Mitigating the Medicaid cuts

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Look for the helpers

The enactment of the Republicans’ monstrous budget bill in one sense sets politics and policy at odds, at least for Democrats. Annie Karni, congressional report for The New York Times, frames a political problem for Dems:

A challenge for Ds who expect the passage of this bill to help them win elections is that it may take a while for people to feel the full negative effects. Rs front loaded some temporary tax cuts for working people and backloaded cuts to Medicaid to hit after the midterms.

As KFF’s Larry Levitt points out in response, funding cuts and some impediments to enrollment in the ACA’s private-plan marketplace kick in immediately or almost immediately, i.e., for OEP 2026, beginning Nov. 1 this year (and Charles Gaba has tallied provisions in both Medicaid and marketplace that will take effect before the midterms). That said, Republicans will of course exploit the time lag, which extends to other benefit cuts as well (SNAP, student loans, energy credits), using it to add plausibility to their claims that, as MAGA go-along Tom Kean Jr. (NJ-7) boasted, “we protected Medicaid for every intended beneficiary in New Jersey and across the country.” That is, the bill does not change Medicaid eligibility for anyone (except various classes of lawfully present noncitizens, who are just human waste in Republican parlance). Instead, Republicans set up a thicket of administrative enrollment impediments and cuts to state funding (mostly delayed) that will increase the uninsured population by some 12 million by CBO’s estimate (with another 4 million losing coverage due to Republicans’ refusal to extend the enhanced ACA marketplace subsidies funded through 2025*). If enrollment reductions on that scale don’t happen — as many Republicans claim — neither will the cuts to federal spending that help fund the bill’s gargantuan tax cuts.

All that said, I’d like to consider Democrats’ alleged political “challenge” from the opposite end of the telescope. To what extent can Democrats in state government — and, more speculatively, in Congress — mitigate the coverage and funding losses? Administrative barriers can be erected with steel or Styrofoam — though Trump’s CMS, led by people whose chief passion in life is to ensure that someone somewhere doesn’t get a benefit to which they’re not technically entitled**— will doubtless work to insist on steel. If Democrats take the House, they may be able to delay or reduce some spending cuts — the annual ratchet-down of the provider tax safe harbor, for example, strikes me as the kind of thing Congress is prone to pause.

Republicans make the "abled-bodied" vulnerable

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Community engagement requirements for the "able-bodied"

Republican legislators who wrote the Medicaid provisions of their monstrous megabill are acting on a simple belief: low-income nonelderly adults who lack access to affordable employer-sponsored health insurance should not have access to affordable health coverage.

While their $900 billion* in cuts to federal spending on Medicaid over ten years will hurt all classes of Medicaid enrollees, the cuts are aimed primarily at low-income adults insured through the ACA Medicaid expansion — that is, adults under age 65 who are not recognized as disabled by the federal government (though many have varying degrees of disability**). Some cuts not aimed directly at the ACA expansion population target states that have enacted the expansion.

Provider tax cut aimed at expansion states

The major new spending cut added by the Senate Finance Committee to the House package last week is a case in point. Section 71120 would sharply reduce the revenue that Medicaid expansion states derive from “provider taxes,” a financial maneuver, allowed for decades, that all states except Alaska employ to boost Medicaid revenue and fund services. Under current law, states are allowed to hold taxed healthcare providers “harmless” if the taxes don’t exceed 6% of revenue — that is, they can boost payment to an amount equivalent to the revenue collected. Since the federal government pays its standard Medicaid share of the resulting new spending, varying from 50-77% by state, states can use the federal share to further boost spending. Most such taxes are imposed on nursing homes (46 states) and hospitals (45 states).

That financial maneuver is a classic American “kludge” — a workaround chronic Medicaid underfunding initiated by state governments and accepted by CMS. A responsible legislature looking to end such haphazard, convoluted funding mechanisms might replace the revenue from them, built into state budgets, with a more rational funding source. The House bill put a ban on new provider taxes, leaving current arrangements in place. The Senate Finance Committee takes a deep slice out of the revenue, cutting current taxes — but only for Medicaid expansion states. For those states, the “safe harbor” under which hospitals and other providers can be held harmless is cut by 0.5% per year from the current 6% until it hits a floor of 3.5% (nursing homes are exempted from the lower threshold).

As Georgetown’s Edwin Park notes (citing KFF data), at present 18 expansion states imposes taxes on hospitals above the 3.5% future safe harbor, and some of those states explicitly earmarked that revenue*** to fund the state’s share of the cost of enacting the ACA Medicaid expansion— potentially endangering maintenance of the expansion in those states if this provision is enacted. At the same time, six of the ten nonexpansion states (Alaska, Kansas, Mississippi, South Carolina, Tennessee and Texas) impose taxes on hospitals greater than 3.5% and would be exempt from this cut.