The Senate Republican health-care bill would achieve a historic convergence of GOP priorities, placing major, permanent caps on Medicaid spending and providing a significant tax cut for wealthy Americans.
President Trump and congressional Republicans describe the legislation as fulfilling their promise to repeal the Affordable Care Act, or Obamacare, but key provisions are also aimed at making progress on the GOP’s long-held goal of cutting entitlement spending.
The legislation would sharply break with pledges Trump made during the 2016 campaign to block reductions in Medicaid spending and to deliver tax cuts primarily to the middle class.
All together, it shows how long-term conservative goals of cutting taxes and entitlement spending have overtaken Trump’s agenda, as the bill faces critical votes in the Senate as soon as next week that could take it to the precipice of becoming law. Reducing taxes, Republicans argue, will boost the economy, and shrinking spending on programs such as Medicaid will slow the growth of the federal debt.
“When otherwise has this been done?” said Douglas Holtz-Eakin, a Republican and a former director of the Congressional Budget Office. “You can’t name any combination of tax cuts and entitlement reforms like this in one bill.”
“This is a historic enterprise, and it explains why the screaming coming out of the left is so fierce,” he added.
Republicans have been on a multi-decade quest to fundamentally alter Medicaid, which provides health benefits for low-income Americans and those with disabilities. Medicaid is run jointly by states and the federal government, but conservatives have long decried it as wasteful and bloated with spiraling costs.
The Senate bill would give states the option of changing Medicaid into a “block grant” program or putting firm caps on its spending based in part on how many people live in each state. Just as significant, the bill would arrest future Medicaid spending with tight controls on how much the program can grow.
Meanwhile, the legislation would leave in place reductions in spending for Medicare, the health insurance program for the elderly, that were part of the Affordable Care Act. Republicans previously slammed those cuts as robbing the program to pay for Obamacare.
The Senate bill would also deliver roughly $1 trillion in tax cuts over 10 years, including cuts to the rates wealthy Americans pay on investment income and to a levy charged to health insurance companies.
Democrats argue that the Republicans’ ideological goals will be fulfilled at the expense of millions of poor people who will lose access to health care — in some cases with life-or-death consequences. The liberal Center for American Progress issued a report Thursday arguing that the Senate bill would cut benefits so much that it could “result in 18,100 to 27,700 additional deaths in 2026.”
The Affordable Care Act, which passed with support from only Democrats in 2010, increased access to Medicaid benefits by changing the eligibility threshold and providing more federal taxpayer dollars to cover new enrollees.
Since the law passed, many states — run by both Democrats and Republicans — have expanded their Medicaid programs to take advantage of the new federal support. The authors of the ACA had intended for all states to do so, but the Supreme Court ruled that the government could not compel states to participate in the expansion of the program.
The average number of people receiving benefits from Medicaid and a health-care program for low-income children has risen 30 percent under the ACA, to 74.6 million people, according to the Kaiser Family Foundation. That represents roughly 23 percent of all Americans. By some measures, Medicaid covers more Americans than any other safety net program, larger than even Social Security or Medicare by total enrollment.
Among other things, it covers 45 percent of all births in the United States.
The Senate bill would allow Medicaid’s expansion under the ACA to continue until 2021, but then it would contract the extra federal spending until the expansion is eliminated in three years. States could replace the lost federal money, if they wanted to continue covering the same number of people, by spending more on their own.
And the measure would permanently transition Medicaid into a block grant arrangement or put strict caps on how much money each state receives, shrinking the program far beyond its pre-Affordable Care Act size.
Republicans have tried to transform Medicaid into a block grant program since at least the Reagan administration, an effort that has repeatedly failed. President George W. Bush made a similar attempt that never gained traction. Now, Republicans are on the cusp of achieving these changes.
Supporters say converting the program into block grants will control its costs and give states more flexibility to tailor benefits to specific needs.
Even before the Affordable Care Act passed, Medicaid costs were growing faster than the broader economy, a dynamic that many conservatives argued was unsustainable and needed to be addressed.
“There’s two issues here,” said Charles Blahous, a conservative health policy expert who served as a federal trustee for the Social Security and Medicare trust funds from 2010 until 2015. “There’s the problems in Medicaid that were created under the Affordable Care Act, and then there are the problems that predated that. Medicaid was already on a financially unsustainable course before the Affordable Care Act.”
Critics say the changes will break a model that has covered millions of Americans for more than 50 years, cutting people off from coverage and potentially putting lives at risk.
“This is not just a repeal of Obamacare,” said Donald Berwick, a former head of the Centers for Medicare and Medicaid Services during the Obama administration. “It’s a repeal of the social contracts that have been established in American health-care policy since Medicaid and Medicare were passed in 1965.”
Total federal spending on Medicaid reached $389 billion in 2017, a figure that is projected to grow to $650 billion by 2027 without any changes. Medicaid spending increased 9.7 percent in 2015, compared with 4.5 percent growth for Medicare.
In May, the House passed its own bill that would repeal the Medicaid expansion and give states the option of converting the program to a block grant or capping costs based on a per capita measurement. The Congressional Budget Office estimated that these changes would cut Medicaid spending by $834 billion over 10 years, leading the program to cover 23 million fewer people.
The Senate bill would make the same changes, although in a slightly different way.
Both the House and Senate bills would adjust Medicaid spending caps until 2025 based on a measurement of inflation that takes into account the increase in health-care costs, though the caps would be less strict for older Americans and people with disabilities.
The House bill would keep that measurement in place, but the Senate bill would change it in 2025 so that the caps would probably increase even more slowly, saving money while limiting potential benefits. The nonpartisan Urban Institute estimated that the Senate’s measurement could cut spending by an additional $467 billion over 10 years compared with the House legislation.
“With this bill, we’re cutting — we’re amending — the original Medicaid legislation of 52 years ago that says the feds will split the cost with the states,” said John Baackes, chief executive of L.A. Care Health Plan, a California insurer that has 2 million Medicaid members. “This goes way beyond repeal and replace of the Affordable Care Act.”
On taxes, the House and Senate bills would repeal all the levies put in place by the Affordable Care Act. These include a 0.9 percent tax on people who earn more than $200,000 a year.
Those same earners would also see the elimination of the 3.8 percent surcharge on certain kinds of investment income.
These changes would cut about $350 billion over the next decade, according to the CBO.
The Senate bill would also eliminate an “annual fee,” or tax, on health-care companies, which would save an additional $145 billion.
Paige Winfield Cunningham, Max Ehrenfreund and Carolyn Johnson contributed to this report.