Thursday, December 15, 2016

A mantra for Democrats in ACA 'replace' negotiation: "Save Medicaid First"

There's a lot of speculation just now over whether Democrats in the Senate will work with Republicans to pass an ACA replacement after swift repeal. While repeal can substantively be done with just 51 votes via reconciliation, a replacement bill would require 60 votes, and hence eight Democrats. Per Politico:
Twenty-five Democrats are on the ballot in 2018, including 10 in states that Donald Trump just won. The GOP is betting that many or most in the latter group will be under irresistible pressure to back an Obamacare replacement, if the alternative is leaving millions of people in the lurch without insurance.
Greg Sargent responds that if Republicans put forward a plan that covers far fewer people that the ACA (as expected), Democrats can counter that  "they will only support a more generous replacement plan that covers a lot more people than the GOP replacement would.

It seems to me that the major barrier to bipartisan cooperation is the Medicaid expansion. The Medicaid rolls have increased by 16 million since 2013. By Charles Gaba's estimate (updating Kaiser's), 12.3 million new enrollees were rendered eligible by the ACA, which makes Medicaid available to adults with incomes up to 138% of the Federal Poverty Level in states that opt to implement the expansion (as 31 plus DC have done to date).

While restructuring the private individual market for health insurance would to some degree affect modestly more people than the Medicaid expansion -- about 18-20 million at present -- the ACA marketplace subsidies affect fewer, about 9 million.  Republican replacement plans would probably hurt  most of those subsidized enrollees (and future applicants with similar incomes), as any replacement they enact will likely provide skimpier subsidies, very possibly not income adjusted, and almost certainly subsidizing premiums only rather than out-of-pocket costs. Conversely, if the replacement provides tax credits that are not adjusted for income, as in the plans put forward by Paul Ryan and Tom Price, they will provide substantial aid to the roughly 9 million individual market enrollees who currently don't qualify for subsidies.

Rejiggering the individual market, much as it may hurt current subsidized enrollees (and future prospective low-income enrollees ), is a lower-stakes operation than repealing the Medicaid expansion -- or phasing it out by reducing the federal government's extra high share of the funding for those rendered eligible by the expansion.  The expansion -- including enrollment of those previously eligible through increased outreach, publicity and threat of tax penalty for remaining uninsured -- accounts for more than 60% of the ACA's reduction of the uninsured population. Those who have gained coverage through Medicaid, moreover, are less likely to be underinsured than those who gained it through the marketplace -- and much less likely to be underinsured than they would in a private plan marketplace remade by Republicans, assuming the enrolled in a plan.

It is difficult to imagine Republicans putting forward a replacement plan that offers anything remotely affordable or usable for the beneficiaries of the ACA Medicaid expansion -- unless, against the odds, their legislation more or less preserves the expansion. A "private option" like the one negotiated with HHS by Arkansas, which puts Medicaid-eligible enrollees in private plans while covering their premiums and out-of-pocket costs to Medicaid levels, would be much more expensive than maintaining the expansion as is. Fixed premium subsidies for skimpy health plans offered in a deregulated marketplace would be grossly inadequate to the needs of people with incomes under 139% FPL.

If Republicans block-grant Medicaid, moreover, or impose per capita caps tied to inflation, millions who were eligible under pre-ACA criteria will likely be cut from the rolls -- or else benefits for enrollees will be cut.  The House Budget Committee budget would cut Medicaid spending by $1 trillion over ten years. Draconian solutions will vary from state to state.

The ACA marketplace has always sucked up a disproportionate share of the passion and attention attached to the ACA.  The Medicaid expansion has not only helped more people, it's helped more vulnerable people and provided them with more satisfying and less problematic coverage. Any compromise that preserved the Medicaid expansion would be worthy of consideration.

In a less dysfunctional political environment, a plausible compromise would be to effectively cede the individual market to Republicans while expanding Medicaid eligibility. Let the state (and Democrats) take care of people up to say 300% FPL, and let the free market (and Republicans) have their crack at conjuring magic for those with some resources to deploy.  But that's a solution for an alt-universe.

It's possible that Republicans' quick repeal will delay repeal of the Medicaid expansion or stipulate some kind of gradual funding noose for it, beginning to take effect at the date set for replacement legislation. In that case, Democrats may negotiate to salvage the bulk of it along with substantial subsidization of the individual market. In any replace negotiation, perhaps "Save the Medicaid Expansion First" should be the Dem watchword.

Update: If Republicans follow form on their 2016 ACA repeal bill and immediately repeal the taxes that fund ACA benefits, as TPM's Tierney Sneed points out, there's no way the Medicaid expansion or anything like it can survive.  Cut taxes today, impose new ones to fund restored benefits tomorrow? That's not how Republicans roll.


  1. Andrew
    For the long game, marketplace might mean more. Think of the ESI conversions and potential 65-70 yo folks who might migrate in over the next decade. While Medicaid more bureaucratic and a real political football, levers can be pulled. But the ramifications on the private side for future growth? If you muck with the marketplace now, it might have multiplier effects down the road, big time--and you wont get them back with 125M people plus in the mix.

  2. According to some estimates I have read, almost 40% of the "Medicaid expansion" consists of woodwork people who were actually eligible before the ACA was even proposed.

    If Medicaid goes to block grants, maybe they are still vulnerable to getting cut off.