Medicaid Now Covers More Americans Than Medicare

Since LBJ signed into law health insurance for elderly people in July, 1965, Medicaid has grown from an oversite, thought to care only for the poor, to the providence of some 74 million Americans–1 in 5–covering their needs from the womb to the grave. Thus, Medicaid is now central to the nation’s healthcare system.

Moderate Republicans were unwilling to gamble with deep cuts in Medicaid and therefore helped doom the GOP’s drive to “Repeal & Replace” the Affordable Care Act (“ACA”) aka “Obamacare.” Representative Frank LoBiondo (R-NJ), a centrist, noted that almost 1 in 3 of all his constituents were covered by Medicaid. Likewise, Senate Republicans and Republican state governors expressed worry about jeopardizing care for the working poor, children and people with disabilities, and reducing funding for the care of elderly people in nursing homes.

Last week’s doomed GOP bill that would largely have undone the ACA would have ended the open-ended federal funding of the largest share of states’ Medicaid costs and replaced the same with block grants. Block grants were not precisely stipulated, thus the concern that some states would be treated differently or more unfairly than others (see Georgia’s Nathan Deal’s expressed concerns). Moreover, the unanswered question of what states would do if their block grant money ran out in say, month 9 of a 12-month period–simply tell recipients that their care wouldn’t be covered for the last 3 months? Block grants or a fixed-annual sum per recipient were the two options available and either would have clearly led to major cuts in coverage over time.

Nevertheless, many GOP governors and members of Congress intend to continue efforts to curtail Medicaid due to budgetary concerns. In 2015, the total cost of Medicaid nationally was more than $532 billion. The federal government funded about 2/3 (63%) of that and the states picked up the remainder. But, last week’s defeat of the GOP’s AHCA shows how difficult it is to take away an entitlement. This reality prompted Vermont’s Bernie Sanders to again promise to introduce a single-payer act in Congress. Indeed, California is actively considering a single-payer system for its healthcare needs.  States often have different names for the program, but whether you know it as Medi-Cal, MassHealth,or TennCare in Tennessee, it’s just Medicaid by another name. And the percentage of people who support cutting Medicaid spending has never exceeded 13%. Even Donald J. Trump recognized Medicaid’s political potency during his campaign, when he declared that Medicaid should be saved “without cuts” and repeatedly Tweeted support for Medicaid, stating as “wrong” Republicans who wanted to cut Social Security and Medicaid.

Medicaid pays for nursing home care and other long-term care for more than 6 million Americans older than 64 years. But the Republican bill, the AHCA, would have only allowed Medicaid payments to grow per recipient at an inflation rate less than the true inflation rate of health care costs. Thus, the AHCA would have eroded benefits over time. Beneficiaries would have had to re-enroll every six months instead of annually. This threat to the elderly led Florida  Representative Daniel Webster to vote “No” on the legislation. Central Florida constituents in one retirement center alone, The Villages, number greater than 150,000 residents. So, even as Medicaid has gained some hint of a stigma with all the political polarization from the Obama years, the reality that some people can’t afford health insurance whether or not they were “able-bodied” and working has caused even Republican-led states to expand Medicaid coverage. The expansion has helped with the opioid epidemic, birth defects, and the fact that 10,000 Baby-Boomers per day are still turning age 65. So, despite the stigma that, “people don’t deserve [free care],” no one wants to see someone they know lose their healthcare due to unaffordable costs. Perhaps equally as important, Republicans recognized that any bill that would lead to drastic cuts in Medicaid would simply hurt too many of their constituents.

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Initial Glimpses Into Trump’s “Repeal & Replace”

Last week, the House and Senate committees that oversee health policy and GOP leadership released a white paper detailing initial structure of the replacement of large sections of the Affordable Care Act (“ACA” or “Obamacare”). Importantly politically, the plan allows its most critical provisions to be passed through a special budget process that requires only 50 Senate votes. These procedural mechanisms will allow fulfillment of Trump’s promise that repeal and replacement would occur “simultaneously.”

Currently, it appears that the major changes will be to expand the number of Americans who could benefit from federal assistance in buying health insurance coverage. But, the plan will change who benefits most from that federal assistance.

The ACA extended health coverage to 20 million Americans by expanding Medicaid for low income and needy in participating states, and by offering income-based tax credits for middle-income people so they could buy their own insurance. Effectively, Obamacare redistributed wealth from the rich to the poor.

This new GOP plan would alter both those two existing mechanisms. First, it will drastically cut funding for states in providing free insurance through Medicaid to the low income and needy. Secondly, it will change how tax credits are distributed by giving all American not covered through their employment a flat credit. But there’s the sticker: the credit will be determined by age, not income levels, the latter being entirely disregarded in the calculus.

So, the larges financial benefits will go to older Americans. For example, Warren Buffett will get the same amount of financial assistance as someone his age, living in poverty. Likewise, a Trump Cabinet member, 64 year-old multi-millionaire Secretary of State Rex Tillerson, if he didn’t have access to government coverage, will get substantially more money than a poor, young person, but the same amount of financial assistance as any given 64 year-old American living in poverty.

To be sure, older people tend to have higher medical bills and so are charged more by insurers even under the ACA. So, matching tax credits to age has a rational basis–to a degree. And the new plan would simplify the current system in that verification of applicant income to optimize just the right amount of financial assistance would be eliminated. And, it would also eliminate incentives for low-income people to avoid earning more to avoid facing a reduction in benefits. But the GOP plan will result in more low-income people losing coverage if they can’t find the money to pay the difference between their tax credit and the actual cost of their health insurance. The ACA is set up to ensure low and middle-income Americans can afford the premiums charged for healthcare insurance.

Moreover, older people without employer-based insurance typically earn more than young people starting out their careers. Independent estimates of similar tax credit plans from Speaker Paul Ryan and Secretary of HHS Tom Price show changes based on tax credits will result in millions losing coverage.

Now, in moving resources from the poor to the rich, limits to deposits in Health Savings Accounts (“HSAs”) will increase. Generally, those with higher incomes paying more in taxes tend to benefit more from HSAs and recent studies show that HSAs are disproportionately held by families with higher earnings. The new program will also eliminate a number of taxes on the health care industry at large.

Curiously, the new plan omits changes to any of the Obamacare regulations the GOP have argued drive up costs of health insurance: the rules including mandates that every plan cover a standard package of benefits, and those requiring companies to charge the same prices to healthy and sick Americans (removal of pre-existing condition penalties). These rules can’t be changed through the budget process and so will require 60 votes in the Senate. It is yet unclear how these proposals will affect Aged, Blind & Disabled Medicaid assistance programs, if at all.

The new plan will undoubtedly change as it moves through committee hearings. But the above seems to set forth the outline of the discussion. So, against this backdrop essentially approved by every major committee working on health care in Congress, it seems that President Trump’s promises to provide a beautiful plan of health insurance for “everybody” are truly speculative.