Republicans celebrated on Thursday after successfully moving a health-care bill forward that they said would fulfill their promise to repeal President Barack Obama's Affordable Care Act. Yet one of the bill's most far-reaching sections is only tangentially related to repealing the law, also known as Obamacare.
The law would limit federal spending on Medicaid — the program that provides health insurance to the poor — to an index of inflation in medical prices. Since the program's costs are increasing more rapidly than that index, over time, the government would spend hundreds of billions less on Medicaid than it would under the current system. It would be up to states to decide how to make up the difference.
The provision will affect millions of Americans on Medicaid — many of them children, the disabled or patients in nursing facilities — whose coverage is not otherwise affected by Obamacare. The main provisions of that law expanded Medicaid to a broader population and established markets for people who were not eligible for insurance through the government or through an employer to buy coverage.
In the existing system, the government covers a share of each beneficiary's costs, regardless of how many enroll in each state or what their expenses are. That guarantee would end under the GOP plan.
How did a sweeping reform to the Medicaid program make it into a bill that is ostensibly about Obamacare? For Republicans, changing how Medicaid is financed has long been a chief priority, aside from undoing Obama's reforms. At a conference in March, Rep. Paul D. Ryan (R-Wis.), the speaker of the House, joked with Rich Lowry, editor of the conservative National Review, about how the two of them had been planning to limit federal Medicaid spending since partying together as much younger men.
“We've been dreaming of this since I've been around — since you and I were drinking at a keg,” Ryan said.
Republicans have long argued that the new system would force states to find ways to use federal dollars more efficiently to take care of their residents, and that the new system will also give states more flexibility to meet the specific needs of the population in each state. As a result, as Republicans laid out a conservative vision for how American health care should be reformed, substantial changes to Medicaid were to be expected.
“While repeal and replace of Obamacare has attracted the most attention, this Medicaid piece is very important and again, something that conservatives and Republicans have talked about for a long time,” said Avik Roy, a health-policy expert who has advised former GOP presidential candidates Mitt Romney, Sen. Marco Rubio (R-Fla.) and Energy Secretary Rick Perry.
Roy argued that Medicaid, which was enacted by President Lyndon Johnson in 1965, imposes outdated rules on states, preventing them from designing more efficient plans for beneficiaries that would penalize wasteful medical care — such as visits to emergency rooms for minor ailments — and use the savings to improve the system overall.
Most research suggests that Medicaid is more financially efficient than both Medicare — the other primary public insurance program, which serves elderly Americans — and insurance offered throughout the private sector. One study found that private companies would shell out as much as 25 percent more than Medicaid to cover similar patients.
“All the evidence that is out there — that we’ve pulled together and other people have — is that Medicaid is a pretty low cost program,” said John Holahan of the nonpartisan Urban Institute. “It’s so much more expensive to put people in private plans.”
Democrats argue that state officials already have some authority to design Medicaid as they wish. When he was the governor of Indiana, for example, Vice President Pence worked with the Obama administration to develop an elaborate system for people on Medicaid in the state. The changes were designed to encourage them to take responsibility for their care and their costs and to reduce wasteful spending.
Many Democrats are convinced that Republicans are cutting spending on Medicaid so that they can use the savings to fund the GOP alternative to Obamacare, without relying on the taxes that Obamacare imposed on the wealthy. Those will be repealed, although one surcharge on rich Americans' wages and salaries would remain in place for another five years under the Republican bill.
“It’s just, honestly, an excuse for a tax cut,” said Andy Slavitt, the former administrator of the Centers for Medicare and Medicaid Services under Obama.
Determining exactly how much the federal government would save, or how many people would be affected by the change, is difficult. Officials in each state would have to make decisions about how to use the more limited money available money from the federal government, and their choices would determine how much the government would spend and who, if anyone, would no longer be covered.
Roy argued that states will be able to use the funds more efficiently, and that those who would have been on Medicaid anyway had Obamacare never been implemented will be able to remain in the program. Many of those who benefited from the expansion of Medicaid to a broader population would likely lose coverage as the new bill would undo the expansion without offering a suitable alternative for that group, Roy said.
In March, the nonpartisan Congressional Budget Office analyzed an earlier version of the bill that Republicans approved in the House on Thursday. At the time, CBO projected that the changes to Medicaid would result in 14 million additional Americans without insurance, while saving the federal government $880 billion over a decade. Those figures include both undoing the Medicaid expansion under Obamacare and the separate provision to index spending for each beneficiary to inflation.