Would U.S. Senate Bill Devastate Virginia’s Medicaid Program?

In a preliminary analysis, the McAuliffe administration estimates that the U.S. Senate’s proposed Obamacare replacement bill would cost Virginia’s Medicaid program at least $1.4 billion over seven years. “The legislation currently up for a vote in the United States Senate would blow a hole in Virginia’s budget and severely impair our ability to offer health coverage and long-term care to the people who need them most,” said Governor Terry McAuliffe in a statement released yesterday.

The per capita caps in the Better Care Reconciliation Act of 2017 affect almost every population covered by Medicaid, and would cost Virginia’s program almost double the $708 million that the House-proposed American Health Care Act (AHCA) was estimated to cost over the same time frame, stated the governor’s office.

The difference between the impact of the House and Senate proposals on per capita caps lies in the “annual growth factor” – the estimation of how much costs will increase in the future over a baseline estimate of Medicaid spending. The Senate bill uses a growth factor that estimates lower growth than the House bill – and both houses use a growth factor that is arbitrary. DMAS estimates costs will outpace the growth factor of both bills; that change becomes more pronounced in later years. Provisions in the BCRA that provide safety net funds to providers and eliminate Disproportionate Share Hospital allotment reductions would not directly make up for the losses Virginia would experience from per capita caps.

According to Michael Martz with the Richmond Times-Dispatch, the estimated loss in federal support in Virginia would jump from $117.2 million in fiscal year 2024 to $327.9 million the next year, and then to $493.5 million the year after that.

Bacon’s bottom line: If this is a fair summary of the impact of the Republicans’ proposed health care reform legislation, then it’s a big deal. It would blow a nearly $500 million hole in the state budget for a Medicaid program that is already one of the most austere in the country.

But let’s look a little closer. The McAuliffe administration says that the Senate and House GOP “annual growth factors” are arbitrary. And perhaps they are. But I would like to know what the McAuliffe administration’s cost escalator is, and what assumptions it is based on. How do we know that it is any less arbitrary? As I understand the Republicans’ logic, the Senate bill would generate savings by giving the states more latitude in how they administer Medicaid. Is it inconceivable that Virginia could run the program more cost effectively than it’s being run at present?

I’m not saying that the McAuliffe estimate is wrong, but I do think we need to subject it to some scrutiny before we accept it as valid.

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10 responses to “Would U.S. Senate Bill Devastate Virginia’s Medicaid Program?

  1. I don’t think McAuliffe’s “numbers” are really much different than other states…

    But the policy question is this: Should the states themselves be responsible for their own poor, handicapped and needy and not rely on Federal money so it ends up their responsibility and their choice as to what they want to pay for or not? I suspect that’s the basic GOP idea.

    The GOP has – from the beginning with Medicare been opposed to the Federal government doing health care… and there is a little irony here when it comes to the concept of “state’s rights” which they defend strongly in a lot of other areas.

    The niggling detail is how much of what Virginian’s pay in taxes that essentially finds it’s way back to Virginia a Medicaid money and do we get any of that back or do the Feds keep it and spend it on .. defense and let the states come up with whatever they want and can – to pay for their own healthcare needs?

    And then … if this bill/law “sticks” will the GOP then try to convert Medicare into a State owned and funded program also?

    so is the GOP right? is healthcare fundamentally a state responsibility and the Feds should get out of it?

  2. Larry – the devil is in the details. There is no reason to trust one set of assumptions any more than the other. They need to be tested.

    But I don’t see the logic behind your argument that not providing federal money for Medicaid is inconsistent with states rights. On the other hand, the question you raise about whether health care is primarily a state responsibility and the feds should not be involved is a good question that should be debated by reasonable people. If the feds did step out, there must be a major cutback on the amount of federal income taxes so the money that has been funding federal health care cannot be raised by the federal government. States would then be free to raise their income taxes to a level necessary to fund their health care programs. Tax and spend a lot or a little.

    I’m not sure where I come out on this issue. I’d like to hear more arguments pro and con. If the feds stay involved Medicaid would be a better program if the federal money were provided in block grants.

  3. re: ” But I don’t see the logic behind your argument that not providing federal money for Medicaid is inconsistent with states rights.”

    The argument is that the Feds put “strings” on how the money can or not be spent and that – the states need “flexibility” .. the “right” to decide how to spend the money and not have the Feds dictate it.

    I still do not suspect that McAuliffe’s “numbers” are way out of whack… compared to the CBO score or other states.. that data is generated by several sources… and fairly consistent… and you can bet it’s a LOT of money… in the larger picture as opposed to it being a small amount of money.

    “block grants” are how the GOP plans to get out of funding.. they first put a limit on the funding – “block grant” . then as the years go by – they reduce the block grant…

    • “The argument is that the Feds put ‘strings’ on how the money can or not be spent and that – the states need ‘flexibility’ .. the ‘right’ to decide how to spend the money and not have the Feds dictate it.” That’s exactly what block grants do – provide the money with few restrictions as to how it’s spent. State officials, both the governor and legislators decide how to spend the money. Some may cover more people, but for fewer services. Others may cover fewer people, but for more services. And some states might find ways to grind out costs in order to get more for less. .

      Block grants are fully consistent with states rights and federalism. I have no reason to believe McAuliffe’s numbers are any better or worse than those of Congress.

      One of Obama’s biggest failures with health care reform is the failure to drive out costs to make health care more affordable. One could argue he didn’t reform health care, but rather, major parts of health insurance and health care financing. We still need to drive out costs from the system. We need better results for less at least in real terms.

      I also really like the Senate’s provision that prohibits a person who allows his/her insurance coverage to lapse for more than 60 days from getting new insurance on an exchange for six months. That will provide an incentive for younger and healthier people to buy and keep insurance. And if Congress were to cancel the excessive coverage required by Obamacare, even more younger and healthier people will buy insurance. And once one is covered, it’s likely one will stay insured.

  4. re: ” One of Obama’s biggest failures with health care reform is the failure to drive out costs to make health care more affordable. One could argue he didn’t reform health care, ”

    as if Obama is the only one that could propose something including now?

    If Obama “failed” then what has the GOP done – before him and after?

    As one POTUS said “health care is hard”.. don’t blame others if you have no plan either.

    The young and healthy are not going to buy insurance as long as ERs are there… or they’ll buy super-cheap insurance that does not cover and once their coverage runs out – the hospital will once gain pick up the unpaid costs and shift them to others. This has not been fixed… at all.. No matter how you cut it – GOOD insurance costs money and if you do not require it then people WILL do it on the cheap.

    This is going to affect Employer-provided insurance also. Instead of everyone paying the same premium – the younger and healthier will get to pay less – and the older more…instead of like it is right now where every subscriber pays the same premium and the young and healthy essentially subsidize the sick and older…

    Now if you think the GOP plan “fixes” the health insurance problem that Obama failed to fix – you have my admiration for being a really optimistic goober and I do expect you to say that – yes.. the GOP plan achieved what Obama failed at…

    • Larry – here’s addressing your arguments. It wasn’t Obama’s fault. Because of Obama’s veto power, the GOP was unable to pass and see enacted any significant changes to the Democrats’ health insurance law. Now we see bills being proposed and discussed. I think that’s good.

      As far as younger and healthier people being able to avoid buying insurance or substantial insurance because they can go to the ER, you’ve been the one opposing my proposal to phase-out EMTALA. To the extent that law no longer provided a safety valve, more younger and healthier people would have a financial incentive to buy more substantial coverage. Also the Senate’s plan would bar any person from buying insurance on an exchange for six months if they have not had insurance in 63 days. That’s a good incentive for people to be insured.

      Yet at the same time, the states should be able to set standards for any minimum coverage and the feds should allow interstate sales of insurance. Again, checks and balances. If a state is too stingy on minimum coverage a person can buy from a company in a state that has more attractive coverage. And people in California who don’t want to pay for illegal immigrants can buy from a state that doesn’t provide that feature and costs less.

      You will likely raise the point about what law applies to interstate sales of insurance. Simple-contracts regularly include a choice of law clause that specifies which state’s law governs the contract.

      Who knows what employers will do? There is nothing that prevents them from charging the same rates irrespective of age. Today most plans charge a single rate, a two-person rate and a family rate. Some have a three-person rate. Employers will craft their plans to be attractive to employees. It’s part of their compensation and most companies want to attract and retain good quality employees.

      And, to the extent Trump’s enforcement of immigration laws weakens the ability of businesses to pay below-market wages to Americans and those with green cards, wages will go up for the lower-skilled workers, who, in turn, can afford better insurance coverage.

      If you like your insurance company, you can keep it. If you like your doctor, you can keep her. The average family will save $2400 a year in premiums. Yah, right.

  5. Jim:

    I am confused. Little Timmy Kaine keeps talking about drastic cuts in Medicaid. Yet your blog post seems to indicate it’s more of a difference in how much more money Medicaid will cost … a lot more or a whole lot more. Is this true?

    So, if my employer grants me a 3% raise when I was hoping to get a 5% raise can I honestly say that my salary was cut?

    Is our Little Timmy fibbing again? I told you we shouldn’t have let him hang around with that Hillary kid.

    http://bit.ly/2tTDH31

    • I guess it all depends on how you define a “cut,” doesn’t it?

      Little Timmy Kaine apparently defines a cut as a reduction in forecast increases. Well, that is a cut of a sort. But to emphasize that definition of a “cut” without acknowledging that total Medicaid spending still would continue to increase clearly is an example of political spin.

      • You have your opinion and I have mine. Claiming that I took a pay cut when I actually got a raise is simple deception in my book, not just spin. Little Timmy Kaine also boldly lied about one of Neil Gorsuch’s opinions during the Supreme Court nomination process. In this case, there could be little found to defend Little Timmy on the basis of “word wobble”. Kaine posted a Tweet where he claimed that Neil Gorsuch wrote an opinion which called contraceptive use as “wrongdoing”. Gorsuch did no such thing. He was clearly summarizing the thoughts of the Green family in the Hobby Lobby case. The Green family does consider the use of contraceptives to be “wrongdoing”. Judge Gorsuch’s opinion the matter of contraception is unknown – at least from his opinion in the Hobby Lobby case.

        Now, Little Timmy Kaine could have just apologized for the Tweet and blamed the misrepresentation on the 140 character limit. A few years ago, that’s what he would have done. But Little Timmy studied under one of the world’s great dissemblers in the last election. So, he wrote a 1,000 word explanation of his Tweet where he did everything except explain why he lied about Neil Gorsuch.

        I guess more than a little of Darth Clinton rubbed off on our Little Timmy.

        http://www.weeklystandard.com/tim-kaine-is-flat-out-lying-about-neil-gorsuch/article/2007513

  6. I don’t think you develop much real knowledge by consulting the weekly standard on substantiative issues. It’s mostly for those who want to get ginned up on some right leaning political rant…

    So when is a “cut” really a “cut” and not just capping an increase?

    it works that way for a lot of things that are related to increases in population or use of services.

    MediCARE is a good example.. more baby boomers retiring will drive up costs.. and if you cap the costs – then it means reduced benefits for the beneficiaries.

    Ditto with MedicAid… increased numbers of baby boomers going into nursing homes that cannot afford it themselves – which is way more people than many think -even folks who own their own homes… can’t afford the 24/7 care… or even partial day care..

    Next you have folks who are the working poor – they do work 40 hours a week but cannot afford health insurance even under Obamacare or the GOP proposal.. so how do you deal with this increasing population as manufacturing and mining go away ? Just build more subsidized ERs or just not provide health care .. i.e. it’s too “costly”?

    Finally – you have a serious opioid problem that the Obama Medicaid expansion was just starting to deal with – and that pool of people that need those services is “increasing” and if you cap it.. it means reduced services.

    This is not propaganda… just simple facts … and in the end – people – voters – have to decide how they want to deal with it… and yes.. there are on the right – a substantial number who say ” it’s not my problem and I should have to pay for it”.

    So the reality is not what Daily Caller and “Little Timmy” have to say – it’s really up to you….. in the end.. the politics will reflect what you and I and others believe and will or will not do…

    Why donj’t we deal with that in the dialogue here instead of just blathering about it?

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