Senate Rules Loom over Medicaid Proposals

This article was originally written by Erin Durkin and published by National Journal on February 22, 2021.

Although policy experts think the Medicaid provisions of the COVID-19 package will likely clear budget-reconciliation rules, nothing is guaranteed.

House Democrats are aiming to beef up Medicaid as part of their COVID-19 response package heading for a floor vote this week.

The proposals include COVID-19-specific policies, like guaranteeing full coverage for vaccines without out-of-pocket costs under the program. Others reflect longtime health-policy goals of the Democratic Party, such as offering incentives to get red states to expand their Medicaid programs under the Affordable Care Act, expanding postpartum coverage for women, and providing Medicaid eligibility for inmates 30 days before release.

The changes to Medicaid are riding on the coronavirus relief bill, President Biden’s top legislative priority, a $1.9 trillion vehicle that could be passed without Republican support.

The budget-reconciliation process is reserved for making changes that directly impact spending, revenue, or the debt limit. Provisions that don’t address those—or that make a change that is “merely incidental” to the federal budget—can be struck out of the legislation in the Senate. The judgment over whether proposals violate these restrictions, known collectively as the Byrd Rule, is typically deferred to the parliamentarian, whose job is to advise the Senate on rules and procedures.

Experts who spoke to National Journal said they were fairly confident the Medicaid provisions fulfill the requirements of a reconciliation package and are safe from being challenged on the floor of the Senate.

However, they conceded that determining if a budget change is “merely incidental” and therefore should be removed is left up to the interpretation of the parliamentarian.

“All of these provisions are changing what the federal government would pay for states through Medicaid under particular circumstances, and so it is hard to think of provisions that would be much more budgetary than that,” said Matthew Fiedler, an economic-studies fellow at the USC-Brookings Schaeffer Initiative for Health Policy.

“It seems likely to me that these types of provisions would be acceptable under reconciliation, with the caveat that the rules for what types of budgetary impacts are merely incidental are not entirely clear-cut, so there can always be surprises when the parliamentarian actually rules,” Fiedler added.

Other attempted changes to Medicaid spending in the past were determined to be in violation of the Byrd Rule. Republicans in 2017, as part of their attempt to repeal Obamacare, included a provision that would block funding to Planned Parenthood for one year. Republicans also wanted to remove requirements that made Medicaid alternative-benefit plans cover 10 health benefits Obamacare deemed mandatory for insurance policies.

The parliamentarian determined that these measures violated the Byrd Rule, according to a memo from the Senate Budget Committee minority at the time.

“Changing mandatory benefits packages for populations of Medicaid—that would technically affect spending levels but might look more like a policy choice, and so that might be viewed more skeptically by a parliamentarian,” said Phil Waters, staff attorney at the Center for Health Law and Policy Innovation of Harvard Law School.

“Right now, what they’re proposing, all these sort of funding extensions for Medicaid expansion, there’s some dedicated funding in there for extending coverage postpartum to new mothers … I think those are all just specific funding increases that are pretty easy,” Waters added.

But he said that the amount of leeway the parliamentarian has to judge what is “merely incidental” is unclear.

A bigger hurdle might be keeping any potential increases to the deficit within the budget window outlined in the budget resolution, said Kelly Whitener, associate research professor at Georgetown University. A provision would violate the Byrd Rule if it increased the deficit beyond the budget window set out for the reconciliation, which in the case of the current package ends in 2030.

“It is potentially more concerning for those provisions that have spending in 2031 or in 2030 because you could see kind of a tail of spending extending into the next budget window,” Whitener said. “Where for some of the other provisions you start seeing zero, zero, zero as early as 2025 or 2028, you’re kind of well within that 10-year window, so I think that could be a challenge for some that have a bit of a tail.”

Many of the provisions proposed to change Medicaid coverage are not expected to add to the deficit by 2028, according to the Congressional Budget Office. That includes proposals requiring the coverage of COVID-19 vaccinations without cost-sharing in Medicaid and providing 12 months of postpartum coverage.

But some provisions, including the higher federal payments to incentivize states to expand Medicaid coverage, increase the deficit over the entire budget window.

Whitener said lawmakers included a Medicaid provision as a “revenue generator” that would help offset the costs of some of the deficit-increasing changes. The proposal would allow Medicaid to collect more money from drug manufacturers who pay to have their outpatient drugs covered in the program. Removing the cap on these rebates is anticipated to reduce Medicaid spending by almost $16 billion between 2021 and 2030.

“I think most of the provisions from the Energy and Commerce Committee have been pretty well thought through, and even though this is a House committee, I think they’ve put the package together with Senate rules in mind, so none of them really stick out to me as particularly risky,” she said.

Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, also said that any Medicaid provisions that may increase the deficit in the long term are offset by other provisions included by lawmakers.

While Goldwein said he thinks the Medicaid provisions are not likely to run afoul of the Byrd Rule, he disagreed with Democrats’ move to include policy goals in Medicaid that “aren’t really related to COVID relief.” As an example, he cited the proposal to increase federal spending to push states to expand their Medicaid programs.

“I don’t think we should borrow for things that aren’t COVID relief that really are long-standing policy priorities, no matter how good they are,” he said.

“The plan here is clearly to approve them for two years and then to extend it and make it permanent,” he added. “It’s not to provide extra relief for COVID.”