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How the GOP plan to change Medicaid punishes the working poor

Explained in a cartoon.

The whole idea behind the Affordable Care Act, the bill Republicans in Congress are now moving to replace, was to make sure more Americans who couldn’t afford health insurance gained coverage. And that’s pretty much how it has worked out. Today, many of the 20 million Americans who became insured through the ACA are the working poor.

They are also the group that’s going to hurt the most if the Republicans go ahead with their Obamacare repeal and replace plan, the the American Health Care Act. To understand why this is so devastating, let’s step back and take a look at the progress that was made for America’s poor under the ACA.

Before the ACA, these people often couldn’t afford to pay for private health insurance — and also weren’t eligible for Medicaid, the government health insurance program for low-income Americans. In most states, only children and parents, pregnant women, or the disabled were eligible.

Then Obamacare came along in 2010 and changed that: Suddenly anyone whose family income fell below 138 percent of the federal poverty level (about $15,000 for an individual) was eligible for government health insurance. The federal government also offered states funding to pay for all the new enrollees in the program.

A majority of the states (32 including Washington, DC) took the money, expanding Medicaid.

And it’s no surprise. The feds offered up a pretty sweet deal. The states and the federal government share the cost of Medicaid. But the feds paid a lot more for Medicaid expansion enrollees, matching 100 percent of the states’ costs for the first three years, with a plan to phase down to 90 percent by 2020 and beyond.

Compare that with traditional Medicaid enrollees, whose costs are only partly matched by the federal government based on a formula tied to the state’s wealth. (Richer places such as New York get a 50 percent match for Medicaid, while the feds pay poorer states like Mississippi up to 73 cents for every Medicaid dollar they spend.)

The ACA’s Medicaid push was a huge success. Of the 20 million who got health insurance through Obamacare, at least half of them got it as a result of Medicaid expansion.

Medicaid expansion has also been shown to improve the health and well-being of enrollees on a number of measures. It improved people’s access to care, so they get the medical attention they need. It helped relieve depression. It reduced their financial strain. It improved their diabetes care. It also boosted their perceptions of their health and well-being — which is key to improving overall health and reducing mortality risk in the long run. (Other researchers have found Medicaid expansion has likely averted tens of thousands of deaths each year.)

Medicaid expansion has meant a great deal to Emerson Slain, a Louisiana native and nonprofit worker with no children. In the past, he paid for private insurance when he could afford it or had a job that gave him generous coverage, or he went without it. He finally got Medicaid through his state’s expansion last year, and now he has some security.

But if the Republicans in Congress leading the charge to replace the ACA get their way, Emerson and the millions like him may soon lose this safety net again. Their latest replacement plan, called the American Health Care Act, puts Medicaid — and particularly Medicaid expansion — in jeopardy.

The most recent plan, which will go to a vote today, includes what essentially amount to cuts to Medicaid through changes in how it’s funded. Right now the federal government matches all the dollars states spend on Medicaid. But Republicans are proposing a new plan, to kick in in 2020, whereby the feds will only match Medicaid spending to a certain fixed amount.

If states exceed that cap, they’re on the hook for 100 percent of their Medicaid costs. Because Medicaid spending can fluctuate a lot year to year — depending on the cost of drugs, for example, or any health crises that arise — a cap system like this could be really punishing to state economies. Researchers project the change will amount to a $280 billion cost shift to states over 10 years.

And that might put them in the position of having to pare down Medicaid services, limit coverage, or drop people from the program altogether.

After 2020, Republicans also want to end Medicaid expansion entirely, which means the federal government would no longer help states pay for those extra enrollees — the working poor, like Slain — who weren’t eligible for Medicaid before the ACA.

States may decide to stop offering health care to this group. Or if they keep this Medicaid eligibility category, they won’t get as much money for their enrollees. The federal match rate would come down to the regular rate the government was paying states for Medicaid before the ACA. So Medicaid expansion is suddenly a less attractive proposition.

According to Congressional Budget Office, the proposed GOP changes will mean 14 million people are dropped from the program by 2026.

This new Republican plan will most certainly put ACA Medicaid expansion enrollees like Slain in a particular jam. In 2020, when Medicaid expansion ends, Slain’s health insurance status wouldn’t be secure anymore. The government would only continue to match spending on him if he maintains continuous Medicaid coverage by staying below 138 percent of the federal poverty level. So he could face a tough choice: either stay poor to keep his health insurance or risk being dropped from the program. For all the people living in poverty who don’t get on Medicaid expansion before 2020, the future is even more uncertain.

If all goes smoothly in Congress, the House votes on the bill today. The reality for low-income Americans who depend on Medicaid could change fast.

Special thanks to Medicaid researchers Joan Alker and Benjamin Sommers, who helped us with background for this explainer.

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