Most of the discussions about the Graham-Cassidy proposal focus on repealing the Affordable Care Act (ACA). But the most drastic changes in the bill would impact Medicaid. While 11 million individuals are enrolled in marketplace coverage, more than 74 million individuals rely on Medicaid to provide affordable health care, including many services that private insurance does not cover (see NHeLP’s “Medicaid – Fast Facts” for a quick rundown of Medicaid’s impact).
The Graham-Cassidy proposal would effectively destroy Medicaid by:
1. Converting Medicaid’s financing into a per capita cap; and
2. Repealing Medicaid Expansion.
The proposal makes a number of other drastic changes to Medicaid which you can review in NHeLP’s “Top 10 Changes to Medicaid under the Graham-Cassidy Bill.”
Per Capita Caps
Graham-Cassidy imposes a per capita cap (PCC) on states to operate their Medicaid program. The PCC destroys Medicaid’s 50-plus year guarantee of federal funding based on actual health care costs. For all Medicaid enrollees except seniors and people with disabilities, Graham-Cassidy first uses the medical CPI (CPI-M) as the yearly inflation factor and then switches to the “regular” Consumer Price Index (CPI). Both the CPI-M and CPI virtually always result in lower-than-Medicaid cost growth and thus restricts states’ ability to provide comprehensive health care to Medicaid enrollees. Using CPI-M as the basis for inflation for seniors and people with disabilities is unlikely to keep pace with actual costs since CPI-M does not include long-term care costs which accounts for around 25 percent of Medicaid’s budget. So each year, every state starts in the hole by having less money to spend than actual health care costs. And then, if a state happens to overspend its PCC, HHS will claw back overspent funds the following year. A state will not even know if it overspends until the end of the year when the CPI is finalized, and it could be penalized for overspending due to factors beyond its control.
Second, Graham-Cassidy penalizes “high spending” states by lowering its aggregate per capita cap as much as 2 percent per year. Myriad reasons exist why some states may spend more on care than others – geography, an aging population, high costs of care, outbreak of a new virus, etc. The penalty applies to any state that spends more than 25 percent above the average of all states for any per capita cap “group” (seniors, people with disabilities, children, Medicaid expansion adults, other adults). While low-density states are exempt, many states will still be at risk of this penalty. And the penalty compounds every year, causing an even greater loss of funding over time. This will put immense pressure on states to cut services and eligibility, leaving many individuals without vital services.
Third, just when a state is trying to claw its way out of this deepening fiscal hole, Graham-Cassidy limits its ability to use “provider taxes.” All but one state use provider taxes to help the state pay its share of Medicaid costs. Cutting or eliminating provider taxes is a substantial cost shift to states and will make it harder for them to sustain, let alone increase, their Medicaid spending. It also undermines state flexibility to administer the Medicaid program without doing anything to achieve programmatic efficiencies or improve quality.
Repeals Medicaid Expansion
Graham-Cassidy effectively repeals Medicaid expansion for low-income adults in 2020. After that time, Medicaid would not reimburse a state for any expenses attributed to this eligibility group. Prior repeal bills provided a transition from the ACA’s higher match for this eligibility group and allowed states to maintain this eligibility pathway at a lower match rate. Instead, after two years, Medicaid expansion is gone. Graham-Cassidy gives states a block grant with which states have nearly unfettered discretion to determine how to spend. They could provide coverage to those currently enrolled through Medicaid expansion, or they could decide to use those block grant funds for other purposes (e.g. reinsurance, payments to providers, etc.). And funding for the block grant, which also replaces the ACA’s tax credits and cost-sharing reductions, starts at 17 percent below current funding.
So after 2020, the millions of low-income adults, many of whom have disabilities but do not meet Medicaid’s strict definition of disability or care for those with disabilities, will be left without a guaranteed way to obtain health insurance coverage. For example, experts estimate that 1.3 million individuals covered in the Medicaid expansion have a serious mental health diagnosis.
Graham-Cassidy is too bitter of a pill to swallow on many fronts, but particularly because of the death knoll it sounds for the Medicaid program.
Other NHeLP Resources: