Connecting state and local government leaders
The American Health Care Act proposal will be amended to allow states to pick between per capita caps and block grant Medicaid systems. Here's what that might mean for governors.
WASHINGTON — The U.S. House of Representatives is planning to vote on the Republican health care bill on Thursday—a day which also happens to be the 7th birthday for the Affordable Care Act, often referred to as Obamacare.
In an interview on “Fox News Sunday,” House Speaker Paul Ryan said he feels “very good” about the prospects of the bill.
In that same interview, Ryan also confirmed that GOP plan under consideration this week may look a bit different than the original legislation that was released on March 6. Amendments are being made to the bill, in part, to address concerns coming from within the Republican Party in an attempt to shore up the votes this bill needs to make it through the House.
According to Ryan, Republicans are planning to reconfigure the bill’s tax credit system to allow for more generous assistance to lower-income people aged 50 to 65. This change follows analysis by the Congressional Budget Office that shows that in 10 years, the net premium for a 64-year-old making $26,500 annually would end up being more than eight times higher under the GOP plan than under the existing law.
The bill is also being amended include a provision that would allow states to impose work requirements for able-bodied Medicaid recipients.
And, the third major amendment to the plan would give states the ability to choose between two possible Medicaid funding structures. States could receive their Medicaid funds through the per capita cap system or they could accept fixed Medicaid block grants.
Block Grants vs. Per Capita Caps
Both financing systems would make fundamental changes to the Medicaid program. Under the current law, the funding system for the program is open-ended, meaning that states are guaranteed to receive federal matching dollars without a pre-established limit. If a state’s Medicaid costs go up for whatever reason, the federal government will increase spending on that state at its agreed-upon matching rate. In addition, the current system constitutes an entitlement program—where anyone who meets the eligibility requirements is entitled to coverage.
Both the block grant and per capita cap systems do away with open-ended funding and guaranteed coverage of Medicaid.
Under a block grant system, each state would get a fixed amount in federal grants. That amount would be based on historical federal and state Medicaid spending in that state and would increase year over year to take inflation into account. Critics of this proposal contend that it exposes state budgets to too much financial uncertainty. If enrollment in Medicaid increases due to an economic downturn, the block grant proposal would require that the state government pick up the slack. In this case, states may be forced to increase their own spending on health care, reduce enrollment or limit the types of services covered.
Under the per capita cap system, federal funding is capped and the amount a state receives is contingent on the number of enrollees in each state. A base year amount would be determined for each state, and that amount would increase at a fixed rate over time, in accordance with the number of enrollees. While this system does have some flexibility for increased funding paired with increased enrollment—unlike the block grants—it does not provide a way to deal with the possibility that health costs that may rise faster than the fixed rates—in the event of an expensive medical breakthrough, for example.
Critics of these systems contend that they shift the financial risks associated with higher health care costs from the federal government onto the states—whether that increased cost is due to an expensive new treatment option, a disease outbreak, a natural disaster or another unforeseen scenario entirely.
Will the AHCA Garner More Support Among Governors?
The amendment giving states the option to choose between block grants and per capita caps is unlikely to convert many Democratic state leaders to the House GOP cause. After all, most of these Democratic governors found block grants unpalatable when that option was under consideration before.
Of the potential block-granting of Medicaid, Virginia Gov. Terry McAuliffe said in an interview with National Public Radio: “Virginia has a very efficient Medicaid system today. A lot of them say, well, if you block grant it, you can get rid of the inefficiencies. We already have the efficiencies. And what will happen? It will strap our state budget. It will reduce benefits. It will limit choices.”
Speaking on making the choice between either House GOP funding system, Connecticut Gov. Dannel Malloy said in a letter to U.S. House Majority Leader Kevin McCarthy: “Proposals to reduce federal Medicaid spending by converting the program to a block grant or imposing per-capita caps necessarily erode the federal-state partnership and the access to health care for Medicaid beneficiaries.”
The amendment, however, may win additional support from some GOP governors who were on the fence about the plan before.
The buzzword on both sides of the aisle on the health care issue is “flexibility.” And, to many GOP governors in particular a plan that gives state leaders the ability to choose the funding system that works for them sends a clear signal that the House plan takes state needs into account.
One state executive who has been vocal proponent of funding system choice is Arizona Gov. Doug Ducey. In an interview with Route Fifty in late February, Ducey was asked about his preference between a per capita cap and a block grant system.
“Why don’t we provide both out to the states and let the governors make the choice,” he responded. Flexibility is a key factor in Ducey’s support for this choice.
“Governors have been asking for years that we can have charge over the health care system and the spend, and that we have the flexibility that’s available to do that,” Ducey said at the time.
However, while Ducey will likely welcome this amendment, he and other Republican governors may remain unsatisfied with the level of flexibility that the House GOP plan affords them. Governors such as Matt Bevin of Kentucky, Paul LePage of Maine and Scott Walker of Wisconsin have all used “flexibility” as their rallying cry to insist that the plan in question doesn’t go far enough to extend power to the states.
And, even with the new amendments proposed in the last week, the bill the House GOP bill does little to change the structures in place that prevent these governors from having the authority to work at the state level to develop their own health systems.
Quinn Libson is a Staff Correspondent for Government Executive’s Route Fifty, and is based in Washington, D.C.