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May 18, 2017 · OPINION

AHCA would eliminate Medicaid coverage for millions

By Bob Gettings

The federal government would sharply reduce medical assistance (Medicaid) payments to the states under a health reform bill approved by the U.S. House of Representatives on May 4.

The American Health Care Act (AHCA, HR 1628) would phase out Medicaid benefits for individuals with income under 138 percent of the federal poverty level (FPL) and cap federal financial participation (FFP) in program costs for the first time in the 52-year history of the program.

The Affordable Care Act of 2010 adopted two major strategies for reducing the number of uninsured Americans: expansion of Medicaid eligibility and underwriting the costs of private health insurance for other persons with low and moderate incomes.

Media attention has focused mainly on acquiring government subsidized coverage through federal and state-run insurance exchanges. However, more than 60 percent of the 20+ million individuals who have obtained health insurance coverage since the passage of the ACA – a total of some 14 million persons – have been enrolled in the Medicaid programs in states that have elected to expand eligibility.

Effective Jan.1, 2020, the AHCA would terminate enhanced federal matching ratios for the 32 states that chose to expand Medicaid eligibility prior to March 1, 2017.

The 19 non-expansion states, including Virginia, would be eligible to receive federal safety-net funding during a five-year transition period ending in 2022. This funding would be drawn from a special, $10-billion pool, allotted among the qualifying states based on the proportional number of individuals with income below 138 percent of the FPL (currently $20,420 for a family of three).

The House-passed version of the health reform bill also would end FFP in all state Medicaid expenditures and instead limit federal payments in accordance with a series of per capita spending caps, beginning in fiscal year 2020.

A state’s Medicaid population would be divided into five recipient groups (children; elders; blind and disabled; expansion adults, and other adults). A per capita spending cap would be established for each group, based upon past expenditure patterns. States would be obligated to pay out of general revenues 100 percent of costs in excess of the aggregate federal cap.

In lieu of a system of per capita caps, a state could opt to receive an annual federal block grant allocation. This option, however, would apply only to children or non-expansion adults (not to seniors and persons with disabilities) and would sunset at the end of 10 years. With certain restrictions, a block grant state would be allowed to establish its own eligibility requirements. They would be required, however, to provide certain, specified health services to recipients.

The non-partisan Congressional Budget Office (CBO) estimates that federal aid to the states would be reduced by $839 billion over a 10-year period (2017-26) compared to baseline projections. Faced with a steep reduction in federal payments, states would have to trim Medicaid eligibility and benefits, slash funding for other state programs, including education and public safety, or raise billions in additional tax revenue.

CBO anticipates that, nationwide, there would be about 17 percent fewer individuals enrolled in Medicaid programs by 2026 and the states collectively would be spending about 25 percent less on medical assistance services. The impact would be less in Virginia because the commonwealth has elected not to expand Medicaid eligibility.

Nonetheless, federal Medicaid payments would decline by $689 million below baseline projections over the next seven years, according to Cindi B. Jones, director of the Virginia Department of Medical Assistance Services. Optional community-based services for frail elders and persons with disabilities, as well as a recently initiated expansion in addiction treatment, would be among the casualties of the House bill.

Proponents of deep cuts in federal Medicaid spending argue that the current program is “broken,” offering inadequate access to healthcare providers and fostering out-of-control spending.

These contentions, however, are not supported by the facts. A recent analysis by the Kaiser Commission on Medicaid and the Uninsured found that Medicaid beneficiaries were slightly more likely to have seen a doctor during the past 12 months than enrollees in employer-sponsored health plans (74 percent vs. 69 percent), and they were just about as satisfied with the services they received as employer-based plan enrollees (85 percent Medicaid; 87 percent employer-plans).

Medicaid spending increased by 10.5 percent during 2015, primarily because of the initial enrollment spike in expansion states. But the rate of increase declined to 5.9 percent in 2016 and is expected to drop even further (to 4.5 percent) this year. Per capita spending on Medicaid services also has lagged behind the pace of general health care spending over the past 10 years.

Like many large, multi-purpose government programs, Medicaid is far from perfect. But, it is difficult to understand how cutting more than $800 billion in program spending from an already lean federal-state program would improve the effectiveness and efficiency of health services to poor Americans.
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BJ · May 18, 2017 at 6:47 am
They want to reduce federal monies for health care with the AHCA, so why then aren't pharmaceutical companies required to reduce the amounts they charge for medications too. I picked up a 5ML (very tiny bottle) of prescription eye drops yesterday that if I hadn't had insurance would have cost me $250. That is highway robbery! Blaine Johnson
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