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Monday, 27 November 2017 07:20

The GOP "Plan" for Medicaid: Why Block Grants to States Are a Bad Idea

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Medicaid 1127wrp opt(Photo: Don Buciak II / Flickr)An under-appreciated time bomb of block grants to states for Medicaid and other safety net programs is a constant thread within budget plans going forward in Congress and the Trump administration. This is likely to happen soon and have big impacts on the 75 million Americans now covered by Medicaid, many of whom gained this coverage as residents of the 31 states that expanded Medicaid under the Affordable Care Act (ACA).

As we know, the GOP tax plan that will probably emerge will give huge benefits to corporations and the wealthiest top 10 percent at the expense of the middle class. It will increase the federal deficit by some $1.5 trillion and lead to an attempt to make up that deficit by cutbacks in such "entitlement" programs as Medicare and Medicaid. A convenient way of doing this for Medicaid will be to give block grants to states with the unproven assumption that they can better design and manage their Medicaid programs with more flexibility -- and less federal money! If the costs of state programs exceed their budgets, it will be up to them to make up the difference.

An analysis by Avalere Health has shown that the federal government could save about $150 billion over the next five years through these per capita block grants. Any such savings would be on the backs of the most vulnerable among us.

Let's look at how these block grants will actually work to better understand what their impacts will be on vulnerable low-income Americans and safety net programs across the country.

Some of these approaches have already been implemented by administrative actions of the Trump administration under federal waivers of ACA requirements. As a major example, Seema Verma, the new director of the Centers for Medicare and Medicaid Services (CMS) who had formerly crafted a very restrictive Medicaid program in Indiana during the governorship of Michael Pence, recently released a 365-page proposed rule that would let states define (read: limit) essential benefits, relax the threshold for state regulators to review premium increases from 10 to 15 percent, and allow insurers to spend more of their premium revenues on administration and profits.

What will happen with block grants to states for Medicaid?

1. Increasing premiums and cost-sharing as barriers to care

Rather than viewing Medicaid as an essential safety net program for lower-income Americans, Republicans in Congress see Medicaid as a welfare program. They want to add premiums and copays to some state Medicaid programs, together with other ways to cut Medicaid spending, such as adding work requirements, drug testing and rolling back Medicaid expansion. These approaches restrict eligibility for Medicaid and increase financial barriers to essential care, especially for older and poorer patients, that result in delayed care and worse outcomes when care is finally received.

2. Reduction of covered services

With more flexibility to design their own programs and with minimal federal oversight, states receiving block grants for Medicaid would have latitude to not cover some essential benefits, such as hospital care, prescription drugs,  rehabilitative services and mental health services.

3. Annual caps

Despite its importance, Medicaid has been chronically underfunded since its enactment in 1965. Congressional Republicans are intent on capping federal contributions to the program, requiring increasing financial commitments by the states. A recent report in the American Journal of Public Health recounts the experience of block grants for Medicaid to Puerto Rico, a US territory with 3.5 million residents. A statutory cap of 50 percent of Medicaid's costs was established in 1968. By 2010, the federal share of Puerto Rico's Medicaid costs had fallen to just 18 percent. Today, the program does not cover nurse midwife services and long-term care.

The researchers have this to say about Medicaid caps being considered in Congress:

States cannot afford the steep cuts in federal Medicaid spending -- about $800 billion over 10 years, amounting to a 24% reduction that would increase to 35% in the following decade -- that House and Senate Republicans have proposed. Capped funding inevitably would force states to make painful decisions about reducing Medicaid eligibility and benefits. Medicaid funding caps would unravel the program in many states, leaving millions of low-income persons without any health insurance.

4. Elimination of retroactive coverage

Retroactive eligibility has been a part of Medicaid for decades, by which poor, uninsured and seriously ill patients could qualify for Medicaid for the previous three months without coverage. This has been an important way for these patients to gain access to urgently needed care, and for providers and hospitals to be compensated for that care. Today, however, four states have already received federal permission to eliminate this benefit, and a growing number of other states are likely to follow suit.

5. Increased privatization, profiteering and fraud

Privatized Medicaid is already the norm across the country, accounting for 73 percent of Medicaid beneficiaries nationwide and with 12 states having more than 90 percent enrolled in private programs. This has become big business for some insurers. Centene Corp., the largest Medicaid insurer, took in $1.1 billion in profits between 2014 and 2016 in California, even though its plans were among the worst performing in the state.

As states face their budget crunches with block grants for Medicaid, we can expect that they will succumb to claims by private insurers that they can provide services more efficiently and cheaper (read higher profits to them and worse care).More privatization of Medicaid is a direct threat to nursing home care, preventive care, and family planning services. We can also expect increasing bureaucracy and fraud. In Florida, for example, the state paid some $26 million to Medicaid insurers for coverage of people who had already died -- mostly as a result of outdated information in state databases and poor collaboration among different agencies.

Adverse impacts of state block grants for Medicaid

Based on the above projections, we can expect severe Medicaid cuts on a short and long-term basis if block grants to states are implemented. Many millions of the most vulnerable Americans will lose coverage of necessary health care, with increasing death rates due to delayed and inadequate care. Community health centers, a backbone for primary care across the country, will lose funding, as will hospitals. Other safety net programs will likely also lose funding, including CHIP and food stamps.

The American Association of Retired Persons (AARP) has taken a strong position against block grants to states for Medicaid:

AARP opposes Medicaid block grants and per capita caps because we are concerned that such proposals will endanger the health, safety, and care of millions of individuals who depend on the essential services provided through Medicaid.

States will find that premiums and cost-sharing in Medicaid will not produce significant savings. Instead, a recent study by the Kaiser Family Foundation drew these conclusions:

Even small levels of cost-sharing in the range of $1 to $5 are associated with reduced use of care, including necessary services . . . State savings from premiums and cost sharing in Medicaid and the Children's Health Insurance Program (CHIP) are limited. Research shows that potential revenue gains from premiums and cost sharing are offset by increased disenrollment, increased use of more expensive services, such as emergency room care, and increased costs in other areas, such as resources for uninsured individuals and administrative expenses.

All this will become part of Trumpcare, which further sabotages the ACA, will decimate Medicare and Medicaid through future budget cuts, tears more holes in the nation's already tattered safety net and lends more urgency to real health care reform.

In order to bring equity and universal access to necessary health care for all Americans at a lower cost than we now pay as patients and taxpayers, we have to confront the rapacious profiteering of the private health insurance industry and other for-profit corporate stakeholders in our medical-industrial complex and establish a not-for-profit single-payer system, Medicare for All. Almost two-thirds of Americans support this approach, and they are who our system should be for.

Timothy Jost, J.D., professor emeritus of law at the Washington and Lee University School of Law, brings us this important observation:

A state-based approach to health insurance reform is very attractive because it shifts the political and financial responsibility for coming up with an ACA replacement away from Congress to the states. Congress and the administration can say it is not our fault that millions are losing coverage -- the states are to blame.


John Geyman, M.D. is the author of Common Sense about Health Care Reform in America (2017), Crisis in U.S. Health Care: Corporate Power vs. The Common Good, and The Human Face of ObamaCare: Promises vs. Reality and What Comes Next. Visit John at:http://www.johngeymanmd.org/