Examining Selected Proposals in ‘A Better Way to Fix Health Care’: Part 3

NCHC Writer

In two previous blog posts, we have discussed some of the ideas and approaches to health care reform in the House Republicans “A Better Way” plan where NCHC shares common ground (and also expressing our opposition of outright repeal of the Affordable Care Act). In this blog post, however, we want to talk about a couple ideas with regard to Medicaid where we do not agree; where we, in fact, have very serious reservations.

“A Better Way” would give states the option to choose either a block grant or a per capita cap for their Medicaid programs, both of which we are strongly opposed to. Both ideas have been around for decades. And there are good reasons why neither has been enacted into law, even when Republicans controlled both the White House and Congress.

“A Better Way” points to the growth in Medicaid spending as to why block grants and per capita caps are warranted: The report says that “during fiscal year 2016, federal and state Medicaid outlays are expected to be approximately $545 billion. Today, Medicaid accounts for more than 15 percent of all health care spending in the United States and plays an increasingly large role in our nation’s health care system.“ What is does not say is that per capita spending in Medicaid is actually lower compared to private insurers after adjusting for the greater health needs of the Medicaid population. A 2013 Kaiser Family Foundation study found that if a low-income adult Medicaid enrollee were instead covered by private health insurance, spending would be over 25 percent higher. Growth in Medicaid spending is driven by growth in enrollment, not because it is an inefficient system.

A block grant – which would give states a lump sum of money to run their Medicaid programs, with few, if any, strings or requirements attached — may sound like a good way to control health care costs, but it does so on the backs of our most vulnerable citizens: low-income children, mothers, the poor and frail elderly. By capping what the federal government gives to state Medicaid programs, there is every reason to believe that states will reduce benefits, restrict coverage, and cut payments to providers. Those strategies might save the federal government money, but could over the long-term impose significant cost on state economies and taxpayers. For example, states would be left holding the bag if an economic downturn floods the Medicaid rolls.

Though often touted as an alternative to block grants, per capita caps in Medicaid are also a bad idea. Under this approach, the federal government would give states a set amount of money per enrollee. It differs from a block grant in that it is not a fixed amount of money, but rather pays per enrollee, no matter how many people are enrolled so it would protect states against unexpected surges in enrollment.

“A Better Way” would calculate separate caps for four subpopulations (aged, blind and disabled, children and adults); caps would be calculated the first year and only adjusted for general inflation after that. Historically, health care cost growth has far outpaced general inflation, even when health care costs slowed during the recent recession. Tying adjustments to general inflation virtually guarantees a cap that does not keep pace with health care costs.

Per capita caps would not protect against higher than expected costs that could arise from a jump in chronic disease (think opioid addiction), outbreak of a communicable disease (think Zika) or the arrival of a high-priced, but life-saving drug or device (think recent Hepatitis C drugs). So here too, any money the federal government saves will be at the expense of the states. And states, in turn, would turn to curbing benefits, restricting coverage or further cutting provider payment for children, pregnant mothers, disabled beneficiaries, the poor and frail elders.

We acknowledge that Medicaid is a major investment for states. And we are concerned that the escalating health care costs that are squeezing families, employers and Medicare today are also wreaking havoc on state budgets. The answer is to do the hard work of finding systemic efficiencies for the entire health system, not reduce needed access solely for the most vulnerable.

Our health care system is facing any number of challenges. I know that House Republicans want to address as many of these problems as they can, and there are ideas in “A Better Way’ that NCHC can support. But on some of the biggest problems facing our system – such as making Medicaid more affordable and cost-efficient – it is time for some new thinking. And there may be many Republicans who might agree.