Medicaid under a Trump Administration: What the Next Four Years Might Look Like

Dear readers: this post is going to be a bit different from our regular posts, in that we are going to try to refrain from getting too far in the weeds, and avoid too much legalese. Why? Because the results of the November election will likely have major implications not only for the Medicaid program itself, but for the millions of individuals it serves. We are fortunate to have a platform here and it is our hope that, at least this post, is able to reach out to a broader audience. An educated populous is a good populous. We are not taking a position on the election one way or another on this blog (full disclosure: one of our co-editors is a solid, lifelong Republican; the other, a Democrat). But we do think it is important, for everyone, to know what changes to America’s largest health insurance program are coming, and what this means not just for you, but for your family and friends.

Medicaid is important for all of us.

Not just for the elderly lady down the street; or the least unfortunate among us. Medicaid is the single largest source of insurance in the country, covering more than 71 million Americans. 71 million. That means that 1 in 5 Americans, today, receive health care services paid for by the Medicaid program.

And while Medicaid provides a substantial amount of services to the poor, Medicaid is also the major source of health care coverage for other key populations that we don’t traditionally lump in with those “less fortunate.” Medicaid is the main payer for long-term care services, including nursing home services, accounting for 62% of all long-term care spending in 2010. Most people don’t realize how expensive long-term care is, and, if we are lucky enough to live a long life, most of us will exhaust our savings paying for that care. When we are broke – Medicaid steps in.

Medicaid is also the major payer for children’s health insurance. Nationally, Medicaid covers nearly 1 in 2 births. In some states, like New Mexico, Medicaid pays for nearly 75% of all births.

Of course, with all of this coverage, comes a price tag. While Medicaid is surprisingly efficient at what it does, the numbers are still staggering. Total Medicaid spending in 2015 was $509 billion. That means, 1 in 6 dollars spent in the healthcare system is coming from Medicaid (with 1 in 2 dollars spent on long-term care coming from Medicaid.) In 2014, Medicaid constituted roughly 10% of total Federal spending.

Medicaid is complicated.

One of the reasons we don’t talk about Medicaid much, is that it is complicated. Unlike Medicare, which you can start to wrap your head around by thinking of a Canadian or European-style single payer system, Medicaid is really 50 different state programs funded, in part, by the Federal government.  This Federal funding (known as the federal medical assistance percentage, or FMAP) varies based on the per capita income of the state you live in, meaning that the Federal government is picking up a bigger share in Mississippi (75%) than it is in New York (50%).

While there are limits and rules for what States can and cannot do with their jointly-financed Medicaid dollars, states have significant flexibility to design their own programs — whom they cover, what benefits they provide, and how they deliver health care services. The federal government sets minimum standards, including specifying certain categories of people that all states must cover and certain health coverage they must provide.  Beyond that, states are free to set their own rules. And to make matters even more complicated, states are able to receive “waivers” from most of these requirements, if approved by the Federal government. Thus, moving across state lines means changes to both (1) eligibility (i.e. are you even eligible to receive Medicaid); and (2) benefits (i.e. the amount, duration, and scope of services you are able to receive.)

Medicaid is changing.

The original law that authorizes the Medicaid program and sets the major rules under which it operates dates back to 1965. Much has changed since 1965. Subsequent legislation has dramatically expanded the benefit, changed the rules regarding what types of services must be covered, changed how it is provided, and added new covered populations. Most recently, under the Affordable Care Act (or “Obamacare”), a population once ineligible (childless, low-income adults) may now be eligible for benefits. Remember that a 2012 Supreme Court decision made it so states may, but are not required, to expand Medicaid to this new population (although the Federal government picking up the extra costs for several years has been enticing, even for Republican-leaning states like Arkansas, Indiana and Ohio). Enhanced federal funds will continue to fund the expansion n gradually slower increments, with a phase down to 90% of the costs coming in 2020.  Since passage of the Affordable Care Act, Medicaid enrollment has increased by more than 10 million individuals.  Millions more would be eligible and enroll if the 19 states that have not adopted the Medicaid expansion yet, did so.

What a Trump Win Means for Medicaid

The Affordable Care Act, or Obamacare, envisioned a health care coverage continuum. Any individuals, including childless adults, earning less than 138% of the Federal Poverty Level (roughly $16,000 a year in 2016, for a single individual) would be eligible for Medicaid. For those earning between 100% of the Federal Poverty Level and 400% of the Federal Poverty Level ($47,520 for a single individual in 2016) would be eligible for cost-sharing reduction and/or premium tax credits in a State or Federally-facilitated Exchange. Individuals earning more than this amount, are presumably insured through their employer, or able to purchase insurance on the Exchange without subsidies or tax credits. Separate rules apply for lawfully present immigrants. The individual mandate (the requirement that everyone have insurance) tied this altogether.  What was to result was, some hoped, a patchwork resulting in universal coverage.

Republican control of the White House and both houses of Congress in 2017 means that this vision is likely to change. “Repeal and replace” of Obamacare has been a longstanding Republican (and Trump) commitment, and one that the electorate is likely to hold them to (even if symbolic) Right now, we don’t know exactly what the new vision is, but we do have some ideas. Briefly speaking (and we are talking about health insurance generally here), we are likely to see:

  • A budget process known as “reconciliation” used in the first 90 days of the Administration that will repeal some of the major aspects of the Affordable Care Act, including repeal of the requirement that everyone have health insurance, and a phase-out of the subsidies and credits in the health insurance exchange (see a Democrat take on this process);
  • Executive action by President-elect Trump directing the relevant agencies (most notably the Department of Health and Human Services and the Department of Labor) to wind down implementation of the Affordable Care Act;
  • Some legislative package, sometime within the first year, that replaces some key aspects of the Affordable Care Act with more state-led options and with a heavy focus on consumer-led health plans, like Health Savings Accounts.

But what about Medicaid? What about the millions of individuals that are currently eligible for Medicaid because of the Affordable Care Act?

In some ways, it is still way too early to tell. We don’t yet know who President-Elect Trump will appoint to head the Department of Health and Human Services, and we don’t know what sort of legislative package Republicans might put forward. But here are some things we do know.

5 Things We Know About Medicaid in 2017

  1. Medicaid is still important. In fact, there is a case to be made that Medicaid, in a Trump administration, could be even more important. Under the Affordable Care Act, millions of individuals otherwise unable to afford health insurance, are able to purchase private health insurance thanks to tax credits and subsidies. If Republicans follow through on their plans, these credits and subsidies could go away. For many, Medicaid will play an even more important role as a social safety net.
  2. Medicaid managed care will play a bigger role. Currently, more than half of all Medicaid beneficiaries receive their care through private managed care companies. This trend is expanding and is certain to only increase under a Trump administration. If Republicans are successful in their attempts to block grant Medicaid, or even to move to a per-capita payment system, Medicaid managed care plans are well aligned to succeed (as they already operate under a capitated model).
  3. The Expansion may not go away. Even under existing Republican proposals, the Medicaid expansion does not simply go away (although it does prevent new states from expanding.) Yet, in light of several politically key Republican states that are already participating in the expansion (i.e. Indiana – Pence, New Jersey – Christie, Ohio – Kasich) it may be that the expansion continues, albeit with some changes. One likely outcome is that the ability to expand will ultimately be phased out. In light of the potential move to block grants (discussed below), this is particularly meaningful, as Republican block grant proposals have assumed that states that have expanded Medicaid will continue to receive this extra funding. This may entice additional states to expand in the near future.
  4. Watch for waivers. Without getting too much into the weeds (have we already done that?), Medicaid has several processes (known as waivers) that permit states to waive certain Federal standards in order to innovate their Medicaid programs. These waivers are approved by the Department of Health and Human Services, which will soon have a Trump-appointed head.  A Trump-administration is likely to be willing to approve certain waiver proposals previously rejected, including increased cost-sharing or work requirements. However, waiver authority only goes so far, so look for subsequent lawsuits, as well.
  5. States will play a bigger role. One Republican-led proposal for Medicaid is to block grant the program, which would result in a single lump annual sum from the Feds to the States each year, with the states responsible for administering the entire program. A less dramatic alternative, would be to set a per capita amount from the Feds per enrollee, so that states receive a set amount per individual enrolled in their state program. Again, the states would be responsible for managing these costs.

What to Watch For

In the coming weeks, watch for who President-elect Trump taps as the new Secretary of Health and Human Services, a key indicator of what direction the agency is likely to take. Also look at states and see what they are contemplating with their Medicaid programs. Watch for various reform packages in Congress. And keep reading


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