The U.S. Senate appears poised to take one final shot at “repeal and replace” legislation for the Affordable Care Act. The clock is ticking toward the Saturday, Sept. 30, deadline for adopting the legislation with a simple majority.
The “Graham-Cassidy” legislation would fundamentally transform the coverage provisions of the ACA. It would provide block grants to states for the ACA’s Medicaid expansion and individual marketplace populations, and include “contingency funds” to nonexpansion states like Missouri in 2020 and 2021. It also would shift the traditional Medicaid program from an open-ended state-federal match to a per capita capped federal allotment.
The bill is a massive policy pivot. Although Missouri stands to gain in some areas under the bill, the long-term implications aren’t clear. In fact, as drafted, the funding for the block grants to support coverage ends in 2027.
The compressed congressional timeline hasn’t provided anyone — including official congressional budget score keepers like the Congressional Budget Office — an opportunity to evaluate the proposal. Unpacking something this complex takes time and patience. So far, here’s what we know.
First, the legislation transfers the central health care responsibility for nearly one-quarter of Missouri’s population to the state. Missouri must implement this new program by 2020 — just two years from now. Given that next year is an election year, it’s safe to say that Missouri — and most other states — will effectively have one year to implement this change. Since it took congressional Republicans seven years to decide how to “repeal and replace” Obamacare, it seems a bit optimistic to think states, with a far shorter timeline and an equally heavy lift, could accomplish the task.
The second issue is in the numbers. There are so many payment puts-and-takes to unpack, that just managing the spreadsheets is a Herculean task. The topline for Missouri is that under the block grant provision of the bill, states have flexibility to build coverage programs for individuals outside of traditional Medicaid coverage. In 2020, Missouri’s block grants and contingency fund total is estimated to be $1.43 billion. However, current federal marketplace assistance under the ACA would be $1.21 in 2020, without change to the law. Assuming that Missouri didn’t use the grant to shift subsidies from current marketplace participants to the state’s ACA-Medicaid expansion eligible population, only about $214 million would be left. The 2020 federal-share cost of Medicaid expansion in Missouri — under the ACA — would be approximately $2.5 billion. Clearly, block grants will require significant eligibility changes, benefit restrictions or new state investment to achieve broad coverage.
Per capita caps also will reduce federal spending in the traditional Medicaid program. The per capita caps — which essentially were pulled from the Better Care Reconciliation Act that was defeated in the Senate earlier this year — reduce the federal share of spending every year. In 2020, federal Medicaid spending would drop by $143 million under the caps. By 2027, the estimate is $529 million. Given the new block grants and caps on Medicaid, Missouri would be ahead in 2026. You could argue that the authors of this legislation listened to the pleas of the states that did not expand Medicaid and sought to provide an equitable solution for dealing with the uninsured.
But for every dollar the federal government sends to Missouri, the fine print in the legislation shows that it cleverly takes some away. The bill reduces states’ provider tax rates from 6 percent of provider revenue to 4 percent. The rate cut impacts all of Missouri’s provider taxes, not just the Federal Reimbursement Allowance. By 2027, Missouri could lose nearly $900 million annually in provider tax revenue.
Bottom line — Missouri is up by approximately $345 million in federal funding by 2026. That’s just less than $50 million per year during the years 2020 thru 2026 to innovate and restructure our health care system. However, with the elimination of the new block grant in 2027, Missouri’s funding goes negative — very fast and very deep.
The state’s risk is large. In addition to the financial risk, the state must implement a new, broad and complex health insurance and health safety net system. Although the state is protected from increases in enrollment, it is not protected from increases in utilization. Similarly, the capped programs aren’t flexible enough to bring swift assistance in an economic downturn, during a natural disaster, or in other unexpected situations, such as a flu pandemic or the introduction of a new cure.
All in all, it would be much better to have the bill legislated through regular order with committee and stakeholder input, CBO scoring, and consensus building inside and outside of the Capitol. With the reconciliation process driving the timeline, that isn’t happening.
Missouri is one of 19 states that haven’t adopted Medicaid expansion. That changes the calculus slightly. Moreover, majority leadership in Congress and the Missouri legislature have already signaled a desire to not only shun the ACA, but also move toward a system with more state flexibility.
Graham-Cassidy would provide an opportunity for Missouri to address the coverage gap for its most vulnerable and low-income residents. Compared to the ACA’s uptake in Missouri, such a reshuffle might make sense. Of course, that means using Missouri alone — and its ACA implementation — as the benchmark for the national policy. At the same time, it creates real uncertainty for the state — particularly by breaking the 30-year partnership of funding Medicaid through provider taxes. This could put new strains on state general revenue options.
Graham-Cassidy may not be the final program. However, the policy options included in the legislation are unlikely to pass as quickly as the Sept. 30 deadline. Here is the link to the American Hospital Association’s legislative alert on this legislation.
Let me know what you think.
Herb B. Kuhn
MHA President and CEO
September 21, 2017
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