National Consumers League

Medicaid per-capita caps: A recipe for disaster

j_johnson92.jpgSpotlight on Health Care Series, Part 1: As America's health care system is facing uncertainty, NCL staff is exploring the topic in a new weekly blog series.

No matter how you slice it, the proposed changes to Medicaid in the GOP’s new health care bill are not a spending compromise–but rather a massive cut in funding that will decimate the Medicaid program as we know it.  

House Republicans recently introduced the American Health Care Act (AHCA) as a first step in fulfilling their promise to repeal and replace the Affordable Care Act (ACA).  The AHCA would cut $880 billion in federal support for state Medicaid programs over the next decade, while dramatically altering the funding structure of Medicaid from a flexible federal entitlement to a rigid per-capita cap. Under the current system, the federal government matches state Medicaid spending as enrollment increases and health care needs change. The new plan proposed by Republicans would cap federal funding solely based on the number of Medicaid enrollees.

This cap would not match the dynamic nature of health care. If Medicaid spending increases–perhaps due to a natural disaster, a sudden disease epidemic, or even a breakthrough drug the state wants to cover–states would be left to foot the bill for any costs over the strict per-person cap. This policy also makes Medicaid particularly susceptible to deeper cuts in the future; if Congress succeeds in divorcing federal support from the actual cost of providing health care, it will have greater liberty to continue to slash funding over time to generate more federal savings.

Republicans assert that the capping approach will slow the growth of Medicaid and expand states’ flexibility to innovate and provide patients with the care they want. The reality is, rather than curtailing spending, the costs will simply shift away from the federal government and onto the backs of state governors–sending state budgets into turmoil and placing millions of Americans at risk. Ultimately, states will be faced with the choice of raising taxes on their residents to meet funding needs, cutting funding from critical programs such as infrastructure or education, or imposing devastating cuts to Medicaid eligibility, benefits, and coverage for millions.

Among those most severely affected by a Medicaid spending cap are rural communities, where at least one-quarter of residents rely on public insurance. Several health crises already plague this population, including the onset of disease in coal workers and the Opioid epidemic. These issues, among many others, have contributed to a spike in the mortality rate of lower and middle class white Americans, and a huge reduction in federal funding would only further limit states’ ability to respond.  Capping will also have negative ramifications for children, who account for approximately 40 percent of the Medicaid population. According to the Center on Budget and Policy Priorities (CBPP), a slash in funding for Medicaid will have devastating consequences for children’s health, educational attainment, and earning potential, leading to long term damage to state economies. In short, this colossal overhaul of Medicaid would jeopardize health care for our country’s most vulnerable populations.

Today, 70 million low-income and disabled Americans rely on Medicaid to fulfill its guarantee to provide coverage for all eligible men, women, and children just as it has done for over 50 years. The GOP proposal reneges on that guarantee. Capping funding for a program that serves as an essential lifeline for so many will not lead to a more efficient health system or healthier Americans–it’s a recipe for disaster.