Urban Institute: Block Grants and Per Capita Caps

This issue brief from the Urban Institute highlights another impact of changing federal funding for Medicaid to either block grants or per capita caps: locking in current variations in federal funding among the states. Block grants would give states a fixed allotment based on aggregate, historical spending levels multiplied by a predetermined growth rate. Per capita caps would set the allotments for specified enrollment groups based on historical spending per enrollee multiplied by a predetermined growth rate.

Setting state allocations based on their historical spending levels would lock in the current huge variation in federal dollars sent to each state. Federal funding for Medicaid per low-income person varies by a factor of about 5 to 1 across the states, and funding per enrollee varies by a factor of at least 2 to 1. Thus, some states would get far higher block grant allotments relative to the size of their high-need populations or much higher spending per enrollee than other states. Despite federal matching grants that vary inversely with state per capita income, higher-income states now spend more and would receive the larger allotments or caps.

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Medicaid and CHIP Payment and Access Commission: Alternative Approaches to Federal Medicaid Financing

This chapter from the June 2016 Report to Congress from the Medicaid and CHIP Payment and Access Commission (MACPAC) describes alternative approaches to federal financing for the Medicaid program. The majority of the spending growth in Medicaid can be attributed to enrollment; spending per enrollee has grown at rates comparable to or lower than Medicare and private coverage. Spending in Medicaid also reflect the unique role that Medicaid plays in providing coverage to individuals without other sources of health insurance, including low-income families and high-cost, high-need populations, such as people with disabilities and those in need of long term services and supports

There are several major alternatives to Medicaid financing that could result in federal savings, including block grants, capped allotments, per capita caps, and shared savings. Proponents of capping the federal share of Medicaid suggest that this approach could lead to federal savings and eliminate state incentives to maximize their share of federal funds. Others raise concerns regarding the potential cost shift to states and the limited options states have to curb cost growth without affecting enrollment, access to care, and the quality of coverage. In developing proposals to change Medicaid financing, policymakers will need to establish spending limits, define the level of state contribution, decide which programmatic features to include, and determine the degree of state flexibility and accountability.

This chapter includes discussions of capped allotments and shared savings approaches, which have received less attention than proposals to change Medicaid funding into block grants or per capita caps.

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Medicaid and CHIP Payment and Access Commission: Medicaid Spending by State Fiscal Year 2015

This table lists the amount of spending by the federal, state, and territorial governments for Medicaid in each state and territory for Fiscal Year 2015. The total amount of federal government spending was $556 billion, and the federal government share was nearly $352 billion, or 63%. States and territories expended over $204.5 billion on Medicaid, with the states of California (over $33.8 billion), New York (over $26.8 billion), Texas (over $14.7 billion), Pennsylvania (over $10.5 billion), and Florida (over $8.1 billion) having the highest state spending on Medicaid.

The table also lists the amount of federal funding each state received for Medicaid, including funding for the expansion of Medicaid under the Affordable Care Act. The states of California (over $56.7 billion), New York (over $32.7 billion), Texas (over $21.4 billion), Pennsylvania (over $13.5 billion), and Florida (over $13.3 billion) received the highest levels of federal funding for their Medicaid programs. These levels of funding are threatened by proposals to defund or repeal that expansion of Medicaid, and to change the federal funding for Medicaid into either block grants or per capita caps.

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Executive Order: Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal

President Donald Trump’s first executive order was issued on January 20, 2017, within hours of his inauguration, to establish his Administration’s policy “to seek the prompt repeal of the Patient Protection and Affordable Care Act”. Pending that repeal, the executive order directs the executive branch “to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market.”

Specifically, the executive order directs that, “to the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

It also directs that, “to the maximum extent permitted by law, the Secretary and the heads of all other executive departments and agencies with authorities and responsibilities under the Act, shall exercise all authority and discretion available to them to provide greater flexibility to States and cooperate with them in implementing healthcare programs.”

However, the executive order acknowledges that many, if not most, of these executive actions still require compliance with ordinary regulatory procedures: “to the extent that carrying out the directives in this order would require revision of regulations issued through notice-and-comment rulemaking, the heads of agencies shall comply with the Administrative Procedure Act and other applicable statutes in considering or promulgating such regulatory revisions.”

While Presidents have the prerogative to issue executive orders directing executive branch action, this first executive order seems to be more a statement of policy rather than directing any specific executive action or changes in policy. Every directive is limited by “to the maximum extent permitted by [current] law” and “shall comply with…applicable statutes” and “this order shall be implemented consistent with applicable law and subject to the availability of appropriations.”

 

 

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HHS Assistant Secretary for Planning and Evaluation: Medicaid Expansion Impacts on Insurance Coverage and Access to Care

This issue brief from the U.S. Department of Health and Human Services Assistant Secretary for Planning and Evaluation provides updated data on the impact of the expansion of Medicaid through the Affordable Care Act (ACA). Under the ACA, Medicaid provides enhanced federal matching funds to states to cover the cost of expanding coverage to nonelderly adults (ages 19 to 64) with income less than 138 percent of the federal poverty level (FPL). A 100 percent federal match rate applied to newly eligible individuals in the expansion population for 2014-2016 and is being phased down incrementally to 90 percent by 2020. The target population for this expansion includes parents and childless adults who were previously ineligible for Medicaid coverage. To date, a total of 31 states and the District of Columbia have expanded Medicaid.

Between 2014 an 2016, the percentage of uninsured adults in expansion states was reduced in half, decreasing from 18.5 percent to 9.3 percent. Medicaid expansion has increased access to primary care, expanded use of prescription medications, and increased rates of diagnosis of chronic conditions for new enrollees. For example, between 2013 and 2015, Medicaid expansion states saw a 7.2 percentage point increase in the number of low-income adults (non-elderly, ≤138 percent FPL) reporting a usual source of care. Uninsured individuals who gained Medicaid coverage had increases in prescription drug fill rates (79 percent increase) and reductions in out-of-pocket spending per prescription (58 percent reduction). In Ohio, which implemented Medicaid expansion, 27 percent of the Medicaid expansion enrollees were diagnosed with at least one chronic health condition but these individuals subsequently had lower levels of high blood pressure or high cholesterol since enrolling in Medicaid.

78 percent of Medicaid expansion enrollees who have used their plan indicated that they would not have been able to access and/or afford their care prior to Medicaid expansion and enrollment. 88 percent of adults are very or somewhat satisfied with their Medicaid health plans and 92 percent are very or somewhat satisfied with their Medicaid health plan doctors.

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Congressional Budget Office: How Repealing Portions of the Affordable Care Act Would Affect Health Insurance Coverage and Premiums

This analysis from the Congressional Budget Office (CBO) describes the impact of a partial repeal of the Affordable Care Act (ACA) on health insurance coverage and health insurance premiums.

If Congress repeals the ACA’s employer and individual mandate penalties and de-funds premium and cost-sharing tax credit subsidies now provided by through health insurance marketplaces and the expansion of Medicaid, the CBO estimates that 18 million Americans would lose their health insurance in the first year of implementation. This would include 10 million losing their health insurance from the health insurance marketplace, 5 million losing Medicaid coverage, and 3 million losing employer-based coverage. The CBO estimates that the number of Americans losing their health insurance would rise to 32 million by 2026. The CBO estimates that by 2026, the total number of uninsured Americans would be 59 million (compared to 28 million today); 21 percent of Americans under age 65 would be uninsured.

The CBO also estimates that such a partial repeal and de-funding would result in the destabilization of health insurance markets, with an estimated increase in premiums of 20 to 25 percent to purchase health insurance in the remaining individual health insurance markets in the first year of implementation, rising to nearly 100 percent by 2026.

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New England Journal of Medicine: Risks of ACA Repeal without a Replacement

This commentary from President Barack Obama describes the risks of repealing the Affordable Care Act (ACA) without simultaneously replacing it with legislation that would maintain health insurance coverage for the millions of Americans who have obtained or been able to continue their coverage because of the ACA.

The President writes:

…there is more work to do to ensure that all Americans have access to high-quality, affordable health care. What the past 8 years have taught us is that health care reform requires an evidence-based, careful approach, driven by what is best for the American people. That is why Republicans’ plan to repeal the ACA with no plan to replace and improve it is so reckless. Rather than jeopardize financial security and access to care for tens of millions of Americans, policymakers should develop a plan to build on what works before they unravel what is in place….[the] approach of “repeal first and replace later” is, simply put, irresponsible….“Repeal and replace” is a deceptively catchy phrase — the truth is that health care reform is complex, with many interlocking pieces, so that undoing some of it may undo all of it.

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This is the second time that the President has published a commentary in a medical journal. His first commentary was in the Journal of the American Medical Association:

Obama B. United States health care reform: progress to date and next steps. JAMA. 2016;316(5):525-532.

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Center for Budget and Policy Priorities: Repealing Health Reform’s Medicaid Expansion Would Cause Millions to Lose Coverage, Harm State Budgets

This issue brief from the Center for Budget and Policy Priorities describes the impact of repealing the Affordable Care Act (ACA) expansion of Medicaid, which would result in millions of Americans losing their health insurance coverage, and severe pressures on state government budgets with rising health care costs.

An estimated 11 million Americans in 32 states and the District of Columbia are now receiving health insurance coverage through the expanded Medicaid program; another 4 million uninsured Americans could be covered in the remaining 18 states.

Through the ACA’s 100% funding for Medicaid expansion in Fiscal Years 2014-2016, states have received tens of billions of dollars in federal funding to provide health insurance to their residents. If the Medicaid expansion is repealed, states would have to use state funds to continue such coverage.

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Kaiser Commission on Medicaid and the Uninsured: What Coverage and Financing is at Risk Under a Repeal of the ACA Medicaid Expansion

This issue brief from the Kaiser Commission on Medicaid and the Uninsured describes how a repeal of the expansion of Medicaid under the Affordable Care Act (ACA) would impact both tens of billions of dollars in state government budgets and millions of Americans who now rely on the expanded Medicaid program for their health insurance coverage.

32 states and the District of Columbia have implemented the expanded Medicaid program, covering all individuals residing in those states with incomes below 138 of the Federal Poverty Level ($16,394/year for an individual and $33,534/year for a family of four in 2016). As of 2015, an estimated 10.7 million Americans were enrolled in these expanded Medicaid programs and are risk of losing their health insurance coverage if the expansion of Medicaid under the ACA is repealed.

Under the ACA, almost all the costs for Medicaid expansion have paid by the federal government (100% for Fiscal Years 2014 through 2016, and phasing down to 95% this Fiscal Year 2017, eventually to 90% in Fiscal Year 2020). States that wanted to maintain some health insurance coverage for some or any of those 11 million Americans would have to use state funds to pay for such coverage. This is a cost shift of tens of billions of dollars from the federal government to state governments. During the first 18 months of the implementation of the Medicaid expansion, states received an estimated $79 billion to cover their costs. All these federal funds would become unavailable to the states with repeal.

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Center for Budget and Policy Priorities: Per Capita Caps or Block Grants Would Lead to Large Cuts in State Medicaid Programs

This issue brief from the Center for Budget and Policy Priorities describes how changing the current Medicaid program to per capital caps would result in large, and over time, increasing cuts to state Medicaid programs, ultimately resulting in millions of low-income, elderly, and sick Americans losing health insurance coverage.

The issue brief notes that while the growth in Medicaid expenditures has been slower than other parts of health care expenditures, any proposal is based on reducing overall federal government Medicaid expenditures, which means cuts in funding available to the states for their Medicaid programs.

The issue brief also notes the impact of the continued aging of the U.S. population, with more and more seniors enrolling in both Medicaid and Medicare. Seniors have higher per enrollee costs in Medicaid. It will be challenging to establish a per capita cap funding formula that will account for these increasing per enrollee costs while achieving overall reductions in expenditures.

In order to sustain their Medicaid programs with reduced funding under per capita caps, states would have to limit eligibility, increase cost-sharing requirements with higher premiums and co-payments, and/or limit the scope of health care and services covered. Any and all of these policy options would result in less access to Medicaid, decreased enrollment, individuals losing their current Medicaid coverage, and less access to needed care and services for those remaining on Medicaid.

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