By skyforbes 
Despite a campaign promise not to cut the Medicaid program, President Donald Trump has not only signed off on a House bill to slash Medicaid by an astounding $880 billion over 10 years but has also conceded to conservative Republican Study Group members to take the bill further to the right by adding a provision to create an option for states to either choose a Medicaid block grant or per capita cap.
Governors should recognize the “con” for what it is. The two options that the states will be offered — either a block grant or a per capita cap — are a false dilemma and a fundamental abdication by the federal government of their responsibility in the 52-year-old shared federal-state partnership that is Medicaid. There is no policy justification for the federal government unilaterally slashing $880 billion out of their share of the Medicaid program and to effectively put the burden entirely upon the states to impose cuts that will be imposed upon the health care system and millions of vulnerable citizens.
As Gene Sperling wrote for The Atlantic earlier this week about the current House proposal:
. . .block grants or per-capita caps don’t just shift costs and hard decisions to the states — they shift all the risks as well. . .Governors will be the ones dealing with much of the fallout from these cuts and risk-shifting, as it becomes clearer that these Medicaid cuts would threaten the viability of many hospitals (particularly rural ones), forcing them to raise prices and provide less care in order to cope with increased uncompensated treatments.
All of this makes it truly puzzling why any governor would support the AHCA. The entire Medicaid approach smacks of the president and Congress’s desire to fund their high-income tax cuts by whatever means necessary, while choosing to delegate painful health-care rationing choices to the states.
Under the per capita cap option, the Congressional Budget Office (CBO) analysis of the House bill highlights that the federal government would impose arbitrary funding limits in five separate categories (“elderly, blind and disabled, children, expansion adults, and non-expanion adults”) on the states and the District of Columbia (for a total of 255 separate categories nationwide) and projects that the inflation rate would shortchange states by a compounding 0.7 percent annually. Between that and other changes the bill makes to Medicaid, CBO estimates, “ “By 2026, Medicaid spending would be about 25 percent less than what CBO projects under current law.”
Consequently, CBO estimates that 14 million people would lose Medicaid coverage under the House bill and millions more of our nation’s most vulnerable citizens would face the lose of benefits, affordability protections, and access to care due to rationing measures that states would be required to undertake to meet an estimated $880 billion in federal cuts to Medicaid over a 10-year period.
Despite selling the legislation, known as the American Health Care Act (AHCA), as something that would “repeal and replace Obamacare,” it is more about cutting taxes for the wealthy and paying for it by slashing health care for 74 million low-income children, people with disabilities, and senior citizens covered by Medicaid.
So, how would Medicaid per capita caps be imposed under the bill? In Table 1, we created a hypothetical state that managed to achieve the savings necessary to stay under the caps for children and adults, meet the cap for the elderly but, because of unforeseen expenses due to something like new therapies and treatments that stem from discoveries resulting from the 21st Century Cures Act, exceeded the cap for people with disabilities.
In this example, this hypothetical state would exceed its aggregate cap by $1,419,082, or 3.4 percent. Under AHCA, the federal government would then recoup that “overage”(which would actually be impossible to implement since it often takes months and months to finalize and financially reconcile a state’s final Medicaid spending level) by adjusting the federal matching rate to the state in the following year.
To stay under the cap that would be imposed in the following year, the state would have to cut spending or benefits in a range of areas in order to achieve a near freeze in spending. That would be quite difficult, as CBO estimates annual Medicaid inflation to be 4.4 percent under current law.
Despite the difficulty for a state in achieving a spending freeze, the “clawback” imposed on the state for the prior year’s “overage” effectively reduces the federal matching rate to states, so the state would still be required to spend more money over the prior year while the federal government would be able to contribute less to Medicaid. This is a major factor as to why CBO estimates the bill would save the federal government $880 billion over 10 years. The bill imposes a massive cost shift of Medicaid costs to the states.
Unfortunately, a block grant option likely would be even worse.
Although we don’t know all the details of what a block grant option would look like as of yet and probably won’t even see until just before Congress considers the legislation on the House floor, we do have some real world examples of Medicaid block grants, as Puerto Rico and the territories already have Medicaid block grants imposed upon them. In Puerto Rico’s case, the federally-imposed block grant radically under finances the Commonwealth’s health system.
According to David Thomsen of the National Council of La Raza, Puerto Rico has nearly the same population as Oklahoma and far greater poverty, but only receive one-tenth of the support from Medicaid that Oklahoma does. This has created severe problems with Puerto Rico’s health care system, but it has also become a major factor in the Commonwealth’s debt crisis. Dr. Johnny Rullán, Puerto Rico’s former Secretary of Health and Secretary of the Puerto Rico Healthcare Crisis Coalition, points out:
. . .more than 40 percent of the island’s debt is due to health care and the lack of funding from Medicaid in particular. This chronic underfunding has caused cutbacks in services, a major physician exodus, life-threatening delays in getting appointments and huge delays in payments to hospitals and other medical providers. Patients are suffering and the system is crumbling.
Knowing this, it is unclear why state officials could be duped or conned into thinking this something they would want imposed upon their own state or the nation. But somehow, the allure or promise of state flexibility under a block grant seems to blind some state officials as to what is most important, which is the money, the math, the state’s health system, and most of all, the low-income, vulnerable people that such a system would shortchange.
In Florida, Governor Rick Scott and Florida legislature have both expressed an interest in Medicaid block grants. So, just how would a Medicaid block grant impact the Sunshine State?
To begin, Florida should know that block grants tend to: (1) create permanent losers among states with low-historical spending by permanently locking those disparities; (2) hurt states with high population growth because block grants often do not adjust for population changes; and, (3) harm states with high poverty, as block grants fail to adjust for growing or changing needs.
Therefore, according to estimates by the Urban Institute (see Table 1), Florida would be locked into its historical low level of Medicaid spending, or 27 percent below the national average, for years or even decades into the future.
Second, Florida has high population growth. According to Ann Swerlick at the Florida Policy Institute, “Florida already has the largest percentage of elderly residents in the nation.” Since block grants typically don’t adjust for population growth and Florida is a state with high growth, this is a particular problem for the Sunshine State.
Third, states with high poverty rates have, by definition, higher need. In Florida’s case, 24.1 percent, or nearly 1 in 4, of its children live below the poverty line, which is far higher than the national average of 20 percent.
Marianne Page, a renowned expert on child poverty writes, “Medicaid is a cost-effective tool to improve economic mobility, a core principle of the American Dream. Million of low-income children rely on Medicaid for basic health services that, in the long term, pay off. Converting the program to a block grant is short-sighted, and reducing opportunities for vulnerable children — to the detriment of everyone.”
Fourth, block grants do not adjust for natural disasters. The allocation of funds in future years under a block grant would be arbitrarily decided today and does not change when there is a crisis, which is in sharp contrast to the current Medicaid program that adjusts automatically as need grows.
Nearly 22 years ago, former Florida governor and then-Senator Bob Graham (D-FL) was confronted by legislation proposed by House Speaker Newt Gingrich (R-GA) to block grant Medicaid and this problem was one of many reasons for Senator Graham’s opposition. As Graham said on the Senate floor in opposition to block granting 0f the Medicaid program:
. . .when Hurricane Andrew hit South Florida, our Medicaid caseload shot up by 12,000 people. Not only had their homes been blown away, their jobs had been blown away. Therefore, people who had been employed and self-supported needed the assistance of Medicaid during that time of crisis.
Under block grants, a State that is knocked down to its knees by a flood, earthquake, hurricane, would not find a helping hand from the federal government at the time it needed help to get back on its feet. No, Mr. President, acts of God and block grants do not mix.
Fifth, block grants do not adjust for public health emergencies, such as Zika, opioid epidemics, etc. Furthermore, block grants or per capita caps would limit the ability of states to provide access to cures, therapies, and treatments for life-threatening diseases and illnesses in Medicaid, as was the stated hope and promise from the 21st Century Cures Act that passed in the last Congress.
Sixth, according to Moody’s, arbitrary caps and $880 billion in cuts by the federal government in Medicaid would be extremely harmful to the credit rating of states, hospitals, insurers, pharmaceutical manufacturers, and medical device firms.
Finally, if money, poverty, demographics, the threat of natural disasters and public health emergencies, the real world example of Puerto Rico, and credit agencies aren’t enough to convince state lawmakers as to the perils of the House bill, Florida’s Senator Graham’s words should give them great pause.
In a Senate floor speech nearly 22 years ago, Graham pointed to how an arbitrary block grant would undermine the federal-state Medicaid partnership in reducing infant mortality, promoting prevention, providing mental health and substance abuse services, serving foster care kids and other vulnerable populations, helping low-income seniors with Medicare cost-sharing protections, and providing a majority of all long-term care services. In comments directly at governors that were supporting Newt Gingrich’s Medicaid block grant proposal in 1995, Graham said:
I say shame on the governors of the states who are now cheerleading for the destruction of that partnership. I have a warning for them, or more accurately a proverb for them. The proverb goes as follows: Fish see the worm, not the hook.
Those governors who are salivating, who are so anxious to gobble up block grants being proposed, will feel the hook when their economies stumble, when an epidemic strikes, when a natural disaster hits, when inflation creeps up again, or when their population grows. Worst of all, they will be held accountable in history for killing a program that actually had achieved its objectives and nurtured a national pride in providing basic health care for fragile and vulnerable citizens.
The proposed level of funding cuts associated with Medicaid caps at the time was $187 billion, which was just a fraction of the $880 billion in Medicaid cuts proposed in the pending House bill. However, as Graham added:
I have strained my eyes to see and my ears to hear the justification, the policy basis for the amount of $187 billion. What is the rationale? What is the health policy behind reducing this program $187 billion over the next 7 years, reducing it below what its current projections are that will be necessary in order to continue to provide health care to poor children, their mothers, the disabled, and the frail elderly?
The response to this is dim words and inaudible whispers. There is no answer to the question of what is the policy rationale behind the reduction in terms of health care for the American people.
Is it any wonder that millions of Americans, including this Senator, are left to conclude that the measuring stick being used for the $187 billion Medicaid cut is the width of the wallets that will be fattened by the tax cut, a cut taken in part out of the lives of working people and defenseless people?
It is remarkable that, 22 years later, the debate is much the same — just the dollars amount has changed. Sperling explains:
. . .Republican efforts to cap and cut Medicaid make pretty clear that the strategy is to pay for tax cuts that largely benefit the highest earners by forcing governors to become rationers-in-chief — making painful choices regarding how to best ration or deny health care to those in nursing homes, with disabilities, and/or near the poverty line (and that’s in addition to the 14 million Americans who are projected to be completely denied Medicaid coverage over the next decade under the Republican proposal).
Sperling notes that, whether through the adoption of Medicaid per capita caps or block grants, such arbitrary funding limits “will put governors in the position of having to ration care anytime there are spikes in health-care costs — even if they occur due to reasons beyond any state official’s control.”
Sperling adds:
For example, caps wouldn’t rise to accommodate epidemics like Zika or AIDS, or in instances of rising health-care costs in the private sector unrelated to Medicaid. In both of those cases, the money might just run out, and instead of having guaranteed necessary health care for those who need it most, states would have to in some way ration care to meet their pre-set budget cap.
At both the federal level and in the states, our nation’s policymakers should at least recognize and acknowledge that the House proposal fundamentally weakens and destabilizes Medicaid’s role in providing a strong safety net for millions of Americans. The fact is that millions of Americans, including police officer Jaime Waltimere, voted for President Trump and believed him when he said he would not cut Medicaid. They deserve better.
As Senator Graham concluded his speech in opposition to Medicaid block grants in 1995:
I urge my colleagues to think twice before closing this chapter of America’s history. Medicaid has not been a failure. It has been a success. This success story needs to be told and retold from the healthy infant born to the frail elderly living in dignity; from the disabled adult to the handicapped child; from the abused child to the immunized child. These are the faces of the success story that is called Medicaid. These are the faces that are watching the Senate at this defining moment of American history.