GOP’s Obamacare repeal plan caps Medicaid funding at states’ peril | McClatchy Washington Bureau

An estimated 10 million people could lose health coverage under the Republican plan to repeal Obamacare – most of them as they lose access to the nation’s foremost health care program for low-income families: Medicaid.

And that would mean a big challenge for states who must decide how to make up for shortfalls and handle any increased health care funding needs among their residents.

In congressional Republicans’ new legislation to repeal and replace the Affordable Care Act, they would slash federal Medicaid spending by capping it at a predetermined amount per recipient beginning in 2019.

A new analysis by S&P Global on Tuesday projected the GOP bill would cause 2 million to 4 million of those with individual health insurance to lose coverage, and another 4 million to 6 million Medicaid recipients to lose coverage from 2020 to 2024.

“The proposal put forth by congressional Republicans will hurt low-income people, the elderly, people with disabilities and those who need long-term care, while providing a tax break for the wealthy and shifting unaffordable costs onto the states,” said Democratic Gov. Jay Inslee of Washington state in a statement Tuesday.

Inslee said the GOP proposal would cut $1 billion in federal Medicaid funds to the state and eliminate coverage for more than 600,000 Washingtonians.

Those federal cuts mean that states would either have to make up the funding shortfall through higher taxes or cut program spending by limiting enrollment, cutting benefits or cutting payments to Medicaid providers. The GOP plan is likely to give states added flexibility to do all three.

Possible scenarios include lowering income eligibility thresholds, eliminating coverage for some groups, like single, childless adults, or requiring enrollees to fulfill work or job search requirements and denying coverage to those who don’t meet the new program rules.

State Medicaid funding under the new formula, called “per capita caps,” will depend on how much a state historically spends for its various categories of enrollees: the aged, children, pregnant women, people with disabilities and childless adults.

A study last month by Avalere, a health care consulting firm in Washington, estimates that per capita caps would cut federal Medicaid spending by $110 billion over five years.

“And it gets dramatically larger in the out years, so it’s probably around four times that for the 10-year score. It gets bigger every single year,” said Caroline Pearson, senior vice president at Avalere.

In 1965, when Medicaid first began offering health coverage to low-income Americans and those with disabilities, only 4 million people were enrolled.

Today, Medicaid is the nation’s largest insurer, with nearly 69 million enrollees, most of whom are at or near the poverty line and work in low-wage jobs that provide no health coverage.

Medicaid’s growth reflects its open-ended funding formula, which increases when the need is greatest.

The state and federally funded health plan for the poor and those with disabilities has repeatedly expanded its coverage and services to accommodate those struggling with HIV and AIDS, the opioid epidemic, high infant mortality rates, Zika and other public health scourges.

But 70 percent of Medicaid’s spending growth is due to increased enrollment.

If the capped funding had been in place from 2001 to 2008, Avalere found 24 states would have seen their federal Medicaid funding increase, while 17 others and the District of Columbia would have seen funding cuts of up to 15 percent. Nine states would have experienced cuts ranging from 16 percent to 30 percent.

While the Congressional Budget Office hasn’t scored the GOP bill, Pearson said she thought estimates that 15 million to 20 million people could lose coverage under the measure were overblown.

A recent report by The Commonwealth Fund said the caps “fail to take into account that even within a single beneficiary category, some individuals are much more expensive to cover than others.”

Generally, high-income states that have typically spent more on Medicaid would get larger allotments under the per capita funding formula, according to research by the Urban Institute.

Under the new GOP proposal, a state’s per capita allotment will be based on its Medicaid spending in 2016 and adjusted to reflect the medical cost component of the consumer price index, which has grown by an average of 3.8 percent a year over 10 years, said Matthew Buettgens, a senior research analyst at the Urban Institute.

Medicaid spending, however, grows about 4 to 4.5 percent a year, so many states will see a reduction in their funding in 2019 when the per capita system is slated to begin, Buettgens said.

“That rate is one way in which the per capital allotment will grow at a slower rate than Medicaid is expected to grow,” Buettgens said.

The 31 states, and the District of Columbia, that expanded Medicaid will take an even bigger hit under the Republican plan.

The per capita caps would maintain program funding during enrollment spikes due to downturns in the economy, said Diane Rowland, executive vice president of the Kaiser Family Foundation. But funding wouldn’t rise under the cap system for unexpected increases in the cost of services or programming during public health emergencies.

The GOP legislation allows newly eligible Medicaid expansion enrollees to get enhanced federal funding – which covers no less than 90 percent of their medical costs – as long as they are enrolled before Jan. 1, 2020.

After that date, medical costs for Medicaid expansion enrollees would be covered at the state’s basic Medicaid matching rate, which can be anywhere from 50 to 80 percent depending on the state.

“That’s a pretty sizable drop,” Buettgens said of lowering the federal reimbursement rate. “Many of the expansion states tend to have lower match rates and a lot of the Southern and Western states that didn’t expand have higher match rates.”

Washington is one state that would see its matching rate for expansion enrollees fall from more than 90 percent to 50 percent under the GOP plan.

State officials estimate that in five years, the state would end up covering half the costs for their expansion population. In 10 years, the state would be covering all expansion enrollees at the lower reimbursement rate. That would cost the state an additional $1.4 billion in 2017 dollars, officials said.

Under the Affordable Care Act, spending for the nation’s newly eligible beneficiaries is projected to reach $806 billion over 10 years, according to federal estimates, with $741 billion, about 92 percent, to be paid by the federal government.

Per capita caps have been proposed by Democrats and Republicans alike to help make the program more financially sustainable.

“But when they talk about making Medicaid sustainable, what they’re talking about is making Medicaid sustainable for its share of the federal budget – not as a health program to meet the needs of the low-income population,” Rowland said.