‘Carve Outs’ Cannot Make Medicaid Per Capita Caps Work

‘Carve Outs’ Cannot Make Medicaid Per Capita Caps Work

Per capita caps (PCCs) in American Health Care Act (AHCA) set a fixed amount of federal Medicaid spending per enrollee. Under AHCA, federal Medicaid funding to states would be allocated for different categories of enrollees – older adults; people who are blind or have disabilities; children; Medicaid expansion enrollees; and other adult enrollees (including pregnant women, parents and caretakers).In an attempt to counter concerns that PCCs will harm Medicaid enrollees, some senators are proposing to exempt certain populations or services from PCCs. But none of the rumored carve-outs would solve the problems of PCCs.

Exempt certain populations from PCCs
Some suggest carving out certain populations from PCCs, such as children with special health care needs. NHeLP recently profiled Leah, a 3 year old in California born with multiple health issues who has had 21 surgeries and is now living at home and thriving due to Medicaid. There is no question that children and others with complex medical needs would be harmed under Medicaid PCCs. So why not exempt them?

Carving out certain populations will not prevent the harm of PCCs. States have historically had a hard time identifying children with special health care needs. Many children may not end up carved out and states will have to build expensive new systems just to try to appropriately identify these children. Moreover, since states would see an overall reduction of more than $834 billion in Medicaid funding , even “exempt” populations with more expensive health care needs would likely face reductions in services and eligibility.

Maintenance of effort
Another proposal is to require states to maintain spending levels for certain kinds of services, for example, school-based health care, while carving out the costs of these services from the per capita caps. It is ironic that some Republicans are proposing a maintenance of effort (MOE) provision to lessen the harm of PCCs, since thirty three Republican governors called upon Congress to eliminate MOE requirements for children in the Affordable Care Act.

A new MOE requirement to protect certain services would still shift costs onto states, leading to cuts in other programs. School districts would still be required to pay for special education and other mandated services, but with fewer federal dollars.

Funding for low spending states
Although different from what a traditional “carve out,” some discussions on Capitol Hill focus on providing a higher growth rate for low spending states. Funding levels for PCCs are established using a “base year” that looks at state spending on Medicaid over a period of time. Officials from some low spending states have expressed alarm that PCCs would lock them into a low amount. So a higher growth rate would give them some additional funding, but they still would be unlikely to ever catch up to high spending states. As Alabama Hospital Association Vice President Danne Howard, commented “we’ll be perpetually at the bottom of the pile again.”

Slush funds for certain services
Medicaid PCCs and the repeal of Medicaid expansion would severely impair access to treatment for Substance Use Disorder (SUD). To help mitigate the impact, Ohio Sen. Rob Portman is proposing to set up a special fund to help address the opioid crisis.

However, carving out a proposed $45 billion over ten years, divided among states, cannot match Medicaid’s current funding of SUD services. For example, in West Virginia, the projected cost to treat opioid addiction in 2026 is $351 million, yet the state share of the opioid fund would be just $51 million. Medicaid is the single largest source of health care for persons with SUD, providing coverage for 23 percent of all Americans with SUD. Further, many individuals with SUD need other health care services to ensure the effectiveness of the SUD treatment, which they stand to lose under AHCA.

Take action!
Carving out certain populations or services from the devastating effect of PCCs is not only unworkable, but underscores why PCCs are bad policy. In reality, carve outs are nothing more than a cynical ploy to pit communities against each other by forcing the poor and vulnerable to fight over crumbs.

Contact your senators and urge them to vote against AHCA. For more information on AHCA and its impact on the Medicaid program, sign up for our email updates and follow us on Twitter and Facebook.

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