ADEA State Update

President Trump’s Proposed Budget Slashes Medicaid

(State Policy, Insurance, Medicare and Medicaid, HHS, ACA, Federal Policy, Medicare and Medicaid Services) Permanent link   All Posts

MedicaidCutsOn May 23, President Trump released a proposed budget for FY18 titled, “A New Foundation For American Greatness.” The proposal cuts Medicaid by $610 billion over 10 years. Further, the proposed budget drastically changes the funding system for Medicaid. Under the proposed budget, states would have the choice as to how they wish to receive Medicaid funds. States may choose between a per capita cap and a block grant. These significant changes to Medicaid as outlined in the President’s proposed budget are in addition to the $800 billion cut to Medicaid as proposed in the House version of the American Health Care Act (AHCA) passed on May 4.

  • Who Medicaid Covers

Medicaid provides health and long-term care coverage to more than 70 million low-income children, pregnant women, adults, seniors and people with disabilities in the United States. According to the Kaiser Family Foundation, the Medicaid program represents $1 out of every $6 spent on health care in the United States and is the major source of financing for states to provide coverage to meet the health and long-term needs of their low-income residents. Medicaid is administered by states within broad federal rules and jointly funded by states and the federal government.

  • Block Grants and Per Capita Caps

Under a block grant, states would receive a preset amount of funding for Medicaid. A base year of Medicaid spending would be established, and then the cap would increase by a specified amount each year, typically tied to inflation or inflation plus some percentage. To generate federal savings, the total amount of federal spending would be less than what is expected under current law. Under a block grant, if program costs exceed the federal spending cap due to increased enrollment during a recession or rise in health costs, for example, states would have to increase state spending or reduce enrollment or services.

Per capita caps, set a limit per Medicaid enrollee on federal funding. A base year of per enrollee spending would be determined, and then that amount would increase over time by a preset amount (i.e., inflation or inflation plus a percentage). These per enrollee caps could be determined for all enrollees, or separate caps could be calculated based on broad Medicaid coverage groups (children, adults, elderly and people with disabilities). States would receive the sum of the per enrollee amounts multiplied by the number of enrollees in each group. To achieve federal savings, per enrollee spending would be set to increase slower than expected under current law. Although this approach adjusts for enrollment, it would not address increases in health costs or changes in technology that increase per enrollee spending.

  • Administration’s Rationale for Medicaid Cuts

Mick Mulvaney, the Director of the Office of Management and Budget explained the administration’s rationale during a press briefing at the White House on May 23. Mr. Mulvaney said the administration essentially wrapped the changes in Medicaid from the AHCA into their budget proposals.

“What we are doing is growing Medicaid more slowly over the 10-year budget window than the Congressional Budget Office says that we should or says that we will under current law,” said Mulvaney. “Why do we change it? We change it—we change those growth rates in Medicaid spending because of the American Health Care Act, which this President does support.”

  • Next Steps

The president’s proposed budget is just that—a proposal; the final decision is within the purview of Congress. Congress is tasked with drafting and passing the federal budget. Additionally, the changes to Medicaid as outlined in the AHCA have passed the House, but the bill must pass both chambers and to date, AHCA has not been voted on and passed by the Senate. ADEA will continue to keep everyone informed of any funding and structural changes to the Medicaid program.

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