Congress Shortchanging States and the Health of Millions of Americans

The House of Representatives is moving forward with legislation that would impose 255 separate “per capita caps” upon state Medicaid programs — a fundamental and radical change to the financing of Medicaid — with the goal of slashing billions of dollars out of the program. This would represent a fundamental abdication of the federal government’s shared responsibility with states that it has shared over the 52-year history of the program to provide health coverage to our nation’s low-income children, people with disabilities, and senior citizens.

According to the summary of the legislation, known as the American Health Care Act (AHCA), the newly imposed Medicaid per capita caps “would use each State’s spending in FY2016 as the base year to set targeted spending for each enrollee category (elderly, blind and disabled, children, non-expansion adults, and expansion adults) in FY2019 and subsequent years for that State.”

Beyond the enormous negative consequences that Medicaid per capita caps would have on the health and well-being of millions of vulnerable Americans, there are also important questions of fairness and equity.

First, the bill establishes FY2016 as the base year by which to determine the caps and limits that the federal government will enforce upon states by aggregating the five categories of per capita limits for each and every state and the District of Columbia. These caps, which will be established based on spending levels in FY2016 and enforced for years and years into the future.

One fundamental problem is that Medicaid data is self-reported by states and is of poor quality, so nobody truly knows what the cost per person will be under the cap. This leaves enormous discretion with the Trump Administration and Secretary Tom Price to decide exactly what the cap shall be for each and every one of the 255 categories, which raises questions and concerns about partisan manipulation of the data, backroom deal-making, and pure politics determining the future limits on spending that will be imposed upon the states.

Whatever level is established, even if mistakenly calculated by federal bureaucrats or due to anomalies in the data needed to calculate the 255 caps, it will impact the allocation of hundreds of billions of dollars to the states to provide care elderly, blind and disabled, children, non-expansion adults, and expansion adults across the country for years, and maybe even decades, to come.

Another problem is that using 2016 as the base locks states into some significant variations in funding between states well into the future. As Sara Rosenbaum said to the New York Times, “I think of it as essentially putting states behind bars. Whatever you are doing circa 2016 is what you are going to do forever.” With the accompanying cuts of billions of dollars to states, “losers and bigger losers” will be created in every single one of the 255 categories that are being created.

The political power of a congressional delegation, the friendships that members may or may not have with Secretary Price, and data errors could shortchange certain populations in individual states across this country.

Sadly, this could have tragic consequences. For example, should a child in one state be assured the coverage they need without question while a child in another state must compete with people with disabilities or senior citizens for limited resources that are being rationed because of the per capita caps? Even within a state, should a child with chronic health problems find their care capped or rationed simply to meet an arbitrary limit imposed upon the state by federal bureaucrats at the Department of Health and Human Services (HHS)?

The health, benefits, and access to care for low-income children should not be so dependent on the zip code of their family. Unfortunately, that is the system that a federally-imposed Medicaid per capita cap would have on vulnerable Americans all across this country.

Some states will fairly argue that the per capita caps will punish them for having run extremely efficient Medicaid programs, as low-spending states may find themselves unable to find additional savings to stay under the arbitrary caps without having to impose cuts to enrollees and providers that may threaten the delivery of quality health care. In contrast, states that have run less efficient programs with higher than average levels of fraud and abuse may have some cushion in which to find savings to stay under the newly imposed arbitrary federal caps without any harm.

It can also be argued that states with above average spending that they operate in higher cost areas or that they made investments in their health care system providers and the benefits provided to ensure high quality and improved access to care than in lower spending states. Per capita caps imposed upon these states may force them to abandon such health system improvements.

Highlighting both the disparities in funding and the poor quality of the data, the Urban Institute attempted to estimate Medicaid federal expenditures per enrollment group and found wide variations in spending levels.

For example, due to “anomalies” in the reported data, the Urban Institute was unable to even include New Mexico in the calculations. For the remaining states, they estimate that Vermont ($3,510), the District of Columbia ($3,428), Rhode Island ($3,384), and Kentucky ($3,150) will spend far much more money per child in 2017 compared to Wisconsin ($1,320 in Speaker Paul Ryan’s state), New Hampshire ($1,359), Michigan ($1,386), and Colorado ($1,400). If HHS bureaucrats confirm these numbers and disparities, the four highest spending states will forever receive more than twice the amount of money per child in poverty than the lowest spending states.

However, even in states with a higher than average per capita cap for a child, advocates for children must remain deeply concerned. First, for the federal government to reap savings, the inflation rate established in the final bill will not keep up with the growth in Medicaid expenses, so all states will become losers over time.

But even in states where child advocates feel comfortable that the state can keep their average cost per child below the per capita limit for children, it does not guarantee that children will be safe from cuts. The reason is that states are given the flexibility through the aggregate cap, which is the sum of the five individual categories in each state, to find savings from other categories to offset spending that exceeds the cap in another category.

As an example, Kentucky’s per capita limit for children will likely be set above the national average. Consequently, the state may be able to find ways to safely keep the spending level per child below the cap.

Unfortunately, Kentucky may still be under intense pressure to cut spending for pediatric services because the Urban Institute estimates that the State will have a per capita cap for the disabled that will be well below the national average (just $10,089 for Kentucky in 2017 compared to a national average of $13,084, or 23 percent below the national average). If Kentucky were to spend closer to the national average for people with disabilities in 2019, they might exceed their disability cap by around $3,000 per enrollee and have to look to find savings in other populations, such as children, in order to keep the federal government from imposes a penalty on the state for exceeding the aggregate limit. Since children are close to half of all the enrollees in Medicaid, one can safety say that children and pediatric services may often be targeted for cuts in order to offset spending in excess of the HHS bureaucracy-imposed limit in another category.

The focus in Medicaid with change from figuring out ways to improve the quality and access to care for enrollees in a cost-efficient manner to one where many states are looking for ways to restrict coverage, benefits, and access to care in order to simply save money.

However, advocates in states with lower spending than average should be particularly concerned that they will forever be locked into those lower levels for decades to come. As an example, in the case of funding that will be allocated for health coverage for children, the Urban Institute believes that states with lower than average spending for children will be: Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, South Dakota, Washington, Wisconsin, and Wyoming.

These states have 249, or 57 percent, of all the members of Congress. One wonders if they will willingly accept and agree to vote in favor of giving their states just a fraction of the money per child that other states will receive through Medicaid in 2020 and for years beyond. Their votes could result in the children in their individual states having less coverage, higher cost sharing, lower paid providers, fewer benefits, and less access to care than children in other states.

States that the Urban Institute estimates will be below the national average of spending for people with disabilities include: Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Hawaii, Illinois, Kansas, Kentucky, Michigan, Nebraska, Maine, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin.

States that the Urban Institute estimates will be below the national average of spending for adults include: Alabama, Arkansas, California, Colorado, Connecticut, Hawaii, Illinois, Indiana, Iowa, Maine, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Pennsylvania, South Dakota, Utah, and Wisconsin.

Meanwhile, states that the Urban Institute estimates will be below the national average of spending for senior citizens include: Alaska, Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Iowa, Kentucky, Michigan, Missouri, Nebraska, Nevada, New Jersey, New Hampshire, North Carolina, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Washington.

With hundreds of billions of dollars at stake in the Medicaid program all relying on what the allocations based on poor data and an arbitrary base year of 2016, it would be surprising if senators and congressman simply accept such disparities in funding. Do they believe their children, their senior citizens, their pregnant women or low-income adults, their disabled citizens, and their medical providers are less deserving of adequate funding than in other states?

Some state leaders clearly understand the problems the Medicaid per capita cap will impose, such as in:

Pennsylvania

Illinois

New York

Delware

Nevada

Virginia

Nevada

Idaho

Texas

Unfortunately, particularly for the low-income children, disabled, and seniors in their states, there remain some state officials, such as Sen. David Sater in Missouri, who clearly still do not get it.

But, state officials should all figure out the “big con” and object to having per capita caps or block grants imposed upon them by the federal government quickly or they will find that it puts their citizens in jeopardy when it is far too late.

And, if nothing else, they should just simply join the growing crowd of opponents to the AHCA.