The GOP’s latest Obamacare overhaul proposal could significantly reduce funding for state Medicaid programs and turn expansion plans — including Indiana’s HIP 2.0 — on their heads.
The bill, referred to as Graham-Cassidy after its two major sponsors, restructures Medicaid, the federal health insurance program for the poor and disabled people, in in sweeping, fundamental ways.
Graham-Cassidy caps the amount of Medicaid dollars based a per capita amount, distributing it in lump sums known as block grants. (Currently, the program operates as an open-ended entitlement that pays a certain percentage of a state’s Medicaid price tag.)
Additionally, it does away with the Affordable Care Act’s Medicaid expansion, the funding engine for the HIP 2.0.
A Kaiser Family Foundation analysis released this week shows Indiana would receive 3 percent less under the block grant system than it currently does under the Affordable Care Act.
It’s not as a big of a reduction as some expansion states would see, but report author Rachel Garfield said it would not be simple to use that block grant money to continue funding HIP.
“The block grant amount the state would get in lieu of the federal funds for their ACA Medicaid expansion could not be used to finance coverage for populations that are not traditionally covered under Medicaid,” she said.
Garfield says the state could try to set up a similar state-run system, but it could not be a Medicaid program. “There would be a fair amount of administrative work to get that up and running and figure out how that could work.” she said.
Indiana Family and Social Services Administration Secretary Jennifer Walthall told the Indianapolis Business Journal earlier this week she was aware of the bill’s potential to create a funding gap but was committed to maintaining coverage for Hoosiers.
(A spokesman for the Indiana FSSA did not respond to email as of press time.)
Indiana would lose less under Graham-Cassidy than other states. Certain expansion states — such as Minnesota, Vermont and Oregon, would see their federal funding drop 30 percent or more.
When asked why Indiana’s percentage decrease is smaller, Garfield says it all comes down to the formula, which considers the percentage of the population that is low-income as well as other factors.
“At the end of the period [in 2026] it is solely based on a certain cut of poor people. Some states have a relatively high share of poor people,” she said.
But the state still loses out on a lot of money — because the bill also caps federal spending for traditional Medicaid recipients, too, such as the elderly and disabled.
“When you add in the changes to traditional Medicaid, most expansion states that looked like they were doing well under the block grants are still coming out behind,” Garfield said.
When both traditional and expansion dollars are taken into account, Indiana loses $1.5 billion from 2020 through 2026, according to the Kaiser report.
Despite these potential losses, Indiana’s Eric Holcomb joined 14 other Republican governors when he signed a letter of support for the bill earlier this week.
“Adequately funded, flexible block grants to the states are the last, best hope to finally repeal and replace Obamacare – a program which is collapsing before our very eyes,” the letter reads.
As of Friday afternoon, Graham-Cassidy is hanging on by a thread after vital senate vote John McCain announced he wouldn’t support the legislation.
This story was produced by Side Effects Public Media, a reporting collaborative focused on public health.