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Reality Check: Senate Health Care Bill Doesn't "Cut" Medicaid

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The release of the “Better Care Reconciliation Act” last week was followed by a predictable flood of media stories and commentary decrying the proposed changes to Medicaid. In some ways, it echoed arguments used during the welfare reform debate in the 1990’s.

Yet the health care outrage lacked basic context and often contained misleading statements or outright falsehoods. While the bill is far from perfect and needs some significant changes, a reality-based foundation is imperative for meaningful discourse to occur.

False claim: The Medicaid “cuts” are huge

Reality: Only in government does slowing the growth of spending mean “cuts”

The primary false narrative being sold to the public is that this bill will result in massive spending cuts in Medicaid. It simply is not true.

The bill does not spend fewer dollars. In fact, under this bill, taxpayers will spend more over the next 10 years. The “severe” change being referenced in almost every news story is a reduction in the rate of growth.

For decades in the health policy community most have agreed a good first step would be to slow the rate of growth, but in a partisan environment, that becomes “mean and heartless.”

During the 2012 campaign, while debate was swirling around Obamacare’s payment reductions in Medicare, PolitiFact wrote that While the health care law reduces the amount of future spending growth in Medicare, the law doesn't actually cut Medicare.”

Surely ACA supporters aren’t using this logic for partisan or ideological reasons?

Ultimately, Obamacare supporters can’t have it both ways, defending $716 billion in Medicare payment reductions as inconsequential in the ACA while claiming a similar reduction in Medicaid will cause the sky to fall.

False claim: Growing costs are the main problem & per capita cap funding will not be enough

Reality: Enrollment growth is driving spending increases and per capita caps are a good first step towards reform

When the Congressional Budget Office (CBO) scored these bills, the projected savings from changes in Medicaid were almost entirely related to Medicaid enrollment changes-- not capping the program. In fact, analysis by my colleague Jonathan Ingram at the Foundation for Government Accountability has shown that, historically, almost all states would not have exceeded the caps set in the House bill. Just 0.4 percent of spending would have exceeded the cap.

Actually, the caps are projected to grow at a higher rate than projected spending for seniors and the disabled. (4.8% projected for 2019 and beyond vs. 4.6%)

Altogether, if the caps had been in place starting in 2000, actual spending growth would have remained lower than the targets set by BCRA.

So the draconian claims of seniors being thrown out of nursing homes or the disabled being targeted for cuts are farfetched. Skyrocketing enrollment is responsible for the vast majority of Medicaid spending increases. Any meaningful effort to improve the program’s sustainability must work to transition more individuals to private coverage.

False claim: Per capita caps will hurt the elderly, those in nursing homes, and the disabled

Reality: The growth rate for the elderly and disabled on Medicaid is projected to be higher than projected spending

Obamacare supporters would have you believe that the new Medicaid funding structure will be insufficient. In reality, these reforms are good steps to get the right incentives in place for states to fight fraud, improve coordination of care and the quality of care provided. The bill does this by setting a per capita cap for each enrollee or allowing a state to apply for a block grant.

States face many challenges with Medicaid. For example, Medicaid beneficiaries use the emergency room 40 percent more than even the uninsured and CMS estimates that the vast majority of improper payments in Medicaid are due to eligibility issues. Tackling these two costly areas are “low-hanging fruit” that will save money and improve care, but most states don’t bother to address them now because of the open-ended nature of Medicaid funding or due to federal rules and regulations. The House and Senate bill both aim to fix that.

A small handful of states are experiencing remarkable results when they focus on enhanced eligibility verification that allows them to disenroll the deceased or individuals who are otherwise ineligible for the program. These kinds of best practice reforms will spread quickly when the Medicaid funding structure changes.

If states are given more options in the health care bill to reduce waste and fraud, even more resources will be preserved for the truly needy, including disabled children that sit on a wait list for services.

Some examples include:

  • Allow prospective eligibility changes (i.e. grandfathering) for Medicaid populations
  • Allow states to restore asset testing for Medicaid
  • Allow more frequent eligibility checks for all populations
  • Allow states to lower the cap on the home equity exemption

False claim: Medicaid changes will result in massive coverage loses

Reality: Individuals will transition to private coverage with a tax credit and some who are currently uninsured will get assistance for the first time

Success in Medicaid should not be measured in terms of enrollment, as by definition that means enrollees will remain poor and are not moving up the economic ladder. Instead, the goal should be to transition as many individuals to the private market as possible.

The Senate bill extends tax credit assistance to those transitioning from the Obamacare Medicaid expansion and to those below the poverty line.

Further, the CBO’s assumptions about Medicaid are not “losses” per sethey are primarily coverage changes. Many, if not most, of these individuals will transition from Medicaid to the private market.

The Senate bill also means that low-income uninsured individuals in non-expansion states will now be eligible for help paying for coverage through tax credits.

False claim: Obamacare’s Medicaid Expansion is great and should not be touched

Reality: ACA supporters should have to defend the immoral funding of Obamacare’s Medicaid expansion

The often-unknown dark side of the ACA’s Medicaid expansion is its funding structure that heartlessly prioritizes working-age, able-bodied adults over the elderly and disabled. ACA supporters should have to defend the outcomes of this policy that ends up hurting the truly needy.

As states have started to pay for the ACA expansion, they have been forced to balance their budget by cutting benefits, payment rates, and services for the traditional Medicaid population. States have also started to cut funding for education, public safety, and roads.

Let’s not kid ourselves: a state cannot spend the same state dollar twice. The immoral funding structure of the ACA expansion must be changed and the Senate bill does that in a commonsense manner.

Why is the debate so misdirected?

Powerful, well-funded, and vocal special interest groups will fight almost any effort to reform the Medicaid program. To do so and to protect open-ended funding – they need to convince the public and policymakers that the sky will fall if Medicaid is touched.

But any dollar that does not deliver value in health care is a dollar taken out of the wallet of a family trying to pay for college, gas, or food. These are also dollars that could be spent more effectively to help a disabled child or a senior who’s struggling to make ends meet. Policymakers must not lose focus. The potential for real meaningful reform is real and should be a top priority. The truly needy have waited long enough.

FIND ME ON TWITTER: @josharchambault

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JOSH ARCHAMBAULT is Senior Fellow at the Foundation for Government Accountability (FGA).