The frenetic final days of the debate over the American Health Care Act in the House of Representatives focused largely on patients with preexisting medical conditions — but not on sweeping cuts to Medicaid, which have the potential take health care from tens of millions of Americans.
A massive expansion of the Medicaid program was one of the key pillars of the Obama administration’s Affordable Care Act, and the AHCA rolls it back in a sneaky way. That rollback will deprive millions of vulnerable people of health insurance on its own terms if the bill is ever enacted in its current form. But the AHCA actually goes even further with Medicaid cuts — enacting broad cuts to the program’s spending that compound over time, offsetting a massive package of tax cuts for the rich.
And while leading Republicans are claiming that you can somehow take $880 billion out of a program to provide health care to the poor, elderly, and disabled without harming patients’ interests, that seems extremely unlikely.
The larger truth is conservative politicians once had a sweeping vision of rolling back all of America’s big entitlement programs — Medicaid, Medicare, and Social Security — to prevent population aging and rising health care costs from inexorably pushing the country toward bigger government and higher taxes. Under Donald Trump, that agenda has gotten far less attention, perhaps because he’s promised to protect Social Security and Medicare, or perhaps because of his emphasis on culture war and immigration politics.
But the effort to smuggle large Medicaid cuts into Obamacare repeal is real. And its failure or success as the Senate takes up Obamacare repeal will reveal if this is either the last gasp of a fading small-government crusade or the start of a welfare state rollback effort that will eventually expand to cover Medicare and Social Security as well.
The AHCA sneakily reverses Obamacare’s Medicaid expansion
The conceptual centerpiece of the Affordable Care Act was and is the new health care marketplaces on which patients can buy subsidized, regulated private health insurance plans. This is where the famous bar on price discrimination against patients with preexisting conditions came in, along with the infamous mandate to purchase health insurance and, of course, the sliding-scale subsidies that are designed to guarantee affordability.
A problem legislators faced when trying to turn this broad vision into legislation is that private health insurance in the United States is very expensive, so guaranteeing its affordability to low-income families is very hard.
Medicaid, a government program that simply compensates health care providers at stingy rates, is much cheaper than private insurance. So the ACA’s authors chose to expand it to cover all families with incomes below 138 percent of the poverty line, rather than shelling out the money it would have cost to have the government pay for them to buy private insurance.
The AHCA reverses this expansion. But to avoid the criticism that the law throws poor children off their health insurance, it reverses it in a somewhat sneaky way. Rather than taking Medicaid away from families who have it, it simply caps new enrollments in Medicaid so no new poor families can sign up. But the way this cap works, you can’t get back on Medicaid if you go off of it. So a poor family that gets a raise and becomes non-poor for a year will lose access to Medicaid permanently.
And poor families become non-poor, then poor again, frequently. A study by Harvard's Benjamin Sommers and George Washington University's Sara Rosenbaum found that fewer than half of people eligible for the Medicaid expansion stay continuously eligible over the course of a year. Only 20 percent are continuously eligible over four years. This structure avoids a dramatic short-term collapse in Medicaid enrollment, but it ensures that over the long run, the expansion is entirely reversed. The Congressional Budget Office estimated that 14 million fewer poor families would end up with insurance under AHCA, “a reduction of about 17 percent relative to the number under current law.”
The AHCA includes cuts to Medicaid beyond Obamacare repeal
The reversal of the ACA’s Medicaid expansion is important, but on another level it’s exactly what you would expect from a law that’s advertised as repealing Obamacare. What’s a good deal less obvious is that such a law would include a sweeping, across-the-board cut to the entire Medicaid program in a way that’s unrelated to any ACA changes.
But the bill also includes some dramatic, and far less publicized, changes to Medicaid as it existed even prior to the Affordable Care Act. The biggest is the adoption of a policy 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 a 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.
Tthe CPI measures consumer spending, so the medical component “approximates what households spend out of pocket” on health care: premiums, deductibles, coinsurance, etc. More importantly, the medical component is growing more slowly than Medicaid costs are expected to grow right now, according to the Center on Budget and Policy Priorities. So switching to a per capita cap is a federal cut of about $116 billion to Medicaid over 10 years.
Per capita caps could have perverse consequences
A truly pure per capita cap — one that simply looked at the number of people enrolled and cut states a check based on that number — would have somewhat ridiculous consequences.
That’s because there are several kinds of Medicaid-eligible people: low-income children, disabled people, senior citizens in need of long-term care, and a relatively small number of able-bodied adults. The cost of covering a senior citizen or a person with a serious disability is considerably higher, on average, than the cost of covering a low-income child. So a pure per capita cap system — what’s typically known as a “block grant” — would encourage states to drop as many members of high-cost classes as possible.
The AHCA, as written, avoids that by including separate caps for different groups of beneficiaries — the elderly, disabled, non-elderly adults, etc.
However, there is still a lot of variation in cost within those categories. “Within your elderly group, you have the young and old, 67-year-olds and 85-year-olds, and the latter are much more expensive,” Joan Alker, a Medicaid expert at Georgetown University, told Vox’s Dylan Matthews. A state like Florida, which has a large senior population, could see costs rise fast as its population ages with time. But a per capita cap wouldn’t keep up with that. To get around that, the state might be motivated to kick off older seniors and focus enrollment on younger ones.
Disability rights activists, as a result, are appalled by the per capita cap plan. “People with disabilities who rely on home- and community-based services through Medicaid — such as personal-attendant care, skilled nursing, and specialized therapies — could lose access to the services they need in order to live independently and remain in their homes,” the Center for American Progress’s Rebecca Vallas, Katherine Gallagher Robbins, and Jackie Odum note.
The only way to avoid creating an incentive for state governments to act like insurance underwriters who try to deny coverage to high-need populations would be to drop the cap concept entirely and do what Medicaid currently does: cover the cost of treatment.
The GOP used to have a much bigger anti-entitlement agenda
If you think back to George W. Bush’s term in office, the Republican Party used to be sharply divided in its message on immigration issues but united behind a bold rollback of America’s entitlement programs. The Bush-era GOP wanted to privatize Social Security and had a vision for privatizing Medicare. Privatization flopped in Congress, but during Obama’s presidency, Paul Ryan leaned hard on the idea of Medicare privatization and steep cuts in Medicaid spending via a block granting scheme.
I was the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare & Medicaid. Huckabee copied me.— Donald J. Trump (@realDonaldTrump) May 7, 2015
Trump turned that on its head, campaigning loud and proud against cuts to Social Security or Medicare and even promising to leave Medicaid untouched.
The Medicaid piece of this was always fuzzy and unclear, since Trump promised to repeal Obamacare even more loudly than he promised not to cut Medicaid, even though repealing necessarily entails a big cut to Medicaid.
After Trump unexpectedly won the 2016 presidential election, Ryan swiftly moved to exploit Trump’s lack of detailed policy knowledge to push for his entire agenda — including cuts to Medicare and Medicaid — to be enacted.
“When Obamacare became Obamacare, Obamacare rewrote Medicare, rewrote Medicaid, so if you’re going to repeal and replace Obamacare, you have to address those issues as well,” Ryan said in a Fox News interview. “What people don’t realize is that Medicare is going broke, that Medicare is going to have price controls. Because of Obamacare, Medicaid is in fiscal straits. So you have to deal with those issues if you’re going to repeal and replace Obamacare. Medicare has got some serious problems because of Obamacare. Those things are part of our plan to replace Obamacare.”
Ryan, in short, wanted to redefine massive cuts to Medicare as part of repealing Obamacare, something that it is unlikely anyone who listened to Trump on the campaign trail would have understood him to be promising. In the end, Ryan didn’t go that far when writing the AHCA. But the Trump administration is staffed with a health and human services secretary and an Office of Management and Budget director who are both longtime proponents of giant cuts to both Medicare and Medicaid. And both Ryan and the Trump administration ended up getting behind the AHCA — an Obamacare repeal bill that also steeply cuts Medicaid.
Medicaid cuts are the most important part of the AHCA
All of the AHCA’s provisions are important. But the Medicaid cuts are the most significant part. On the one hand, in dollars and cents terms they are simply the biggest part of the bill. Financially speaking, the AHCA is essentially a $600 billion tax cut for rich families paid for by an $880 billion cut in Medicaid benefits for poor families. On the other hand, the Medicaid population by definition comprises the most vulnerable people in the country.
But beyond that, the fate of Medicaid in the 2017-’18 legislative process will be key to understanding the medium-term ideological trajectory of the United States.
If cuts broadly along these lines pass the Senate and are signed into law by Trump, it will signal that the welfare state rollback agenda is still alive and well and Social Security and Medicare are still potentially on the chopping block. Trump promised not to touch them, of course, but he also promised to withdraw from NAFTA, designate China as a currency manipulator, and avoid cuts to Medicaid. The promises of the former proprietor of Trump University simply aren’t worth very much.
But if moderate Senate Republicans act to save Medicaid, as they’ve been saying they will, then the transformation of American politics into something that is no longer primarily about the size and scope of federal safety net programs will be ratified.