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Saturday, July 15, 2017

Senate Republican Leadership and the Trump Administration are Presenting Impossible Numbers on Stabilization Funding and Medicaid Expansion

Lydia Mitts

Associate Director of Affordability Initiatives

The Senate health bill ends the Medicaid expansion for adults starting in 2021, leaving 11 million residents across 31 states without health care.

The bill allows people with incomes below poverty to buy coverage on the marketplace, but for someone living at or below the poverty level, marketplace coverage would mean massive exposure to out-of-pocket costs that could total half their yearly income, or more. Medicaid, in contrast, limits how much people have to spend on out-of-pocket costs so that they can actually afford to get the care they need.

Proponents of the Senate health bill have been pointing to its amorphous pot of funding for states called the “Long-Term State Stability and Innovation Fund” (Stability Fund) that now totals $132 billion dollars over 8 years, as being able to make up for the multitude of problems with the legislation. Yesterday, Senate Leader McConnell and CMS Administrator Seema Verma reportedly presented directly to key undecided Senators that this fund could be used by states to protect low-income people from facing harm due to the bill’s end of the Medicaid expansion and its massive cuts to federal funding for Medicaid.

The math behind this claim simply does not add up. Even if the entire Stability Fund were put towards trying to make Marketplace coverage affordable for people with coverage through the Medicaid expansion, it would fall significantly short.

What would it actually take to offset the end of Medicaid expansion by making Marketplace plans affordable for expansion enrollees? The Senate bill funds premium subsidies to cover 58 percent of average medical costs—known as 58 percent actuarial value. Medicaid covers beneficiary expenses at close to 100 percent actuarial value. We estimated what the additional cost would be to provide cost-sharing subsidies to the current Medicaid expansion population so that they would be in a Marketplace plan with a 94 percent actuarial value—the minimum level of coverage that would be workable for people at or below poverty level of incomes.

We found that providing enhanced Marketplace coverage to the Medicaid expansion population would cost more than all the funds available through the Stability Fund in any given year. In total, it would cost $23.9 billion each year to provide this level of coverage to the Medicaid expansion population. (See Methodology below for more details.) The most the Stability fund would ever would make available to states in a given year is $19.2 billion.

That does not count ANY expenditure for low-income people in non-expansion states. It takes no account of inflation. And there would be nothing left for the multiple other purposes that the Senate health bill directs the Stability Fund towards. Even if the entire fund went towards making Marketplace coverage minimally affordable for current enrollees in Medicaid expansion states, it would fall short of being able to protect this population. And this doesn’t even account for the additional funds that would be needed to protect the millions of children, seniors, and people with disabilities who would face reductions to coverage and care due to the massive cuts the bill makes to the Medicaid program more broadly.

Importantly, this fund has already been earmarked to be spent on numerous other programs: $70 billion is earmarked to go to insurers that chose to sell non-ACA compliant plans; another $10 billion is earmarked to be spent on programs to stabilize individual market premiums; and the bill also allows states to put this money towards compensating for the cuts this bill makes to financial assistance with premiums and out-of-pocket costs for Marketplace enrollees.

No one should be fooled: The Stability Fund will not solve the massive problems in this bill and will not protect against millions of low- and middle-income people in Medicaid expansion states losing coverage or facing drastically higher health care costs if this bill becomes law.


We estimated the per person cost of enhancing a 58 percent actuarial value (AV) plan to 94 percent AV, using the national average monthly cost-sharing reduction payments made for people with 94 percent AV plans in 2016 in FFM states.

We assumed an additional $5 increase in cost for every additional percent increase in AV, based on the average cost per percent increase in AV for people currently in 94 percent AV plans. Using this methodology, we estimate that, on average, it would cost $2,160 per person annually to provide cost-sharing subsidies that increase a plans AV from 58 percent to 94 percent.

We estimated the cost of providing this enhanced funding for the current Medicaid expansion population, a total of 11,082,572 people.

Data Source: HHS Public Use File, “Health Insurance Marketplace Cost Sharing Reduction Subsidies by Zip Code and County 2016.”

Originally published July 13, 2017