Republicans’ Changes to Medicaid Could Have Larger Impact Than Their Changes to Obamacare

House Republicans are proposing to fundamentally alter the way the federal government has been financing Medicaid for more than 50 years. The changes are part of their plan to replace the Affordable Care Act, also known as Obamacare.

“This is potentially more major than repealing the Affordable Care Act,” said Joan Alker, the executive director of the Center for Children and Families at Georgetown University.

Medicaid provides health insurance to 74 million people, or one in five Americans. Of the 20 million who gained insurance under Obamacare, at least half were through Medicaid expansion.

The changes would not begin until 2020. But the long-term impact on states would be unequal, with some faring better than others, depending on how much they spent on the program, their demographics and whether they participated in President Obama’s expansion of Medicaid eligibility.


The Republican bill calls for capping how much the federal government gives each state per Medicaid enrollee, based on how much the state was spending on the program in 2016.

Spending varies widely from state to state. Nevada and Georgia, for example, spend less than $4,500 per enrollee, while Massachusetts and New York spend more than $10,000 per enrollee.


Since it was created in 1965, federal funding for Medicaid grew as needs changed for the states. If more people became eligible, say, because of a recession, or if costs rose because of expensive new medicines or a public health crisis, states received more federal money.

Federal spending on Medicaid flexes as states alter their policies, eligibility rules and payment rates for doctors, hospitals and nursing homes.


Under the Republican plan released on Monday, federal funding for every Medicaid beneficiary would essentially freeze, rising only with the medical component of the Consumer Price Index, or the price of medical care. That change would allow funding to grow if more people sign up for Medicaid, but not if the cost of care for Medicaid patients spikes, or states want to offer new benefits or increase payments to doctors.

Some health experts worry that over time, states would be unable to respond to changes in the health care needs of their population unless they use their own money, potentially risking the survival of a program that has been a critical source of health coverage for the poor.

“I think of it as essentially putting states behind bars,” said Sara Rosenbaum, a professor of health law and policy at George Washington University. “Whatever you were doing circa 2016 is what you’re going to do forever.”

Virginia, where the governor has declared its opioid crisis a public health emergency, recently decided to significantly expand the scope of its Medicaid benefits to spend more on drug treatment for patients.

If there was a cap on federal funding, the state would not be able to share these cost increases — beyond simple medical inflation — with the federal government, Ms. Rosenbaum said.“That is the core problem with aggregate limits, whether across the board or per capita, is that they’re impervious to the factors that drive health care spending,” she said. “The potential effects are enormous.”

The Republican plan would set different spending targets for different types of Medicaid beneficiaries, like older Americans, the blind and disabled, children and adults.

States with rapidly growing populations of older Americans, like Nevada and Arizona, may still be hit harder over time.


This is partly because spending for older Americans, along with the disabled, make up a larger proportion of Medicaid spending, even though they are a smaller share of enrollment. Spending for that population is less likely than others to track the medical consumer price index, because much of the money tends to go to nursing home care, not traditional medical services.


Putting an end to the open-ended commitment from the federal government could create an incentive for states to drop its costliest populations, like older Americans, out of concern that their costs will grow faster than inflation, Ms. Rosenbaum said.

In addition, people 85 and older have 2.5 times more Medicaid costs as people 65 to 74, according to Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, a liberal-leaning research and advocacy group.

So, if a state has more expensive people joining its mix, but the amount of money it gets from the federal government is fixed and grows slowly, states would have to pay the additional costs, Ms. Alker said.


In a shift from previous proposals, the Republican legislation does not immediately repeal Medicaid expansion. It allows states like Kentucky, Nevada and Colorado to continue receiving federal funding as they would have under Obamacare until 2020, delaying the potential impact on state that expanded Medicaid.

Under Obamacare, 31 states and the District of Columbia expanded Medicaid to cover adults whose income was at or below 138 percent of the poverty line, covering millions of low-income Americans who previously found it difficult to afford insurance.


Kentucky saw the largest growth in enrollment, though some recent enrollees were probably already eligible even before the expansion.

The federal government currently covers nearly all the costs of Medicaid enrollees who became eligible under the expansion.

But in 2020, enrollment under the expansion would freeze, and if a state decided to continue enrolling new beneficiaries under the expansion criteria, it would have to pay more to do so.

Enrollment could inevitably decline because Medicaid is a program where people go in and out over time, say, if they lose a job, for example. It is not yet clear how much savings the new plan would produce, but Republican leaders have long argued that fixing federal funding for Medicaid would ultimately produce significant savings in the federal budget while providing states more flexibility in managing the program.“But states already have a lot of flexibility in Medicaid,” Ms. Alker said.

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