The bottom line: No one should envy the policymakers who are making these decisions.
An FKD Feature exclusive

One of the biggest budget line items at every level of government is healthcare, and that’s why significant Medicaid reform is at the top of the GOP’s agenda right now. In Washington D.C., there is a lot of momentum for reforming Medicaid, Medicare and Obamacare now that the GOP occupies the White House and both houses of congress.

Medicaid is connected to the potential repeal of Obamacare because it is another government policy that provides healthcare coverage for millions. President Barack Obama’s signature law also set the stage for Medicaid expansion.

There are several schools of thought on Medicaid. During the Obama era, Medicaid was expanded significantly, and some Republican governors jumped on the bandwagon. The prevailing ideas being floated now are more conservative: cut funding significantly to balance the federal budget.

However, this could mean deep cuts and loss of coverage for tens of millions of people, many of whom voted for Trump and were promised that they would not lose coverage

Medicaid 101

Medicaid and Medicare are the two largest healthcare entitlement programs in the United States; one covers healthcare for the poor, and the other provides coverage for senior citizens. Both are widely recognized as budget busters that significantly contribute to the federal deficit.

Medicaid is funded through cost sharing between states and the federal government. Most of the time, the feds match state spending at least dollar for dollar, not counting other funding measures that cover other costs.

Medicaid is a monster program. According to Kaiser Permanente, “Medicaid represents $1 out of every $6 spent on health care in the US 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.”

Policymakers are looking to change the way a whopping 70 million people get coverage through Medicaid, and Medicare reform for elders and an Obamacare repeal isn’t too far behind. Naturally, reform is extremely politically hazardous, especially with entitlement programs.

Houston, we have a problem

There is one major barrier standing in the way of fiscally prudent reform: cost-cuts may translate into people not receiving the healthcare that they need. President Donald Trump wants to cover everyone while saving money, and many experts say that it may not be possible.

Consider this one factoid that will give you grasp of just how interwoven Medicaid has become in American healthcare: About half of live births in America are financed by Medicaid. In New Mexico, Medicaid pays for almost three-quarters of all births. Because of the wide scope of the program today, there is huge debate over whether Medicaid has grown beyond its original mission and needs to be scaled back.

The Obamacare Connection

When the Affordable Care Act passed, the law dictated that Medicaid should be expanded in every state to include everyone up to 133 percent of the federal poverty line. After the law was challenged, the Supreme Court ruled that states could chose not to expand Medicaid. As a result, some states, including Texas and Florida (and 17 others) did not expand Medicaid to include more of the uninsured population.

Many states left money on the table when they didn’t expand Medicaid. The Affordable Care Act guaranteed that the federal government would fully fund Medicaid expansion until 2016. By 2020, states would be responsible for 10 percent of the cost.

Needless to say, there were scores of angry people left without healthcare coverage in these states. Famously, Florida Governor Rick Scott got screamed at by a young lady at a Starbucks in Florida for not expanding Medicaid (in all fairness it was mostly the legislature’s fault, but the governor got the heat).

So what do Republicans want to do now then?

With the changing of the guard in Washington, there are now calls to radically curtail Medicaid and Medicaid spending and repeal Obamacare. While there are several ideas being floated, most Republicans want Medicaid to be a “block-granting” system.

Essentially, through block grants, the federal government gives states the money and direct control over the program. By design, this caps spending to a certain amount and could save U.S.taxpayers trillions of dollars in the coming decades.

A potential middle-of-the-road plan?

More moderate Republicans, especially in the Senate, would like to see a system that cuts spending, but doesn’t completely leave millions without healthcare coverage when they need it.

They’re pushing a “per beneficiary” or a “per capita” payment system, which would allot funding needs depending on the population enrolled. This would allow states to expand coverage during economic hard times, when people lose their jobs and health insurance.

Takeaway: Good luck everyone!

Yes, it’s all very complicated and some tough choices will have to be made in Washington. 

It’s important to remember that healthcare is almost one-fifth of the U.S. economy. Thus, any significant cost cuts are going to impact economic growth and jobs.

Also, we shouldn’t forget that repealing Obamacare without a well-designed replacement would leave millions in limbo. Doing Medicaid, Medicare and Obamacare reforms at the same time could create chaos in American healthcare.

The bottom line: No one should envy the policymakers who are making these decisions.

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Header image: Shutterstock


Posted 01.24.2017 - 12:56 pm EDT

Filed under

federal government healthcare healthcare spending medicaid Obamacare

Written by

David Grasso