Medicaid block grants -- passing the buck without passing the bucks

While it’s still a work in progress, the broad outline of proposed health care reforms is coming into focus in Congress. The measure as currently drafted holds huge ramifications for all Americans, including here in North Carolina. Many of those ramifications come from proposals to change Medicaid from its current form into a block grant program.

State Medicaid Spending

According to Rose Hoban of NC Health News, North Carolina’s share of Medicaid spending was a little over $3.5 billion last year, which accounted for a bit more than 16 percent of the state’s $22.3 billion budget. Statewide there are nearly 2 million Medicaid enrollees – where about 55 percent are children, and the aged, blind and disabled account for 25 percent.

While the sheer numbers weigh heavily toward children, spending on coverage is the reverse. Hoban received figures from the legislative Fiscal Research Division that show the average cost to the state for each child covered is around $250 per month, while spending on ABD (aged, blind and disabled) recipients averages around $1,400 per month.

A Congressional Budget Office analysis shows the American Health Care Act in its present form would slash Medicaid spending by $880 billion over 10 years by phasing out Medicaid expansion and using per capita caps to transform the program into block grants. The CBO estimates enrollment in the program would shrink by 14 million people.

The legislation continues the current Medicaid expansion program as is until the end of 2019, and at that point enrollment would be frozen. It would cover those grandfathered in those who have a lapse in eligibility wouldn’t be able to re-enroll. The CBO projects “fewer than one-third of those enrolled as of December 31, 2019, would have maintained continuous eligibility two years later. Under the legislation, the higher federal matching rate would apply for fewer than 5 percent of newly eligible enrollees by the end of 2024..."

Keeping up with actual costs

The proposed metric used in the new legislation increases allotments over time, but at a slower rate than the average increase in Medicaid spending.  In North Carolina, Medicaid spending rose at rate of about 5 percent a year, some 76 percent overall, between 2000 and 2012.

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The Centers for Medicare & Medicaid Services has projected that health spending will grow 1.3 percentage points faster than the Gross Domestic Product between 2015 and 2025, averaging 5.8 percent per year or 4.9 percent on a per capita basis. The odds look good that the current reform plan would pass the buck to states without passing the actual bucks needed.

Tough choices for the states

From the CBO: "With less federal reimbursement for Medicaid, states would need to decide whether to commit more of their own resources to finance the program at current-law levels or whether to reduce spending by cutting payments to health care providers and health plans, eliminating optional services, restricting eligibility for enrollment, or (to the extent feasible) arriving at more efficient methods for delivering services.’’

The bill currently uses five demographic groups – ABD persons, children, the elderly, working adults and pregnant women or parents – and would calculate a per-enrollee cost for each recipient.

Writing in The Hill newspaper, UC-San Diego chair of political science Thad Kousser said the new formula would hammer states in an economic downturn. “States feel the pinch of recessions the most because they have balanced budget requirements.  Matching rates keep the safety net going by making it a bad deal to cut in hard times — states that cut Medicaid would be leaving lots of federal money on the table.  This keeps the safety net broad when it is needed most.

Under block grants however, this disincentive to cut health care goes away, ensuring deep cuts by cash-strapped states. … A state needing to cut billions in a recession as health costs rise would spread the pain.  They would cut other things — like public safety and education. We saw this during the last recession.’’

Indeed, if you rely on Medicaid you’ll almost certainly be affected by the new legislation in its current form. But even if you don’t, odds are good that you turn to facilities that at least in part count on Medicaid revenues, and services provides by those facilities could be curbed if revenue falls short.

The new formula would also rob states of flexibility to deal with new public health crises. One such well-publicized crisis is today’s opioid epidemic, which was barely on the radar 10 years ago.

The current shape of health care reform should be of particular interest to Baby Boomers who have worked hard all their lives and are looking forward to retirement – the years when health care needs increase. In their zeal to overhaul the nation’s health care system, our leaders also have a responsibility to make sure the new system to deliver health care is affordable and effective.  There’s much work ahead in rising to that challenge.

Longtime mountain journalist and former Asheville Citizen-Times Editorial Page Editor

Jim Buchanan can be reached at Bjim36238@gmail.com