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The new Medicaid wrinkle that could build GOP support for the health bill

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Senate Republicans are considering a key tweak to Medicaid spending caps, multiple congressional aides and lobbyists told me. That change could help build support for the bill, softening the cuts and assuaging senators that their states won't come up short under the new GOP vision for the program.

It doesn't alter the underlying overhaul Republicans want, taking Medicaid from a truly open-ended entitlement to a program with a spending limit. But it's still notable, both for the bill's policy and its politics.

This tweak could, in the eyes of its supporters, make the Senate bill's Medicaid cuts less painful. Remember that the House bill was projected to cut Medicaid spending by $830 billion over 10 years and lead to 14 million fewer people being enrolled in the program versus current law.

But other experts dispute that, arguing it could actually lock in even deeper cuts to the program.

Either way, this change might be one of the fig leaves that could help those Republican senators focused on Medicaid get on board with the bill. Several of those members, like Sen. Rob Portman of Ohio and Sen. Shelley Moore Capito of West Virginia, have started to come around, signaling an openness to, for example, eventually ending Obamacare's Medicaid expansion. It could also reassure some other senators who worried that their state would get a raw deal.

The Senate is weighing whether to reset the baseline for the spending caps every two or three years. The House bill, by contrast, would have created a baseline based on 2016 spending and then left it in perpetuity, increasing the cap every year by a metric linked to consumer spending on health care but nothing else.

It sounds like a technicality — and it is — but it would be an important change to how the spending cap would work. The GOP wants to give states a set amount of money for each Medicaid enrollee; the baseline is one of the key features of that plan. To calculate the amount, you have to start somewhere — the baseline is the starting point.

Under the House plan, which sets a baseline and leaves it, the risk is that health care spending trends would change dramatically 10 years down the line and the caps would be unable to adjust. The caps do increase based on that inflation index, another key feature that we have covered here at VoxCare. But if spending trends get too out of whack compared to that index, there is little recourse for getting the Medicaid caps back into line with what's happening in the real world.

Resetting the cap's baseline could help avoid that problem, supporters of the concept told me. If every couple of years the baseline was adjusted to reflect the past few years of Medicaid spending, the theory is that the caps would better reflect real-world trends.

"This points in the direction of understanding that you do have to accept reality is not a smooth curve," said Joe Antos, who studies Medicaid at the right-leaning American Enterprise Institute.

The Trump administration (and its successors) would have some crucial choices to make in actually implementing the idea, Antos said. Like how to account for unpredictable and singular events, like a flu outbreak or the Zika virus, and to make sure states aren't punished when the baseline is recalculated for reducing spending, as Republicans hope they will.

But other experts argued changing the baseline could actually deepen the Senate bill's Medicaid cuts. At the very least, it does not change the fundamental overhaul the GOP Congress wants to make to put a spending cap on the nation's single-largest insurer.

"I am uncertain what the net effect would be," Matt Fiedler at the Brookings Institution told me. "Certainly, there is no basis for confidence that this type of proposal would meaningfully address the downsides of a per capita cap for states and beneficiaries."

He said that for states that spend significantly less than the cap, once the baseline is recalculated, they could end up with even lower spending caps than they would have without recalculating the baseline. Over time, that could press down Medicaid spending even further.

"The cumulative effect of this 'one-way ratchet' could be very significant," Fiedler said. There is also some risk of states gaming the system, adjusting their spending during years when they know there will be a reset.

No final decisions have been made yet, of course. But it's a key change to watch for whenever we see the Senate's plan.

Oh, and Tom Price's Senate hearing:

I felt like one of the few watching the HHS secretary testify before the Senate Finance meeting. There was no breaking news, but a few important moments:

  • Price refused to give any certainty on the Obamacare cost-sharing reduction payments. The Trump White House has openly held those payments hostage, and insurers are citing that uncertainty as they pull out of the law's marketplaces. But when Sen. Debbie Stabenow pressed him on that point, Price would not commit to the payments being made.
  • He talked his way out of the GOP's proposed Medicaid cuts. Trump is pretty directly breaking his promise not to slash the program, both in the House health care bill and in his budget. Price has said too that Medicaid won't be cut. Price said that because spending would still increase, just not as much, it wasn't really a cut. Even conservative wonks I've talked to think that's disingenuous.

"We are trying to decrease the number of uninsured." Another headscratcher. As you well know, the Congressional Budget Office has estimated 23 million fewer Americans would have insurance in 2026 under the House bill. Price said the CBO has gotten it wrong before, but even most rosier estimates from conservative wonks expect some kind of increase in the uninsured rate.

Chart of the Day

Map of the United States showing the percentages of children covered by Medicaid in Small Towns and Rural Areas Rural Health Policy Project

Where children depend most on Medicaid. Medicaid is an essential insurer for kids in many rural areas and small towns — 45 percent of children in those areas are covered by the program, according to this new report. Read more from researchers at Georgetown and UNC.

Kliff’s Notes

Your daily top health care reads, with research help from Caitlin Davis

Today's top news

  • "Trump ‘all in’ on Senate Obamacare repeal": “President Donald Trump is increasingly invested in Senate passage of a bill to repeal Obamacare, realizing that a successful vote in the upper chamber will provide a major boost to his domestic agenda, say Republicans who have spent time with him recently.” —Burgess Everett and Josh Dawsey, Politico
  • "The leading Medicaid plan in the Senate": “The Senate's current leading option for how to revise Medicaid is to phase out the Affordable Care Act's expansion more slowly than the House did, but grow a per-person funding cap at the same rate as the House bill, according to two GOP aides. This isn't a final plan, but it is the recommendation Majority Leader Mitch McConnell made to Senate Republicans on Tuesday.” —Caitlin Owens, Axios
  • "Exclusive: GOP lawmaker talked stocks with colleagues": “Rep. Chris Collins (R-N.Y.) has boasted about how much money he’s made for other members of Congress by tipping them off to an Australia-based pharmaceutical company in which he is the largest stockholder, two GOP lawmakers told The Hill.” —Scott Wong, The Hill

Analysis and longer reads

  • "State Medicaid Lessons For Federal Health Reform": “Evidence remains sparse on whether policies to increase enrollee engagement and responsibility have reduced program costs. However, the experience of states with 1115 waivers can offer useful lessons on the design and effectiveness of these types of Medicaid reforms.” —Melinda Buntin, John Graves, and Nikki Viverette, Health Affairs
  • "Former Pharma Reps’ New Mission: To School Docs On High Drug Costs": “Capital District Physicians’ Health Plan (CDPHP) is one of the few insurers to have taken the battle against pricey pills a step further. It is recruiting across enemy lines, hiring former pharma representatives and staffing what may be a new job category: a sales force for cost-effective medicine.” —Jay Hancock, Kaiser Health News

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