Governors balk at price tag for Medicaid changes

(This story previously appeared in The Hill Extra.)

A large part of the House GOP plan to repeal and replace ObamaCare is predicated on the idea of giving states more flexibility to run their Medicaid programs.

But with an $880 billion price tag estimated over 10 years, governors and state officials from both parties are pressing Congress to slow down.

States play a tricky balancing act with the federal government over costs for the joint program. Almost every state seeks more options for how they run Medicaid programs, as long as it doesn’t cost them more money. But now that the full extent of the cuts in the House bill are on display, states will have to decide how much the idea of “increased flexibility” is worth.

{mosads}A group of Republican governors blasted the bill in a March 16 letter to House and Senate leaders, saying that it “does not meet” the flexibility goals set by the Trump administration, and is essentially a major cost shift from the federal government onto the states.

The bill “provides almost no new flexibility for states, does not ensure the resources necessary to make sure no one is left out, and shifts significant new costs to states,” GOP Govs. John Kasich (Ohio), Brian Sandoval (Nev.), Rick Snyder (Mich.) and Asa Hutchinson (Ark.) wrote in the letter.

All four governors represent states that have expanded Medicaid under the Affordable Care Act. In the letter, the governors gave GOP leadership an alternative Medicaid proposal. Current expansion states would have the option to retain enhanced federal financial participation.

Nonexpansion states would also have the option of expanding eligibility for adults at any income level at or below 138 percent of the federal poverty level, with enhanced federal participation.

“Equity across states should be a key guiding principle for Congress. All states, regardless of expansion status, should have equal access to federal resources to meet state-specific coverage and population health goals,” the proposal said.

The House GOP legislation, which could be voted on in the House Thursday, would make drastic changes to the Medicaid program. One of the biggest would be a freeze on Medicaid expansion enrollment in 2020. To keep expansion states happy, the bill would keep the federal enhanced matching reimbursement for anyone enrolled at expansion levels — as long as they remain Medicaid eligible.

Democratic governors are voicing similar concerns.

“Flexibility is a term [Speaker Paul] Ryan (R-Wis.) and the committee chairs came up with as a way to have a shiny object to point to … and say ‘don’t pay attention to anything else! We’re going to make it more flexible,’” Connecticut Gov. Dan Malloy (D) told The Hill Extra in an interview. “The idea that giving us more room to run, I suppose, it doesn’t make any sense, particularly when you’re going to block grant it and when you’re going to block grant a lot less money.”

The bill would also change Medicaid’s financing, converting the program from an open-ended entitlement to one that imposes per-capita caps — or potentially block grants  — on states. States would get a fixed amount of money, based on certain categories of individuals, including elderly, blind and disabled, and children. The caps would begin in 2020, and be set initially at 2016 spending levels.

The Congressional Budget Office estimates those changes would result in an $880 billion cut to federal Medicaid spending over 10 years. And to some governors, state health officials, and health plans, no flexibility is worth that much.

“This $880 billion deduction is really concerning,” Jeff Myers, CEO of Medicaid Health Plans of America, said.

Myers said the amount of the cut took him by surprise. Plans won’t be able to negotiate with states if states don’t know what sorts of maneuvering they’ll have to do to fill the gap between federal and state payments, he said.

“We think the size of that number will have a huge impact on our customers. We don’t know what [states] are going to do to reform the program,” Myers said.  

Rebekah Gee, secretary of the Louisiana Department of Health, told The Hill Extra in an interview that if the enhanced matching rate were ended, the state would be forced to make cuts elsewhere in the budget in order to keep funding the Medicaid program.

“Tell me what I want more flexibility for. What services should I cut off from people in Medicaid that would benefit me from a cost perspective?” Gee said. “These discussions on flexibility are political in nature. I don’t know of any state that I’ve talked to is begging for more flexibility. So why is there such an urgency to give us flexibility we’re not asking for?”

Louisiana expanded Medicaid in 2016 under Democratic Gov. John Bel Edwards. In a March 14 letter to Congress, Edwards said expansion is projected to save the state nearly $200 million in the first year of implementation.

“Medicaid expansion was one of the best things to happen to the health of our people in a generation,” Gee said. “The flexibility [Congress] is talking about is the flexibility to cut people off the program. It would be a tragedy to see all this go away to the song of more flexibility, which we’re not even asking for.”

Waivers.

Medicaid is a program run on very thin margins. According to a lobbyist, there are very few areas that can be cut without consequences.

“You can only squeeze so much savings before you start changing benefit packages and cutting off populations, and that’s what these governors are saying” will happen, the lobbyist said.

The program is also already extremely flexible because of the ability for states to request waivers, known as Section 1115.

Such waivers aren’t technically part of ObamaCare, but the law added transparency, public input and evaluation requirements. Seven states have Medicaid expansion waivers, according to the Kaiser Family Foundation. For example, Indiana’s requires certain beneficiaries to pay premiums and Arkansas has a “private option,” which lets newly eligible adults enroll in marketplace plans.   

But governors believe tailoring their own programs could shave costs.

“Every aspect of Medicaid can be altered if you do a waiver,” the lobbyist said. The program has safeguards in place to make sure the most vulnerable populations are protected. But, “if you can get support from the legislature and your governor, and you can put together a waiver proposal [that] … meets broad goals of the Medicaid program, you can do whatever you want.”

Congressional Republicans want to streamline the waiver process, which Democrats and Republicans alike think is a good idea.

“You want to speed up the waiver process? Great. But don’t pretend that you’re doing anything [in the bill] other than cutting reimbursement,” Malloy said. “This is nothing less than trying to get everyone to take their eye off the ball. Grant waivers! But grant waivers that make sense, and increase coverage, not decrease coverage.”

Republican governors have their own wish list for changing Medicaid in their states — including the ability to get waivers to add controversial elements like work requirements and higher cost-sharing to their programs, ideas the former Obama administration shunned. But those can all be done through waivers, which won’t cost $880 billion.

In a letter sent to governors last week, Health and Human Services Secretary Tom Price and newly-confirmed Centers for Medicare and Medicaid Services Administrator Seema Verma urged governors to alter their Medicaid programs by charging higher premiums, locking out beneficiaries who can’t pay them, and requiring beneficiaries to work. They called on states to ask for waivers from the federal government to institute those requirements, and hinted the Trump administration would be much more receptive to the changes. 

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