I’m no fan of Medicaid. It’s a second-class healthcare system that offers free healthcare at government expense but reduces access to doctors and hospitals. What good is free healthcare if you can’t get it?
President Obama’s Affordable Care Act (ObamaCare) greatly expanded the eligibility for Medicaid from its originally intended categories of poor children, pregnant women, the disabled and seniors to include able-bodied adults who earn less than 138% of the Federal Poverty Level (FPL). This may benefit those who get free healthcare coverage, but it is bankrupting the federal government and those states who accepted the expanded Medicaid coverage. Unfortunately, like many government efforts, the people they intended to help aren’t getting the benefits they need.
President Trump is trying to do something to improve this situation created by the Obama Administration. Naturally, Democrats are claiming this is an attack on healthcare for the most needy, when in fact it will benefit those people the most.
The Wall Street Journal editorial board says the biggest beneficiaries of this Trump plan will be Democratic states and low-income Americans. The Centers for Medicare and Medicaid Services (CMS) in a recent letter invited state Medicaid directors to apply for block grants under Section 1115 of the Social Security Act. That law allows the Secretary of Health and Human Services to approve state “demonstration projects” to experiment with plan designs, payment models and delivery.
This is nothing unusual in itself. The Obama Administration enticed several Republican states into expanding eligibility under the ACA by giving them waivers to require cost-sharing by beneficiaries and provide premium assistance for private plans, among other things.
The Trump Administration is taking this one step further by allowing states more flexibility to manage their ObamaCare expansion populations in return for a cap on federal funds in the form of a per-capita limit or lump-sum payment. If the states manage to spend less than the cap, they could keep a share of the federal government’s savings. The goal is to give states an incentive to control skyrocketing costs, especially for able-bodied adults who gained coverage under the ACA.
Under the old Medicaid rules, the federal government pays between 50% and 76% of the cost for the disabled, children, pregnant women and the elderly. Under the ObamaCare expansion rules, the feds pick up 90% of the tab for able-bodied adults earning up to 138% of FPL. In other words, states can spend $1 and get $9 free. (Taxpayers get to spend $9 and get nothing free.)
These incentives have led to more liberal spending on these newly eligible Medicaid enrollees. According to CMS, these enrollees cost the government $16 more per person than other eligible adults. This is resulting in exploding expenses for state governments that accept the ACA Medicaid expansion. Since states must balance their budgets, the net result is less money for all Medicaid enrollees and for education expenses.
The Trump plan of block-grant waivers would allow states more flexibility to control these costs with innovative ideas such as requiring cost-sharing by ObamaCare beneficiaries as long as the co-pays and premiums combined don’t exceed 5% of income. Benefit plans could also be changed as long as they align with ObamaCare guidelines.
Other cost-saving measures might include “closed formularies” that limit which drugs are covered in the plan. Since states currently must pay for all medically necessary drugs, the waiver would give them more leverage to negotiate discounts with drug makers. Democratic governors who complain about out-of-control drug prices will like that.
These Trump plan changes would only apply to able-bodied adults, the demographic previously excluded from Medicaid eligibility entirely. Presidential candidate Pete Buttigieg says these reforms “breaks America’s promise to those in need.” This is clearly untrue.
Similar block-grant waiver programs have been done in the past with good results. President Bush granted such waivers to Rhode Island and Vermont and a 2011 follow-up audit by the economic consulting firm Lewin Group concluded it was “highly effective in controlling Medicaid costs” and “improved access to physician services” for Medicaid patients with asthma, diabetes, heart problems and mental disorders. This latter conclusion is critical. Anything that actually improves access to healthcare is a good thing – and saving money while doing that is government at its finest.
The WSJ editorial ends with an important question: “Block grants would help realign ObamaCare’s perverse incentives that encourage states to spend more on healthy folks and less on those who need care. Do Democrats loathe President Trump more than they want to help their citizens?”