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Friday, July 21, 2017

Trump and McConnell Efforts to Patch Together an Alternative to Medicaid Expansion Are Grossly Inadequate

The latest version of the Senate health bill, as with every version before it, ends the Medicaid expansion funding that has enabled more than 11 million people to get health coverage. Several Republican senators from Medicaid expansion states have objected to the cutoff of Medicaid expansion funding, and the Trump Administration and Senate Republican leadership are mounting a last-ditch effort to get their support.

What the Trump Administration and Senate leadership are offering states won’t come close to blunting the impact of wiping out the Medicaid expansion. Senators should understand that their constituents will lose coverage.

The new Better Care Reconciliation Act takes away Medicaid coverage and gives people coverage with staggering deductibles

Thirty-two states (including D.C.) have adopted Medicaid expansion, and the critical factor in their decision to do so has been that Medicaid expansion is predominantly federally funded. Federal funding began at 100% in the first years of the program and phases down modestly to 90 percent by 2019, where it will remain under the ACA.

The Senate health bill sharply reduces that federal funding to the same level states receive for their broader Medicaid program, a cut which will effectively end the Medicaid expansion. In place of this lost coverage, the Senate health bill offers low income adults marketplace coverage with deductibles so high it will be meaningless for low and middle-income people.

Here’s how the CBO describes these staggering deductibles:

"Because a deductible of $13,000 would be a large share of their income, many people with low income would not purchase any plan even if it had very low premiums—on net, after accounting for premium tax credits—CBO and JCT estimate. Under this legislation, in 2026, that deductible would exceed the annual income of $11,400 for someone with income at 75 percent of the FPL."

This is an absurdly inadequate insurance framework for low income adults, and the CBO projects that virtually the entire Medicaid expansion population would lose coverage under the Senate health bill.

Proposals to blunt the fallout of eliminating Medicaid expansion come up way short

To overcome the very real concerns of senators about losing expansion funds, however, the White House and Republican leadership in the Senate are patching together two structurally inadequate sources of funding:

  1. Making Medicaid funds available at regular match to reduce the extraordinarily high deductibles in the Senate bill's marketplace coverage
  2. Offering an as-yet undefined further $200 billion in funds to purportedly bridge the gap between what would be meaningful coverage for low-income people and the extremely limited marketplace coverage in the Senate health bill

Affordability wrap is just another term for reduced Medicaid funding

The first offer involves supplementing marketplace coverage with Medicaid funds. Such supplementation has previously been allowed by CMS in Massachusetts and Vermont and has been dubbed an “affordability wrap.” But those programs were wrapping ACA marketplace coverage that is vastly more generous than what would exist under the Senate bill, and the wraps are therefore quite small.

Even under the Senate bill, states could use regular match to cover the expansion: They won’t because they don’t have the money to do it. An “affordability wrap” is nothing more than the flexibility to use Medicaid funds at regular match to cover a fragment of the expansion instead of the entire thing—it gives states no additional resources. In trying to use Medicaid funds at regular match to replace the ACA’s much higher federal match, the Trump administration is trying hide the ball on some hard numbers.

Right now, each state dollar spent on expansion adults in 2020 will draw down nine federal dollars. Under the Senate health bill, each state dollar spent on expansion adults in 2020 will draw much less.

Regular match is regular match and the dollars that states have to pay for covering low-income adults are the dollars states have to contribute, whether regular match is called optional coverage under the Senate health bill, an affordability wrap, or something else:

  Federal Dollar Match For Each State Dollar for Expansion Adults Under ACA (2020 and subsequent) Federal Dollar Match For Each State Dollar for Expansion Adults Under Senate Health Bill Federal Dollar Match For Each State Dollar for Expansion Adults Under “Affordability Wrap”
Alaska $9 $1 $1
Nevada $9 $1.92 $1.92
Ohio $9 $2.74 $2.74
West Virginia $9 $1.69 $1.69

 

The $200 billion fund doesn’t come close to making up the difference

The second structurally inadequate resource now proposed by Senate leadership is a fund of $200 billion, ostensibly to further support marketplace coverage for low-income people.

While details on this fund are not known, the small size of the fund is glaring. The CBO projected that Medicaid expansion spending would be cut by $577 billion between 2018 and 2026 under the Senate bill. In 2026—that is, in just one year—the Senate bill would cut that spending by almost 90 percent, or $117 billion.

Those cuts will be on top of hundreds of billions in broader cuts to Medicaid due to the bill’s per capita cap structure. The notion that a $200 billion fund will make up for that level of funding loss is a cruel joke.

The efforts of the Trump Administration and Senate leadership to jerry rig an alternative to the existing Medicaid expansion do not make mathematical sense for states or for the more than 11 million people who rely on expansion coverage.