Monday, July 17, 2017
4 Ways Trumpcare Could Decimate Medicaid
Change is in the air on Capitol Hill -- or at least Republican lawmakers would like you to think so.
When Donald Trump was elected president and Republicans retained their majority in Congress, the repeal and replacement of the Affordable Care Act, best known as Obamacare, was supposed to be easy. However, it's turned out to be anything but easy, with multiple GOP healthcare proposals failing to garner much support among the public, and intra-party bickering holding up the repeal-and-replace effort.
Perhaps the greater irony here is that Congressional Republicans passed a repeal of Obamacare when Barack Obama was still in office. He vetoed the bill. But now that he's not in the Oval Office, Congress is struggling to get a repeal-and-replace healthcare bill passed.
The latest healthcare bill, the Better Care Reconciliation Act (BCRA), also loosely dubbed as "Trumpcare," comes from Senate Republicans. It's comprised of some provisions from the American Health Care Act (AHCA), which was passed by a narrow margin in the House, and completely new proposals from Senate Republicans.
The primary concern for the GOP has to be the public's overwhelming dislike for the AHCA and BCRA. While Obamacare was itself never a particularly popular law among the public, the 17% approval rating for the BCRA and 55% disapproval rating, according to a recent NPR/PBS News Hour/Marist poll, takes "dislike" to an entirely new level.
Though there's a lot for the public to be concerned about with Trumpcare, arguably the biggest worry ties to proposed changes to the Medicaid program. Medicaid is the program that covers lower-income individuals and families, the elderly, pregnant women, and people with disabilities. Changes proposed by Republicans in Trumpcare would completely reshape, and arguably decimate, the Medicaid program.
One of the biggest changes to Medicaid is how the program will fund states. Currently, Medicaid funds are disbursed to states based on their needs. In other words, the federal government sends federal funding to states based on their aggregate annual Medicaid expenses.
With Trumpcare, Medicaid funding would be doled out on a per-capita basis through the year 2025. This means funding is fixed based on a state's Medicaid enrollment, not on how much it actually costs to treat Medicaid patients. In some years, it's possible that Medicaid costs will come in below expectations -- but the pendulum swings both ways. If costs come in higher than expected, states will have little choice but to make up the difference, or to offer less in the way of coverage to Medicaid enrollees or providers.
A recent study from Brookings found that, if the per-capita provision had been implemented in 2004, states, on average, would have had to increase their own funding by 17.4% by 2011 just to maintain their programs under the BCRA. In short, this measure is designed to push some of the costs of covering Medicaid patients onto states, which, in many instances, already have strapped budgets.
If you think the per-capita provision is crippling, you haven't seen anything yet! After 2025, Trumpcare will alter the inflationary index that Medicaid funding is tied to from the Medical Consumer Price Index (CPI-M) to the Consumer Price Index for all Urban Consumers (CPI-U).
Under the proposal, the CPI-M plus 1 percentage point would act as the inflationary tether to annual Medicaid funding through 2025. Historically, based on data from the Centers for Medicare and Medicaid Services, the medical-care inflation rate averaged 5.5% annually between 1961 and 2013, based on constant 2009 dollars. This would suggest annual inflationary increases in per-capita funding of around 6.5%.
By comparison, the CPI-U has been hovering around 2% annually over the past decade, suggesting just a third of the annual raise relative to utilizing the CPI-M plus 1 percentage point. This is going to result in states getting substantially less Medicaid funding after 2025 since the CPI-U traditionally grows at a slower pace than the CPI-M.
Medicaid expansion has been a critical component to Obamacare's success in lowering the uninsured rate to about 9%, per the Centers for Disease Control and Prevention. The federal funding for this expansion, which 31 states took advantage of, allowed millions of people earning between 100% and 138% of the federal poverty level to enroll in Medicaid.
Under Trumpcare, Medicaid expansion will be allowed to continue as a program through 2020, with the federal government covering 90% of the costs associated with funding this expansion, as outlined under Obamacare. However, beginning in 2021, funding for Medicaid expansion will begin being scaled back, putting more onus on the states if they want to keep expansion members enrolled. In 2021, states would be responsible for 15% of costs, and by 2022 this would jump to 20% of Medicaid expansion expenses.
In 2023, Medicaid expansion will disappear entirely. By 2026, according to the Congressional Budget Office's scoring of the BCRA, an estimated 15 million fewer people will be enrolled in Medicaid.
Ultimately, those folks earning between 100% and 138% of the federal poverty level could struggle to afford insurance under Trumpcare in 2023 and beyond, even with federal income-based subsidies.
Finally, an under-the-radar change in Trumpcare that could have sweeping effects is the elimination of retroactive eligibility.
Retroactive eligibility, which is the process by which new Medicaid enrollees can get medical-cost coverage for a period of up to three months prior to their enrollment, has been a feature of the program since 1965! With Trumpcare, retroactive eligibility would be shortened to just the calendar month that a person enrolls, potentially leaving enrollees on the line for exceptionally high medical costs that were incurred in the months leading up to their enrollment.
At the same time, reducing retroactive eligibility to the same month could significantly diminish the desire of physicians to take on lower-income patients who are just beginning the Medicaid-enrollment process, or who haven't begun it yet. Retroactive eligibility is there in the first place to encourage physicians to treat low-income folks, but with this provision altered, it would create major obstacles for the poor when seeking medical care.
It's also tough to see how this would be a positive for insurers. Although Medicaid patients are typically low margin for insurers, federal funding provides a source of guaranteed payment, which insurers tend to appreciate. Losing an estimated 15 million from Medicaid by 2026 could be a tough pill for the industry to swallow.
It's difficult to see a path forward for Trumpcare given how many lives its Medicaid overhaul could adversely impact. This Fool fully expects significant changes in the bill are still to come.
Mark Cuban predicts this will make someone a trillion dollarsShark Tank's Mark Cuban recently predicted that an emerging tech trend would make someone $1 trillion. That lucky future trillionaire is just the beginning -- and the trend itself could be worth as much as $19.9 trillion.
Fortunately, this hasn’t yet gone mainstream -- most people haven’t recognized the scale of opportunity here.
We believe that one market expert has the right answer for investors looking to get in early -- and potentially win big.