Image for Medicaid, Not Medicare, Likely Testing Ground for Healthcare Cuts

The immediate national battle over health care costs and coverage will center on Medicaid that serves lower-income Americans, not Medicare that serves older adults and disabled persons and has been a hot topic on the 2020 presidential campaign trail.

The Trump administration unveiled a plan last week that would enable states to opt out of the current federal funding formula for Medicaid and instead receive a fixed-amount block grant coupled with greater flexibility in determining eligibility, copays and benefits, including which prescription drugs are covered. Administration officials tout the new plan as a way to control costs, which have spiraled for Medicaid that provides health care coverage for 20 percent of the US population.

Democrats, consumer advocates and many health providers have attacked the proposal as a way to undermine health care for lower-income Americans.

As of August 2019, there are 981,843 Oregonians and 1.7 million Washingtonians enrolled in Medicaid and the Children Health Insurance Program (CHIP). There are more than 71 million Americans enrolled in Medicaid and CHIP.

Medicaid offers free or low-cost health coverage based on income and family size, serving low-income people, families with children, pregnant women, the elderly and people with disabilities. In Oregon, 27 percent of Medicaid spending pays for long-term care, mostly for older adults. Long-term care consumes 28 percent of Washington’s Medicaid spending. Most people are unaware Medicare doesn’t cover long-term nursing care, assisted living or adult day care.

The Trump administration is moving ahead, even in the face of continuing litigation, to impose work requirements for some Medicaid recipients. South Carolina received permission in December to proceed with its work requirements, following the lead of 10 other states. Some states that won federal approval to implement work requirements have backed off because of court injunctions. Critics contend that most Medicaid recipients who can work, do work.

Arkansas is the only state actually to apply work requirements, which resulted in the loss of Medicaid insurance coverage for 18,000 recipients.

Along with the new Medicaid block grant plan and work requirements, Trump officials are pushing the Medicaid Fiscal Accountability Regulation (MFAR), which they introduced last fall and would be mandatory. Seema Verma, the administrator for the Centers for Medicare & Medicaid Services said MFAR would address “a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system.”

The American Hospital Association submitted comments saying MFAR could lead to Medicaid payment reductions nationally up to $30 billion per year or nearly 17 percent. The National Governors Association also spoke against the rule, warning it would destabilize state budgets and create an “environment of uncertainty.”

Caitlin Owens, writing for Axios, said, “The rule is deeply technical and wonky, but for some states, it could end up being a much bigger deal than the administration’s Medicaid block grant and work requirement proposals simply because it’s not optional.”

Medicaid was created in 1965 in the shadow of Medicare’s creation as part of Lyndon Johnson’s War on Poverty. Medicaid was conceived as a program to provide health coverage for low-income Americans that would be paid for with a combination of federal and state funds. The payroll tax instituted on companies and workers to pay for Medicare does not provide funding to Medicaid.

A key element of the Affordable Care Act was expansion of Medicaid eligibility to individuals with incomes below 138 percent of the poverty line. As the result of a subsequent court decision, expansion was made optional for each state. States already ran their own Medicaid programs under a set of federal rules and with waivers, such as the one secured by Oregon to allow coverage for in-home care for older adults.

Oregon and Washington opted into the expansion of Medicaid. Oregon enrolled 557,000 and Washington enrolled 628,000 new Medicaid recipients. Oregon’s Medicaid program supports one in five Medicare recipients. Oregon Health Plan eligibility also includes pregnant women and infants with household incomes up to 185 percent of the poverty line, children under 19 in households with incomes up to 305 percent of the poverty and women with breast or cervical cancer in households up to 250 percent of the poverty line.