in parentheses represent revised 2014 data cited in the 2015 actuarial report, based on actual spending patterns. The numbers initially cited in the 2014 actuarial report were $5,514 for newly eligible adults, and $4,650 for previously eligible adults.

[9] Centers for Medicare and Medicaid Services Office of the Actuary, “2014 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2014, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2014.pdf, pp. 36-37.

[10] Ibid.

[11] Centers for Medicare and Medicaid Services Office of the Actuary, “2015 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2015, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2015.pdf, p. 27.

[12] For an analysis of the ways that the Medicare actuary’s office and CBO have changed their baseline projections of Medicaid spending over time, see Brian Blase, “Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems,” Mercatus Center, September 2016, https://www.mercatus.org/system/files/mercatus-blase-medicaid-structural-problems-v1.pdf, pp. 15-20.

[13] Christina Cassidy, “Rising Cost of Medicaid Expansion is Unnerving Some States,” Associated Press October 5, 2016, http://bigstory.ap.org/article/4219bc875f114b938d38766c5321331a/rising-cost-medicaid-expansion-unnerving-some-states.

[14] Ibid.

[15] Christina Cassidy, “Medicaid Enrollment Surges, Stirs Worry about State Budgets,” Associated Press July 19, 2015, http://www.bigstory.ap.org/article/c158e3b3ad50458b8d6f8f9228d02948/medicaid-enrollment-surges-stirs-worry-about-state-budgets.

[16] Ibid.

[17] See also Chris Jacobs, “How Obamacare Undermines American Values: Penalizing Work, Citizenship, Marriage, and the Disabled,” Heritage Foundation Backgrounder No. 2862, November 21, 2013, http://www.heritage.org/research/reports/2013/11/how-obamacare-undermines-american-values-penalizing-work-marriage-citizenship-and-the-disabled.

[18] The author served as an appointee to the commission, whose work can be found at www.ltccommission.org.

[19] Kaiser Family Foundation, “Waiting List Enrollment for Medicaid Section 1915(c) Home- and Community-Based Services Waivers,” Kaiser Commission on Medicaid and the Uninsured 2015 survey, http://kff.org/health-reform/state-indicator/waiting-lists-for-hcbs-waivers/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.

[20] Ibid.

[21] Section 2001(a) of PPACA.

[22] “Federal Financial Participation in State Assistance Expenditures,” Federal Register November 25, 2015, pp. 73781-82, Table 1, https://aspe.hhs.gov/sites/default/files/pdf/167966/FMAP17.pdf.

[23] Nicholas Horton, “Hundreds on Medicaid Waiting List in Illinois Die While Waiting for Care,” Illinois Policy November 23, 2016, https://www.illinoispolicy.org/hundreds-on-medicaid-waiting-list-in-illinois-die-while-waiting-for-care-2/.

[24] Jason Pederson, “Waiver Commitment Wavering,” KATV June 15, 2016, http://katv.com/community/7-on-your-side/waiver-commitment-wavering.

[25] Chris Jacobs, “Obamacare Takes Care from Disabled People to Subsidize Able-Bodied, Working-Age Men,” The Federalist November 18, 2016, http://thefederalist.com/2016/11/18/obamacare-takes-care-disabled-people-subsidize-able-bodied-working-age-men/.

[26] “Federal Financial Participation,” Table 1.

[27] Kaiser Family Foundation, “Waiting List Enrollment.”

[28] Tamara Hayford et al., “Projecting Hospitals’ Profit Margins Using Several Alternative Scenarios,” Congressional Budget Office Working Paper 2016-04, September 2016, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51919-Hospital-Margins_WP.pdf.

[29] Ibid., Table 6, p. 29.

[30] Ibid.

[31] Ibid., p. 34.

[32] For the most recent version, see John Shatto and Kent Clemens, “Projected Medicare Expenditures under an Illustrative Alternative Scenario,” Office of the Actuary, Centers for Medicare and Medicaid Services, June 22, 2016, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2016TRAlternativeScenario.pdf.

[33] Chris Jacobs, “The Report Every State Legislator Should Read,” National Review September 27, 2016, http://www.nationalreview.com/article/440411/obamacare-medicaid-expansion-hospitals-wont-benefit-says-cbo.

[34] American Enterprise Institute, “Medicare after Reform: the 2010 Medicare Trustees Report,” August 6, 2010, video available through C-SPAN at https://www.c-span.org/video/?c4402939/chip-kahn.

[35] Ibid.

[36] Ibid.

[37] Chris Conover, “Will Medicaid Expansion Create Jobs?” Forbes February 25, 2013, http://www.forbes.com/sites/chrisconover/2013/02/25/will-medicaid-expansion-create-jobs/#73893e3e3d25.

[38] Ezekiel Emanuel, “We Can Be Healthy and Rich,” New York Times February 2, 2013, http://opinionator.blogs.nytimes.com/2013/02/02/we-can-be-healthy-and-rich/.

[39] Kate Baicker and Amitabh Chandra, “The Health Care Jobs Fallacy,” New England Journal of Medicine June 28, 2012, http://www.nejm.org/doi/full/10.1056/NEJMp1204891.

[40] Congressional Budget Office, “The Budget and Economic Outlook: 2014 to 2024,” February 2014, http://cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf, Appendix C: Labor Market Effects of the Affordable Care Act: Updated Estimates, pp. 117-27.

[41] Genevieve M. Kenney et al., “Opting in to the Medicaid Expansion Under the ACA: Who Are the Uninsured Adults Who Could Gain Health Insurance Coverage?” Urban Institute, August 2012, p. 9, Appendix Table 2, http://www.urban.org/sites/default/files/alfresco/publication-pdfs/412630-Opting-in-to-the-Medicaid-Expansion-under-the-ACA.PDF.

[42] Ibid., p. 8, Appendix Table 1.

[43] “Annual Update of the HHS Poverty Guidelines,” Federal Register January 25, 2016, pp. 4036-37, https://www.gpo.gov/fdsys/pkg/FR-2016-01-25/pdf/2016-01450.pdf.

[44] Edward Harris and Shannon Mok, “How CBO Estimates Effects of the Affordable Care Act on the Labor Market,” Congressional Budget Office Working Paper 2015-09, December 2015, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51065-ACA_Labor_Market_Effects_WP.pdf, p. 12.

[45] Craig Garthwaite, Tal Gross, and Matthew Notowidigdo, “Public Health Insurance, Labor Supply, and Employment Lock,” National Bureau of Economic Research, NBER Working Paper 19220, July 2013, http://www.nber.org/papers/w19220.

[46] Congressional Budget Office, “Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” July 2012, https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/43472-07-24-2012-CoverageEstimates.pdf, p. 4.

[47] Government Accountability Office, “Medicaid Demonstrations: HHS’ Approval Process for Arkansas’ Medicaid Waiver Raises Cost Concerns,” Report GAO-14-689R, August 8, 2014, http://www.gao.gov/assets/670/665265.pdf, p. 3.

[48] Section 207 of H.R. 3762, Restoring Americans’ Health Care Freedom Reconciliation Act of 2015.

[49] Palmetto Promise Institute, “King v. Burwell: The Obamacare Off-Ramp?” Health Care Fast Facts May 2015, http://www.kbcsandbox4.com/palmetto/wp-content/uploads/2015/05/King-v-Burwell-Fast-Facts.pdf.

[50] Chris Jacobs, “Reforming Medicaid, Beginning on Day One,” Chris Jacobs on Health Care December 12, 2016, http://www.chrisjacobshc.com/2016/12/12/reforming-medicaid-beginning-on-day-one/.

[51] National Association of State Budget Officers, Fiscal Survey of States: Spring 2016, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Reports/Spring%202016%20Fiscal%20Survey%20of%20States-S.pdf, p. 63; National Association of State Budget Officers, 1996 State Expenditure Report, April 1997, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/ER_1996.PDF, Table 3, p. 11.

[52] Amy Finklestein et al., “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment,” New England Journal of Medicine October 20, 2016, http://www.nejm.org/doi/full/10.1056/NEJMp1609533; Katherine Baicker, et al., “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine May 2, 2013, http://www.nejm.org/doi/full/10.1056/NEJMsa1212321.

[53] Congressional Budget Office, baseline estimates for federal subsidies for health insurance, March 2016, https://www.cbo.gov/sites/default/files/recurringdata/51298-2016-03-healthinsurance.pdf, Table 3, p. 5.

How Obamacare Discriminates Against the Most Vulnerable

As previously predicted, many in the press have tried to define the Obamacare debate through the prism of the individuals newly insured by the law. One article has highlighted the election “through the eyes of Obamacare enrollees.” Liberal groups are trotting out studies—studies debunked years ago by a member of the Obama Administration—that claim repealing Obamacare would hasten the deaths of tens of thousands of Americans annually, due to lack of insurance coverage.

But what about Obamacare’s forgotten faces? What about the people who, instead of obtaining coverage because of Obamacare, didn’t obtain coverage because of Obamacare? What about the people with disabilities who quite literally have died on waiting lists to receive care—not despite Obamacare, but because of it?

Instead of talking about how Obamacare “ended discrimination against people with pre-existing conditions,” what about how Obamacare encourages discrimination against the most vulnerable?

The People That Obamacare Doesn’t Help

I’m talking about the individuals with disabilities—more than half a million nationwide—still on waiting lists to receive services, because Obamacare encourages states to expand Medicaid coverage to able-bodied adults, instead of serving them. They include people like Lindsey Overman and her 10-year-old daughter Skylar:

“She [Skylar] was born with a rare medical neurological condition called schizencephaly,” Overman told us.
In the past three months Skylar’s condition has worsened. Last month she had surgery to relieve pressure on her brain and her family is paying $400 per month just for transportation to and from a summer program. A Medicaid waiver would help with the costs that go along with at-home care for children with disabilities.
Skylar remains #754 on the waiver waiting list.

Because Obamacare encourages states to expand Medicaid to able-bodied adults, rather than provide services to individuals with disabilities like Skylar, the 10-year-old continues to wait—and wait, and wait—for needed care, which her mother thinks she will never see during her daughter’s lifetime.

Obamacare Favors the Able-Bodied, Not the Disabled

It’s Obamacare’s dirty little secret, and perhaps its most shocking. For the past three years, the law has provided 100 percent federal funding for states that expand Medicaid to new populations. That funding will phase down slightly beginning in January—the federal match drops to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and future years. But for the populations that qualified for Medicaid prior to Obamacare, the federal government provides a match rate that this fiscal year ranges from 50 percent to 75 percent, based on states’ relative income.

Estimates from the Urban Institute suggest that most individuals eligible for Obamacare’s Medicaid expansion are childless adults in their prime working years. Nationally, more than four in five (82.4 percent) of the would-be eligible adults are those without dependent children. More than five in six (86.1 percent) of the would-be eligible adults are aged 19 to 54.

In other words, the overwhelming majority of the adults covered under Medicaid expansion are able-bodied adults of working age. Yet Obamacare provides states with anywhere from 20 to 40 cents more on the dollar to cover these able-bodied adults in the expansion population than the individuals who qualified for Medicaid prior to Obamacare—including seniors and individuals with disabilities.

There Are Waiting Lists for Individuals with Disabilities

When serving on the congressionally-appointed Commission on Long-Term Care in 2013, I heard much about the waiting lists for care that individuals with disabilities face. Because Medicaid requires coverage of nursing home care, but considers home and community-based services (HCBS) optional, states facing fiscal pressures can—and most do—put individuals with disabilities on waiting lists to receive HCBS care. These individuals may benefit from home-based care—which could help keep them out of nursing homes—but cannot receive it, due to budget restrictions imposed by states.

The latest national estimates provide a sense of the magnitude of the problem. A total of over 582,000 individuals, in 42 different states, remain on waiting lists for home and community-based services, including:

  • 349,511 individuals with intellectual or developmental disabilities;
  • 155,697 aged, or aged and disabled, individuals;
  • 14,128 individuals with physical disabilities;
  • 58,635 children with disabilities; and
  • 4,006 individuals with traumatic brain injury.

At a time when more than half a million individuals with disabilities continue to wait for access to critically important personal care, Obamacare has provided a greater federal match to states that expand Medicaid to able-bodied adults. By giving states a strong incentive to expand Medicaid to new populations—and ignore the hundreds of thousands of individuals with disabilities still on waiting lists—Obamacare discriminates against the most vulnerable in our society.

Obamacare Doesn’t Help The Most Vulnerable

A report issued on Wednesday by the Foundation for Government Accountability highlights how Medicaid rolls have exploded under Obamacare—and how individuals with disabilities have suffered as a result. In Illinois, on the same day state legislators implemented an early Medicaid expansion for Cook County, they also voted to cut traditional Medicaid, costing one patient his access to seizure medication. In Ohio, Gov. John Kasich’s administration, even while expanding Medicaid to the able-bodied under Obamacare, cut eligibility for more than 34,000 individuals with disabilities.

And then there’s Arkansas—home of Skylar and Lindsey Overman, the 10-year-old standing at #754 on a waiting list. While Gov. Asa Hutchinson pledged to cut his state’s Medicaid waiting list in half, in reality the list has grown by nearly 25 percent in the past three years—a time when Arkansas expanded Medicaid under Obamacare. According to state estimates reviewed by the Foundation for Government Accountability, 79 individuals with developmental disabilities have died on the Medicaid waiting list since the state expansion took effect. I’ll say that again: Since Arkansas expanded Medicaid to the able-bodied, 79 individuals with disabilities have died on lists waiting for access to Medicaid services.

Conservatives Shouldn’t Ignore the Plight of the Disabled

In responding to the threat of Obamacare repeal, the left seems eager to develop a “parade of horribles” revolving around individuals who fear losing coverage under an Obamacare alternative. Yet those same groups have singularly failed to notice the tragic stories already in front of them—the individuals with disabilities facing discrimination, and an inability to access needed care, because of Obamacare itself.

Conservatives who have seen the results of this law on individuals with disabilities have no reason—none—take a back seat on the compassion front to any Obamacare supporter. Any measure that encourages states to discriminate against the most vulnerable represents a twisted view of compassion indeed.

This post was originally published at The Federalist.