What’s Next for Medicaid?

After a long and highly contentious presidential election lasting more than a year, we now know that Donald Trump will be our next president. In the days since the election, Trump has nominated individuals for key posts in his cabinet. With the selection of Rep. Tom Price (R-GA)—an outspoken ACA critic—to head the Department of Health and Human Services (DHHS), and Seema Verma—a consultant who helped design waiver-based Medicaid expansions in conservative states—to head Centers for Medicare and Medicaid Services (CMS), Trump’s intention to significantly overhaul Obamacare seems apparent. Indeed, recent commentaries from Jonathan Oberlander and Gail Wilensky make clear that Trump’s victory is not good news for Obamacare supporters and those benefiting from the law.

Repealing and replacing Obamacare entirely is unlikely, because Republicans lack the 60 Senate seats needed for cloture . Thus, the most likely path forward is through budget reconciliation, which requires only a simple majority. Unfortunately, that means the Medicaid program is a vulnerable target, which raises the question: What will the Trump Administration mean for Medicaid? There is not a simple answer to that question. Trump himself has offered conflicting views. While he campaigned on the idea of repealing Obamacare and block granting Medicaid, he also went on Dr. Oz and expressed support for ensuring that low-income individuals continue to have Medicaid coverage.

As I see it, there are four possibilities for the future of Medicaid.

First, Congress and the Trump administration may repeal the Medicaid expansion. While both President-elect Trump and Speaker of the House Paul Ryan (R-WI) have advocated for repeal, doing so may prove politically unpopular. Matt Bevin mounted a successful campaign to become Governor of Kentucky, promising to end the state’s Medicaid expansion. However, once he entered office, the stark reality of taking coverage away from some 425,000 Kentuckians led Gov. Bevin to amend his position and pursue changes to the program instead.

Thus, a second possibility is that the Medicaid expansion continues, but that beneficiaries face new, more stringent eligibility requirements. For example, Speaker Ryan’s “A Better Way” proposal outlines the possibility of introducing work or education requirements, and enforceable premiums into Medicaid. His plan also precludes states from expanding Medicaid after January 1, 2016, permanently establishing the disparity in coverage between expansion and non-expansion states. Moreover, beginning in 2019, Speaker Ryan’s plan would slowly phase down the enhanced federal matching rate for the expansion population to normal levels. This reduction in federal funding may prompt states to reverse their decision to cover the expansion population.

A third possibility is that Congress and the Trump administration will limit federal Medicaid spending through a combination of per capita allotments and block grants. Under the per capita allotment approach, states would receive a fixed amount of federal funding for each Medicaid enrollee, based on the state’s federal matching rate. This means total federal funding would increase or decrease as enrollment increases or decreases, but the per capita amount would remain constant. Alternatively, states could opt to receive a Medicaid block grant—a lump sum based on enrollment and utilization projections.

While the future of the Medicaid program under the Trump Administration is unclear, the potential implications of serious disruptions to Medicaid for tens of millions of vulnerable Americans are frightening.

In his “A Better Way” proposal, Speaker Ryan envisions this giving states “more flexibility to adapt their Medicaid programs, to better design benefit packages in a way that better meets the needs of their state populations, [and] promotes personal responsibility and healthy behaviors…”  Yet, as Colleen Grogan writes, states already enjoy tremendous flexibility in the design of their Medicaid programs. While proponents of Medicaid block grants suggest that they will free states to make their Medicaid programs more efficient, Jeanne Lambrew found that previous block grant proposals failed to predict actual patterns of Medicaid costs. In some cases, that meant that the federal government would have overspent in its attempt to control costs, while in other cases, it meant that state Medicaid programs would have been severely underfunded. Moreover, evidence from both Rhode Island and Puerto Rico fails to support any link between federal funding caps and Medicaid program efficiency.

Finally, there is the possibility that nothing changes. While such a scenario is unlikely, there are two ways it could happen. First, Republican governors in Medicaid expansion states—including Jan Brewer in Arizona and Rick Snyder in Michigan—may oppose efforts to repeal the expansion or implement a block grant because they have seen the expansion work well in their states, and want to avoid the political fallout of rescinding coverage. Second, the courts might preserve the program. Sara Rosenbaum suggests that capping federal Medicaid spending may be viewed as unduly coercive in the wake of the Supreme Court’s ruling in NFIB v. Sebelius, because states agreed to participate in Medicaid with the expectation of an ongoing federal match, not a fixed sum of federal dollars. Thus, the Supreme Court might rule that forcing states to accept Medicaid block grants is unconstitutional, and—just like the Medicaid expansion—might make the block grant optional for states.

While the future of the Medicaid program under the Trump Administration is unclear, the potential implications of serious disruptions to Medicaid for tens of millions of vulnerable Americans are frightening . In a blog post from March 17, 2015, Edwin Park of the Center on Budget and Policy Priorities wrote, “House Budget Committee Chairman Tom Price’s budget plan proposes to radically restructure Medicaid by converting it to a block grant and cutting federal funding for it steeply, by $913 billion over the next decade.” The cuts would put Medicaid spending in 2025 almost 34% below where it would be expected under current law. That certainly saves money, but at what cost?

Featured Image: Antonio, Lego #6, Building Blocks, used under CC BY/cropped from original

More by Brad Wright at Wright on Health: Making Complex Issues in Health Policy and Health Services Research Accessible to All..