Medicaid Program Under Siege

Published by Health Affairs Blog on Thursday, January 18, 2018. Written by Robert Greenwald, Faculty Director for CHLPI and Judith Solomon, Vice President for Health Policy at the Center on Budget and Policy Priorities.

For more than 50 years, Medicaid has been our nation’s health care safety net. Medicaid allows our lowest-income, sickest, and often most vulnerable populations to get care and treatment, and supports the health of more than 68 million Americans today. As an entitlement program, Medicaid grows to meet demand: There is no such thing as a waiting list. This vital health program found itself under fire in 2017, and while there were no major reductions in funding or enrollment, it is far from safe in 2018. Whether by new legislation or actions the Trump administration may take, the threats to Medicaid are not going away anytime soon.

Congressional Threats To Medicaid’s Expansion, Structure, And Funding

Throughout 2017, Republicans tried unsuccessfully to roll back the Affordable Care Act (ACA), including the law’s expansion of Medicaid. Underpinning each effort was the oft-stated belief, held by Republican leadership, that the expansion was a disastrous move that extended coverage to more than 12 million able-bodied people who should not be getting health insurance from the government. While these unsuccessful efforts were commonly referred to as attempts to “repeal and replace the ACA,” every bill that gained any traction in 2017 went far beyond repealing only the ACA’s Medicaid expansion. The proposals also included plans to fundamentally alter the way in which the traditional Medicaid program is structured and paid for.

Medicaid is a partnership between each state and the federal government. Both pay a share of the cost of caring for a state’s enrollees. Under this system, as a state’s costs rise, the federal government’s contribution grows to keep pace. Each of the major “repeal and replace” bills advanced in 2017 would have turned away from this longstanding partnership and placed a cap on the federal government’s contribution.

Under these proposals, once the federal funding cap was reached any further costs of providing Medicaid-based care would be solely borne by the state. Capped funding inherently shifts responsibilities for financing Medicaid to states, particularly if the amount of funding allocated is insufficient. It represents an enormous shift away from a strong federal-state partnership. Capped funding dramatically reduces states’ capacity to respond to unexpected Medicaid program costs, such as those created by economic downturns, natural disasters, and public health epidemics. States are required to have balanced budgets, unlike the federal government, and will likely need to cut funding at the time when people need Medicaid the most.

What we have seen from congressional proposals in 2017, and will likely continue to see in the year ahead, is that each major capped funding proposal cut hundreds of billions in federal funding from the Medicaid program over time. These plans promise “additional flexibility” for states to better serve their particular beneficiaries. However, what is clear is that the only flexibility offered by these bills is the flexibility to cut either eligibility, benefits, payments to physicians, or some combination of the three. Flexibility without adequate funding is meaningless.

While Congress has failed thus far to repeal the ACA Medicaid expansion or significantly cut or restructure the traditional Medicaid program, efforts to do this will likely continue in the year ahead. With the passage of the Republican tax reform proposal, Medicaid funding will be at risk as Congress seeks to address the growing deficit created by it. Speaker of the House Paul Ryan (R-WI) confirmed as much, saying: “We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit…. Frankly, it’s the health care entitlements [Medicare and Medicaid] that are the big drivers of our debt.”

Administrative Action Undermining Medicaid’s Protections

Congress is not the only place where Medicaid is under threat. The Trump administration is also considering policies that could dramatically alter current health care service delivery. Section 1115 of the Social Security Act, for example, gives the secretary of the Department of Health and Human Services (HHS) discretion to waive certain federal Medicaid requirements to allow states to conduct “experimental, pilot, or demonstration projects” in their Medicaid programs. The secretary must find that the demonstration is likely to promote the objectives of the Medicaid program, chiefly to provide medical assistance to low-income individuals.

Under the Obama administration, HHS did not approve 1115 requests to implement policies that would have the effect of reducing enrollment, finding that these policies did not advance Medicaid’s objectives. However, the Trump administration is likely to change tack soon and approve pending state requests to implement work requirements as well as other potentially restrictive policies such as drug screening, time-limited eligibility, and premium payments with disenrollment and lockouts for nonpayment.

It is difficult to imagine how these policies promote the objectives of the Medicaid program. Imposing work requirements ignores data showing that the majority (nearly eight in 10) of Medicaid adults already work or live in working families. Work requirements add more paperwork, increasing burdens for both Medicaid beneficiaries and administrators. Even if some individuals, such as those living with a disability, are exempted from the work requirement, experience with these requirements in other government programs suggests that exemptions are often incorrectly applied, resulting in sanctions imposed on those who are not subject to the requirement and an overall decline in assistance provided.

Many of the pending waiver provisions would cause a significant number of people to lose their health coverage, undermining Medicaid’s core purpose. While it follows that HHS should reject such proposals, the Centers for Medicare and Medicaid Services has released guidance inviting states to request work requirement waivers, and has approved the program’s first work requirement in Kentucky. As work requirements and other restrictive proposals are approved, advocates are poised to challenge such policies, using litigation if necessary to establish that such proposals violate federal law for failing to advance the goals of the Medicaid program.

For a half century, we’ve seen that Medicaid both improves individual health and patient satisfaction, and supports voluntary work and growth in the economy. Despite these proven benefits, the Trump administration and congressional leadership continue to propose policies that would drastically scale back Medicaid. Whether by legislation or administrative action, it is clear that the future of Medicaid is far from certain.