Per Capita Caps: The Devil is in the Details

Per Capita Caps: The Devil is in the Details

Per capita caps are the Trojan horse of Congress’ current “health reform” effort. Cloaked as part of the effort to repeal the Affordable Care Act (ACA), it has nothing at all to do with ACA. Rather, it is part of a long-standing attempt to dramatically scale back our leanest, most cost-efficient health coverage program.

For more than 50 years, Medicaid has operated as a federal-state partnership, with each partner paying its share of the total costs to deliver needed care. Medicaid coverage delivers significant long-term benefits in terms of health, earnings and educational achievement. Enrollees also report that Medicaid coverage makes it easier to find and sustain work. The partnership also allows states to respond quickly and efficiently to unexpected events – such as when Louisiana expanded Medicaid coverage after Hurricane Katrina or when Michigan offered Medicaid services to families exposed to lead-contaminated water in Flint, Mich.

The proposed American Health Care Act (AHCA) destroys this partnership. By imposing per capita caps, the federal government would strictly limit its Medicaid support, leaving states to cover any costs that exceed the cap. AHCA’s per capita caps are designed to cut Medicaid deeply; primarily by raising the cap on federal support slower than the expected increases in the cost of needed health services. Over time, the disparity between actual health needs in a state and available federal support grows bigger and bigger. Need more money to cover an expensive breakthrough treatment, like the new drugs for Hepatitis C? Sorry Pennsylvania, this time you are 100 percent on the hook. Want to expand personal care supports that help older adults and people with disabilities to stay in their communities? Texas, you will have to fund it alone. Have an aging population that needs more services as the average age of its enrollees increases? That is right Florida, you pick up the slack.

The caps also create huge administrative headaches for states have no current ability to sort people into their respective “cap” groups. AHCA creates 5 separate per capita cap groups – the elderly, people with disabilities, children, newly eligible (a.k.a. Medicaid expansion) adults, and other adults. At year’s end, the separate caps get combined into a single aggregate cap for the state. But Medicaid eligibility groups do not fit neatly in these five groups. For example, a quarter to a third of adults in the Medicaid expansion have disabilities, but did not become eligible through a “disability” category. Applying the “adult” cap to a person with a disability shortchanges the state because people with disabilities are more expensive to care for. But creating a new system to screen every Medicaid enrollee for disabilities would be extremely costly and prone to error and elision.

Costs within each group, moreover, vary wildly, creating pernicious and potentially discriminatory financial incentives to ration care. For example, AHCA classifies pregnant women under the “other adults” cap. But unsurprisingly, pregnant women’s care costs more ($9,100 to $13,600 in 2010) than the average “other adult” ($5,000 in 2015). For nearly every pregnant woman covered, the state’s risk of overspending the cap increases. This creates tremendous pressure to cut enrollment or services for pregnant women, which would likely lead more expensive preterm births and poorer health outcomes for newborns and moms. Reducing maternal and newborn care through Medicaid also drives up costs for the health system overall, as Medicaid maternity-newborn care costs are roughly half what commercial insurance pays.

Caps clearly have nothing to do with improving long term outcomes, or even with reducing overall cost of health care. Rather, caps have everything to do with short-sighted cost-cutting to meet arbitrary limits on federal spending. And remember, once a cap is in place, Congress can revisit that growth rate any time it needs a handy “pay for” to find money for other programs or to cut taxes. Some Republican Senators already want to dial down the Medicaid cap even more to pay for other changes in their bill. And the President’s FY 2018 budget lowered the growth rate as well.

Examining per capita caps is like looking at a tick under a microscope. The closer you look, the uglier it gets. If Congress and President Trump enact a per capita cap, states will lunge from one unforeseen budget crisis to the next, making split decisions that are penny wise and pound foolish. This contradicts our best ideas about what constitutes efficient and effective health policy – promoting preventive care, investment in care coordination, and avoiding treatment delays. The one predictable consequence? Millions of the people who need care the most will no longer be able to get it.

Take action!
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.

Health-Advocate-Button

Related Content