This week, the House Republicans continued to advance the recently introduced bill, the American Health Care Act (AHCA), which would repeal much, but not all of the Affordable Care Act (ACA) and make significant changes to the way the federal-state Medicaid program is funded. The Medicaid changes in the legislation have significant implications for the National Association for the Support of Long Term Care (NASL) members because the bill significantly cuts Medicaid funding and changes the structure of the program. The Congressional Budget Office (CBO) score showed that the bill would cut the Medicaid program by $880 billion over ten years, which is a significant cut. The bill has passed the House Energy & Commerce Committee and the Ways & Means Committee through a lengthy markup process. Very few changes were made to the legislation. It is important to note that the American Health Care Act is designed to meet budget reconciliation instructions that were contained in the House- and Senate-passed budget resolution. This means that the AHCA is designed to save money. Yesterday, the House Budget Committee passed the legislation, and next week the bill is expected to be heard in the House Rules Committee where it could receive changes requested by far-right and centrist Republicans prior to moving to the House floor for possible vote next week. Senators on both sides of the aisle oppose the bill as is, so the bill’s prognosis in the Senate remains unclear. An important development this week was the release of the bill’s score by the non-partisan Congressional Budget Office (CBO). CBO provides non-partisan analysis on the budgetary effects of legislation and CBO’s score of the legislation is an important political marker for both parties in making cases for and against the legislation.CBO found that compared to current law, AHCA will:
Much of Congressional and media focus on the bill has centered on health insurance related provisions. NASL members would be most impacted by changes to Medicaid contained in the bill. The Affordable Care Act incentivized states to expand their Medicaid programs to cover adults. This was a way to increase the number of insured individuals and provided states enhanced federal match dollars for a period of years to help states offset this expense. The AHCA would severely cut back the expansion funds and cap total Medicaid funding for the states. So, governors – especially governors from states that expanded their Medicaid programs – are weighing in on this issue. We have yet to see an organized approach by the governors as a stakeholder group. Because Medicaid is a state-federal partnership, and states bear roughly half the cost of the Medicaid program, governors are important players in this issue. Health & Human Services (HHS) Secretary Tom Price, MD, and the newly sworn-in Administrator of the Centers for Medicare & Medicaid Services (CMS), Seema Verma, sent a letter to each of the governors this week offering to work closely with states on increasing state flexibility in Medicaid. Governors want flexibility to run their state Medicaid programs, which would be different than the current one-size-fits-all approach in terms of federal law and requirements. The summary below covers several key elements of the American Health Care Act, and emphasizes the Medicaid provisions in the legislation that would directly impact NASL members. NASL will continue to monitor and review changes to this legislation. Medicaid Program Changes Current Medicaid funding flows from the federal government to the states where the federal dollars are matched by the states, which then administer each state’s Medicaid program. The current Medicaid funding structure is referred to as “an open ended entitlement” since there are no limits on state spending on Medicaid; regardless of how much a state spends on its Medicaid program, the federal government will match that amount according to a set formula and send the match money to the states for use by its Medicaid program. The formula seeks to ensure that poorer states get more federal match dollars than richer states. Congress does not have to appropriate the Medicaid funds; those funds continue flowing to the states as part of the federal budget’s nondiscretionary funds. The American Health Care Act would make significant and fundamental changes to the existing funding structure such that federal funds would go to the states based on a “per capita cap,” which means a set amount of money per beneficiary in that state. Medicaid beneficiaries in each state would be divided into five categories for purposes of designing a set amount of funding per beneficiary category. These categories are 1) the aged, 2) blind and disabled, 3) children, 4) adults through the Medicaid expansion and 5) other adult populations. For example, states would receive funding for the aging category to cover all services and providers that deliver services to that category of beneficiaries (i.e., seniors). Presumably, nursing facility and other long term care services such as home- and community-based services (HCBS) would be funded under this category. In other words, the allocation of funding the state receives from Centers for Medicare & Medicaid Services (CMS) would be capped. To design the allocation, CMS would use fiscal year (FY) 2016 as the base year. Spending for that particular category of beneficiaries (in a state) would be calculated for FY 2016. An allowance for growth would be added to increase this base amount by the medical consumer price index, about 3.6% each year. Nursing facility provider associations have stated that this growth will not keep up with increased costs for nursing home care for these patients. Because of incentives in the ACA, many states expanded their Medicaid programs in order to provide insurance to adults. The law incentivized this by providing enhanced federal matching dollars to states that chose to expand their Medicaid programs. In the AHCA, these enhanced match funds for a state’s Medicaid expansion population would be phased out over three years. For many years, states have been active in negotiating with CMS to waive certain federal Medicaid requirements to experiment in their state’s program or make changes to suit the needs of that state’s Medicaid population. The AHCA appears to force states to renegotiate such waivers currently in place between CMS and states. The costs of the services provided through the waivers will need to be defined to align with the beneficiary category per capita caps. Some states have provided home- and community-based care services through waivers and Medicaid managed care is allowed through waivers. Governors want these waivers to become a permanent part of Medicaid, so this will not be a popular provision with states – and it is very likely to be a negotiation point as the bill moves forward. States would be required to determine Medicaid eligibility every six months. It is not clear that this would apply to beneficiaries who receive care in nursing facilities as it would be limited to beneficiaries whose eligibility is determined under the Modified Adjusted Gross Income (MAGI). This will be a burden for states. Health Insurance Changes The bill repeals the individual and employer mandates in the ACA. AHCA repeals all taxes (except the Cadillac plan tax), including the 2.3 percent excise tax on the sale of certain medical devices. NASL has long supported the repeal of the medical device tax. The bill also eliminates subsidies that help consumers purchase insurance; these subsidies would be replaced with refundable tax credits. Additionally, the bill eliminates the ten Essential Health Benefits (EHB) that individual and small group plans were required to offer through the ACA. NASL was most concerned that the required EHB rehabilitative therapy and habilitative services and devices categories were maintained. The AHCA ends the EHB provisions after 2019 as part of the phase-out of the ACA marketplaces. Some popular aspects of the ACA do remain, including provisions that allow children to stay on their parents’ plan until age 26 and no denial of coverage for pre-existing conditions. The bill also defunds Planned Parenthood. Impact to NASL Members If the bill were to pass as is, states will amend their Medicaid programs in order to keep their costs with the capped allotment of funding. The three areas where states can change their Medicaid program include: 1) change who is eligible for services; 2) revise the rates paid to providers; and 3) limit the range of benefits. The new funding mechanism in the AHCA would reduce the amount of Medicaid funding given to states through the capped allotments, so reduced rates, less coverage and fewer benefits will result. How this would be implemented would likely be different from state to state as state legislatures and governors make changes to their Medicaid programs in response to federal funding cuts.
