July | August 2017

States Ponder the Fate of Medicaid under the Trump Administration

by Debra Miller, CSG director, health policy | 859.244.8241 | dmiller@csg.org
All but three state legislatures will meet in 2017 to adopt budgets. Medicaid, the federal-state health insurance program that currently covers about 73 million Americans, is the single-largest component of state budgets.
It is all but certain that big changes are ahead for Medicaid under the Trump administration, but the shape, fiscal impact and speed of those changes are likely to remain unclear before sine die adjournment in many states.
“We anticipate that there will continue to be discussions about changes that could potentially affect Medicaid financing and coverage,” said Stacey Mazer, a senior staff associate with the National Association of State Budget Officers. “These include changes from a repeal of the Affordable Care Act as well as proposals that may affect Medicaid financing in general such as moving to a block grant or a per capita cap approach.” Mazer said states need to look at implications for expanded Medicaid as well as regular Medicaid.
By the end of 2016, 31 states and the District of Columbia expanded Medicaid as allowed under the Affordable Care Act. Beginning in January 2017, states will pick up a portion of the funding for the expansion population and will be responsible for further increases in 2018 and beyond. The Trump campaign pledge to repeal the ACA begs the question of how much federal financial support will be available to continue health benefits to the nearly 10 million people the Obama administration estimates newly enrolled in Medicaid.
The proposals to move Medicaid to a block grant or a per capita cap would change the flow of federal funds to the states, Mazer said.
“States should be asking questions about the formulas for the funding inflator since health care grows more quickly than inflation as measured by the consumer price index,” Mazer said. She said another unknown is how another recession could impact program funding.
Judy Solomon, vice president for health policy with the Center on Budget and Policy Priorities, or CBPP, in Washington, D.C., said a Medicaid block grant or per capita cap would result in cuts in federal support for health care in the states.
“This will be a huge cost shift,” Solomon said. “States will be left holding the bag. Congress can look away once they devise the funding formula. States will have to make the cuts and take the political heat.”
A December 2016 report by CBPP estimates that under the similar House Republican budget plan for fiscal year 2017, cuts to Medicaid would start relatively small but after 10 years, federal funding for Medicaid and the Children’s Health Insurance Program, CHIP, would be $169 billion—or about 33 percent—less than if current law continued.
Solomon said states should have hundreds of questions about Medicaid changes. Every state’s Medicaid program is different and is likely to be impacted differently, even with promised increased flexibility. For instance, historically low spending states may be locked into that status, at least in terms of federal support, even if a state prioritizes new spending. Changes in the supplemental payments made by Medicaid to hospitals to offset the costs of care to medically indigent patients could affect hospitals’ bottom lines, which could lead to increased costs for insured patients and even impacting hospitals’ viability in some communities. And a host of Medicaid waivers that allow states to experiment with new delivery and payment models could be placed at risk with implications outside just the Medicaid program.
Since the election, Oregon Gov. Kate Brown prioritized winning the Obama administration’s approval for another Medicaid waiver, according to the Statesman Journal. The state won a five-­year approval during the last week of the Obama administration, however it is still in budget trouble and must come up with $350 million to fully pay for Medicaid over the next two years. While the waiver is not directly related to the ACA, federal changes to Medicaid could impact the Oregon coordinated care plan that claims to have saved $1.4 billion in healthcare costs since 2012.
“States must keep their eye on the ball, there are so many important issues and Medicaid is such a significant budget issue,” said Mazer.

Repealing, Replacing the ACA

The Trump campaign promised to repeal and replace the Affordable Care Act. However, any details of replacement remain unclear. Will states resume a more active role in regulating the health insurance market? How will the Medicaid expansion that 31 states and the District of Columbia implemented be funded in the future? How will a replacement for the ACA provide affordable coverage? The Kaiser Foundation reports that in 2016, $32.2 billion in tax credits helped 9.4 million Americans purchase health insurance.

Social Determinants of Health

Increasingly, state decision-makers are taking a public health approach to improving health, pointing to high levels of spending that fail to generate positive health outcomes as compared to other nations. Social determinants of health—factors like socioeconomic status, education, physical environment, employment and social support networks—have a significant impact on health outcomes. To address the social determinants of health, states are linking broader social initiatives to health improvement, including early childhood education, school reforms, transportation and environmental policies.

Prescription Drug Costs

Public opinion polls find consumers concerned with the high cost of prescription drugs and the increase in their out-of-pocket costs for medicines. States, as providers of health insurance to employees, retired employees, Medicaid enrollees and rising prison populations, share their concerns. States are exploring benefit management strategies, rebates and effectiveness research to leverage savings, while still providing access to life-changing treatment options.

Fighting the Opioid Epidemic

No state or community is exempt from the scourge of the growing opioid epidemic. Prescription drug abuse gives way to heroin and now powerful fentanyl. States are looking for solutions, expanding treatment program availability and risk reduction strategies such as syringe exchange programs and naloxone distribution. Changes in federal Medicaid funding, however, may reduce the availability of affordable treatment programs.