Both the president’s new budget blueprint and the House GOP’s Obamacare replacement would cut hundreds of billions of dollars in funding for that joint state-federal program, which serves low-income children and their caretakers, pregnant women, disabled individuals and the elderly.
U.S. Sen. Pat Toomey of Pennsylvania, who is part of the Senate GOP working group drafting a health care bill and leading the effort on Medicaid changes, argues that Medicaid is growing at an unsustainable pace and they want to limit future spending. But doing so would leave states scrambling to replace those federal dollars as costs rise, say health policy experts and Democratic Pennsylvania Gov. Tom Wolf.
The outcome of that policy debate will affect who Medicaid serves in Pennsylvania, what coverage they can access, and how many state tax dollars go toward paying for the program.
“There’s a limited array of choices for states: fill the gaps or making tough choices in their Medicaid programs,” said Robin Rudowitz, a Medicaid researcher at the Kaiser Family Foundation.
In Pennsylvania, Medicaid provides health care to 2.8 million Pennsylvanians — or more than 1 in 5 residents.
That figure includes more than 700,000 who became eligible for the program due to the Affordable Care Act, or Obamacare, which allowed states to expand coverage to non-elderly individuals earning up to 138 percent of the federal poverty level. That’s about $16,000 for an individual, or $32,000 for a family of four.
The federal government has picked up the tab for those new enrollees in Pennsylvania and 30 other states that expanded Medicaid eligibility. That contribution begins to shrink this year and will do so through 2020, when Washington will pay 90 percent of the costs.
That’s a higher federal share than with the traditional program, which roughly splits costs between the federal and state governments. Of the $27 billion that Pennsylvania spent last year on Medicaid, $16 billion came from D.C.
The House bill would change Medicaid payments in two ways. First, the extra federal funding to states for those enrolled under Medicaid expansion largely would end in 2020. New expansion enrollees would be covered at the same rate as traditional Medicaid, or about 57 percent in Pennsylvania, leaving states to decide whether to fill that financial gap or to reduce eligibility or benefits.
Payments would continue at the higher rate for those already enrolled if they remain continuously in the program. But Medicaid typically sees individuals cycle off and on as their income and other circumstances change, and the Congressional Budget Office projects that fewer than one-third of those enrolled at the end of 2019 will have maintained continuous eligibility two years later.
That wouldn’t directly end the expanded coverage. But it would reduce the number of people covered by the higher payments over time, in turn increasing the amount states would need to pay to continue providing the same health care to those individuals.
Second, the House GOP plan would cap how much states receive for Medicaid. Instead of guaranteeing payments to cover the cost of medical care used by Medicaid enrollees, each state would get a set amount of money each year to pay for Medicaid care.
If a state has costs that exceed the capped federal contribution, state officials would need to find the money in their budget.
The federal share would increase based on enrollment and on annual changes to the medical CPI, or consumer price index. While the program would still grow, the changes to the expansion payments and capping the overall Medicaid payment would reduce the money going to states by $834 billion over 10 years, according to the CBO.
Gov. Wolf’s administration estimates that Pennsylvania would lose more than $3 billion annually in federal funding, including more than $2 billion that would be expected for the expanded Medicaid program and more than $1 billion due to the capped overall payments.
Those projections could change again when the Senate releases its approach. Toomey, who along with Ohio Sen. Rob Portman leading effort to craft the Senate GOP’s Medicaid approach, has suggested going even further to limit the program’s future growth.
He wants to link it more closely to the rate at which the economy is growing, which would be a smaller annual increase than the medical CPI. His office says discussions are still underway as to which factor to use, but one option under consideration is the consumer price index for urban consumers, or CPI-U.
Toomey’s office says a factor in that range, which would allow for Medicaid payments to rise by about 2.4 percent annually, would be in line with how much costs per enrollee have grown in recent years.
The CBO, however, expects costs to grow more quickly in the coming years. It projects a growth rate of 4.4 percent, but does not elaborate on why in its analysis of the House Republican health care bill.
Those increases can vary widely from state to state as officials deal with different challenges, such as rising costs for certain prescriptions, demographic changes or spikes in certain treatments, such as with the opioid epidemic.
Right now, those states share in any unexpected cost spikes, but they would bear more of the burden under a capped system, Rudowitz said.
In Pennsylvania, Medicaid costs typically have grown at a faster rate than the medical CPI, said Sarah Galbally, Wolf’s secretary of policy and planning.
“We’ve have done a lot over the last couple of years to control our Medicaid growth and keep it as low as possible, but Pennsylvania has an aging population and that’s an expensive population to provide health care to,” Galbally said.
Wolf and Toomey spoke on the phone recently about the health care negotiations, and the governor told the senator that any changes that shift costs to the state budget would likely result in a loss of care for those on Medicaid.
Galbally said state officials don’t expect they could fill the full gap. It’s not yet clear whether the state would seek to change who is eligible, cut back benefits, or both.
Asked recently about the smaller payment that Pennsylvania could expect, Toomey described the program’s current growth as “unsustainable.” As for the payments covering Medicaid’s expansion, he said states will need to make a decision.
“To suggest that the federal government is being unreasonable when we’re offering to pay more than half of the cost of an expansion that we didn’t support in the first place, I’m sorry, I just disagree,” Toomey told reporters.
The next glimpse at what states may need to prepare for could be coming soon. The Senate aims to have a partial draft of its health care bill by the time congressional lawmakers return from recess on June 5, though significant divisions remain among Senate Republicans.
Toomey and Portman, those working most closely on Medicaid, have different views on that portion. Portman has pushed for more gradually undoing the Medicaid expansion. Toomey has said he’s “open” to discussion on that, but wants to ensure that a transition does occur.