Why Medicaid is central to health-care debate

Some Republicans argue that the burgeoning program has become fiscally unsustainable, but advocates say it's more cost-effective than private insurance or Medicare.

Kevin Lamarque/Reuters
A protester calling for 'no cuts to Medicaid' is escorted away by police after being arrested during a demonstration outside Senate Majority Leader Mitch McConnell's constituent office after Senate Republicans unveiled their healthcare bill on Capitol Hill in Washington on June 22, 2017.

Republican senators unveiled their long-anticipated healthcare plan to replace Obamacare on Thursday, and it includes significant changes to Medicaid, the joint federal-state program for the poor, elderly, and disabled.

The bill, which does not yet have the support of enough senators to pass, reflects the ongoing tussle of costs vs. social benefits that sharply divides the two parties as well as Republicans themselves.

Like the Republican legislation that passed the House in May, the draft bill put forward by Senate Republican leaders aims to rein in federal spending on the burgeoning program a move they say will strengthen it in the long term. But over time, that will mean substantial cuts to some of the country’s highest-need populations, say advocates – though the full scope of those cuts won’t be known until the independent Congressional Budget Office releases its report on the Senate bill early next week.

“Medicaid is fiscally unsustainable,” says Steve Kelly, spokesman for Sen. Pat Toomey (R) of Pennsylvania, the senator who represented the GOP conservative viewpoint on Medicaid as the bill took shape behind closed doors.

Thirty years ago, Medicaid accounted for less than 3 percent of federal spending. Today, it’s nearly 10 percent. About one fifth of the US population is enrolled in it, according to a Congressional Research Service 2015 report. It pays for almost half of all births. It’s the single biggest payer for substance abuse treatment. It helps rural hospitals stay afloat and supports jobs in the health sector. It covers nursing homes for the elderly and long-term care for the disabled.

America’s rising health-care costs – among the highest in the world – account for some of the growth in spending over the years, but most of it is due to increased enrollment in the program. When recessions hit, that ups the rolls because people lose their jobs and health insurance. Various vulnerable population groups have also been expanded incrementally over the years – such as children and pregnant women in the 1980s.

But a big addition came with the Affordable Care Act, which raised the income eligibility of Medicaid to allow more low-income Americans access to its services. About 11 million newly eligible people have enrolled in Medicaid under the ACA’s expansion provision, helping to drop the percent of uninsured in America to a historic low.

Medicaid’s costs have swelled, yes, but it is also less expensive per person than Medicare, which covers seniors, and less costly than private health insurance. Some see it as a good deal that provides essential services to America’s most vulnerable populations.

“It’s important to note that this program, relative to other players, has a pretty good cost per enrollee,” says Rachel Garfield, a Medicaid expert at the Henry J. Kaiser Family Foundation, a health-policy research organization. “It also serves some of the highest-need individuals in the nation.”

And there’s another aspect to the cost issue. Unlike the common notion of jobless “welfare queens” draining federal coffers, two-thirds of Medicaid is actually spent on people with disabilities and the elderly. The remaining third covers children and other adults, who actually make up 75 percent of the enrollees.

“To get at cost growth, you have to address in very tangible ways those very difficult to manage populations of the frail elderly and disabled,” says Daniel Derksen, a physician and the director of the Center for Rural Health at the University of Arizona in Tucson. With more baby boomers retiring, the need to support long-term care of the aged will substantially increase, not decrease, experts point out.

How it differs from the House bill

When the nonpartisan Congressional Budget Office analyzed the House Republicans’ American Health Care Act, it estimated that the bill’s structural changes to Medicaid would amount to an $834 billion cut to the program over 10 years and the loss of 14 million enrollees. The House bill has a public approval rating of 17 percent and President Trump called it “mean.”

Senate Republicans look like they’ve tried to round some of the sharp edges of the House version. Their draft, too, does away with the individual and employee mandates for insurance coverage and ends many of the taxes that supported Obamacare. Both plans allow young adults to remain on their parents’ health insurance plans.

But unlike the House bill, the Senate version ties tax-credit assistance for purchasing insurance to income, geography, and age, rather than mostly on age, so that older Americans take less of a hit. And it ensures coverage for consumers with pre-existing conditions.

On Medicaid, the Senate and House bills both fundamentally change the program from an open-ended, federal guarantee to pay at least 50 percent of a state’s Medicaid costs, to one that caps spending to the states.

The Senate version rolls back federal support for Obamacare’s Medicaid expansion more slowly than the House version. But it uses a less generous inflation index for the program than the House would, meaning less money over the long term.

Republican questions, opposition

These changes “strengthen Medicaid,” according to the summary of the bill by the Senate Budget Committee, by giving states more flexibility. “Those who rely on this program won’t have the rug pulled out from under them,” it maintains, pointing, for instance, to a guarantee that children with medically complex disabilities will be covered.

But others say the changes will result in significant cuts that put the most vulnerable populations at risk. The Senate bill is close enough to the House bill to expect Medicaid “cuts on a similar scale,” says Ms. Garfield at Kaiser. “These are not changes on the margin,” she says.

Dr. Derksen is blunt about his view of the effect of both bills. “There’s really no plausible way a state can provide the benefits to the elderly, blind, and disabled through Medicaid with these massive cuts.”

Already four conservative Republican senators say they will not support the bill as it stands because it does not do enough to repeal Obamacare. Moderate Republicans from states that have expanded Medicaid or rely heavily on it are carefully studying the bill and are likely to have questions.

The bill is expected to move to the floor next week where it will be open to amendments. Republicans can only afford two defections, with Vice President Mike Pence breaking a tie. It’s going to be a dramatic week with much at stake.

(Editor's note: This story was updated to correctly identify the factors which determine eligibility for tax credits under the Senate plan.)

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