There is no shortage of dire warnings from the press, medical industry lobbyists, and other left-leaning organizations about the American Health Care Act’s (AHCA) landmark Medicaid reforms. At the heart of their criticism is the misguided notion that more spending improves care for the most vulnerable, as well as the assumption that status quo Medicaid is serving people well.
Even if a watered-down version of House Republicans’ health-care legislation becomes law, states are probably going to be on the hook for billions of dollars of health-care costs, especially for the poor and sick. And that means they’re going to have to make some hard choices:
The AHCA makes drastic cuts to Medicaid, a program in which 43 percent of enrollees are children. Those federal funding cuts will ‘trickle down’ to the state, adding $2-3 billion in annual costs to our already-strained state budget.
Let’s address these myths, one at a time. To start, changing the way Medicaid is financed, from a federal match to a per-capita amount, is not a spending cut. Rather it restrains future spending growth. Pennsylvania, for example, spends on average $8,508 per Medicaid beneficiary. That’s well above the $6,500 national average. Nothing in the AHCA will force Pennsylvania to spend less.
However, federal funding will be based on enrollment instead of services received. This is the same change Pennsylvania leaders made when they decided to pay managed care companies per-member rates instead of paying for each service. This change will shift focus from the quantity of care to the quality of care.
Secondly, states are already making tough decisions about Medicaid under Obamacare. Soaring enrollment through the program’s expansion is wreaking havoc on state budgets. In Pennsylvania, Medicaid is growing at 6.7% while the economy grows at 2% and tax revenues at 3.3%. That means fewer dollars for education, growing pension debt, or other pressing needs.
Elsewhere, Arkansas is attempting to reduce its Medicaid expansion population due to chronic cost-overruns. This should come as no surprise. Arizona expanded Medicaid to able-bodied, childless adults in 2000. The rising costs led to benefit cuts, specifically Medicaid coverage for heart, liver, lung, pancreas, and bone marrow transplants.
It’s dishonest to claim the only choices before state lawmakers are to raise taxes or cut Medicaid services. The ACHA promotes a third option: fix the broken program.
In addition to getting rid of states’ incentive to spend more money and draw down federal funds, the AHCA offers an expedited path to state waivers. These waivers provide states with freedom from regulations, resulting in better service and taxpayer savings. Examples of successful waivers include Florida’s choice counseling waiver and Rhode Island’s global waiver.
Don’t be fooled by headlines claiming Washington is cutting a trillion or even half a trillion from Medicaid. The per-capita cap will force government to improve the quality of the care it provides and ultimately drive down costs.