The American Health Care Act — House Speaker Paul Ryan's and President Donald Trump's proposal to replace Obamacare — was in its original form a truly massive cut to Medicaid. It slashed the program by $880 billion over 10 years, according to the Congressional Budget Office. It would eventually unwind the Medicaid expansion included in the Affordable Care Act and slash the yearly growth rate for Medicaid spending, forcing states to provide worse coverage or to kick people off the rolls.
Now it’s about to get harsher.
The “manager’s amendment” changing the legislation, which is set to be released Monday night by House leaders and expected to be adopted through a House Rules Committee vote before the full House votes on Thursday, includes new provisions cracking down on Medicaid beneficiaries. The changes would allow states to impose work requirements on able-bodied childless adults getting Medicaid, and to receive funding in a "block grant" that doesn't rise at all with enrollment, which would likely amount to a still-larger cut.
The amendment would also eliminate federal funding for Medicaid beneficiaries making over 133 percent of the poverty line — a cut that would hurt states like New York that have generous Medicaid programs. And it would cut off states’ ability to join the Medicaid expansion immediately, before phasing out the expansion for states that joined before March 1 of this year.
The measures were reportedly adopted to win over House conservatives, like Republican Study Committee’s leader Rep. Mark Walker (R-NC), who vocally opposed the bill at first. Walker is now on board with the plan after securing the Medicaid changes. “The president asked us specifically: Would we support him on this American Health Care Act [with the increased Medicaid restrictions]," Walker told the Washington Post's Mike DeBonis. "We all agreed, to a man.”
The original legislation was already a historic cut to aid for the poor. “No legislation enacted in recent decades cut low-income programs this much — or even comes close,” the Center on Budget and Policy Priorities’ Robert Greenstein told me when the CBO’s score was released. But the two new provisions — allowing work requirements and enabling states to take a block grant — are both major changes that will diminish access to Medicaid even further. They make a bill that already represented a historic cut to the health care safety net for poor Americans even more harmful.
Work requirements are ineffective across the board but especially on health care
Work requirements are one of those ideas that have some intuitive appeal to taxpayers and voters — why should we pay taxes to help people who aren’t even working? — but which in practice don’t do much of anything to encourage work or cut poverty.
The best evidence we have on work requirements comes from experiments conducted in states in the late 1980s and early '90s, when the federal government gave out waivers to let state and local governments experiment with welfare-to-work approaches. Those experiments were usually done rigorously, with recipients randomly assigned to traditional welfare or welfare-to-work programs.
Last year, Center on Budget and Policy Priorities' LaDonna Pavetti took a look back at that experimental literature. In most studies, welfare requirements really did lead to an increase in the share of recipients working, in the first year or two. But only three experiments out of 13 still found significant positive results after five years; two experiments actually found that work requirements reduced one’s odds of working five years later. Overall, the policy didn’t seem to promote work much at all.
Even when work requirements worked, the effects were modest. The program in Riverside, California, the most effective at promoting work of the ones Pavetti analyzed, raised the percentage of welfare recipients working by 5 percentage points by year five. That's good, but it was ultimately an increase from 39.9 percent to 44.9 percent. Huge numbers were left not working and were no longer eligible for benefits either. Worse, subsequent research suggested that the Riverside program’s success at promoting work was a fluke, the product of an already stronger local economy rather than any reforms.
Indeed, Riverside's work requirements did not significantly change poverty rates, relative to a control group without requirements. In only two out of 13 experiments, in Atlanta and Portland, did work requirements significantly cut poverty, and even then the effect size was small. In Portland, 83.4 percent of those not subject to work requirements were in poverty, but so were 79.4 percent of those subject to them.
The evidence, Pavetti concluded, was clear: In most cases, work requirements didn’t cause more people to work, and when they do, the effect was small, and didn’t typically lead to much poverty reduction. The idea underlying work requirements — that there’s a large number of people on public assistance who should be working and aren’t because of laziness or inertia or whatever — just isn’t true.
“Too many disadvantaged individuals want to work but can’t find jobs for reasons that work requirements don’t solve,” Pavetti writes. “They lack the skills or work experience that employers want, they lack child care assistance, they lack the social connections that would help them identify job openings and get hired, or they have criminal records or have other personal challenges that keep employers from hiring them.”
Most of the evidence we have on work requirements come from traditional cash welfare, where work requirements have been in effect since the 1996 welfare reforms. But even some supporters of work requirements in that context, and for programs like food stamps, oppose applying them to adults on Medicaid, because the guarantee of emergency room care makes the promise to cut off aid if work requirements aren’t met an empty threat.
Robert Rector, a fellow at the Heritage Foundation who’s a leading proponent of work requirements and was a major champion of the 1996 law, has argued that “work requirements for medical services would be almost impossible to administer and enforce … The work requirement would reduce Medicaid enrollments, but Medicaid costs might well go up because the eligible ABAWDs [able-bodied adults without dependent children] would go to the emergency room rather than receive routine care elsewhere.”
Block-granting could damage Medicaid by even more than a “per-capita cap”
Currently, the American Health Care Act slashes Medicaid below its pre-Obamacare level through a tool known as a “per-capita cap.”
Currently, the federal government matches state spending on Medicaid, offering about $1 to $2.79 for every dollar states spend on it (with a bigger match for poorer states). The AHCA would change all that. Starting in 2020, rather than matching state Medicaid spending, the AHCA would give each state the set amount of money per person. The amount would grow from year to year according to the medical component of the Consumer Price Index, to account for inflation.
The medical component of CPI is growing more slowly than Medicaid costs are expected to grow right now, according to CBPP. So switching to a per capita cap is a federal cut of about $116 billion to Medicaid over 10 years. That will almost certainly mean worse care or fewer enrollees. Medicaid is a much more efficient form of insurance than private care, so there’s not much waste to be wrung from it:
Unlike a block grant, which just gives states a big lump of cash to spend as they will, a per capita cap is at least somewhat responsive to changes in Medicaid enrollment. The AHCA also includes separate caps for different groups of beneficiaries — the elderly, disabled, non-elderly adults, etc. — so states can’t get more money by dumping lots of seniors in favor of 24-year-olds. And the managers’ amendment actually helps the elderly and disabled a bit relative to the old plan by increasing the per-person cap on disabled and nursing home beneficiaries by CPI-M+1 percentage a year, instead of just CPI-M.
However the manager’s amendment would also allow states could opt for a full block grant instead, at least for their non-disabled, non-elderly populations. That would give states a fixed amount of money every year, regardless of how many people they enroll. And the amount would grow only with the normal inflation rate — slower than Medical inflation, and with no allowance for population growth at all. That would almost guarantee massive cuts over time, as the population rises and medical costs continue to grow faster than ordinary inflation.
States would respond to those cuts, in all likelihood, by kicking people off the rolls and offering those who remain worse health care. Washington & Lee University law professor Timothy Jost writes that states choosing a block grant "would be given considerable flexibility in determining which populations they would cover … and the services they would provide to them."
A block grant would also prevent the program from swelling in recessions, when more people’s incomes fall below the eligibility line and rely on the program. A per capita cap allows more federal spending in situations like that. A block grant doesn’t.
There are some federal requirements as to who states must cover in Medicaid, but they only go so far, and most states now provide additional coverage that they can roll back. “You do have to cover people on Supplemental Security Income” — a program for disabled, elderly, and blind people with low incomes — ”but a lot of folks in nursing homes [are] optional coverage,” Georgetown Medicaid expert Joan Alker told me a few weeks ago.
More analysis is needed on the exact block grant structure included in the legislation to see how much more severe its effects would be relative to a per capita cap. But all indications are that the provision would amount to an even larger cut.