How Medicaid Reforms Made Obamacare Repeal Harder

Conservatives have long sought changes to the entitlement program, but bundling those with the repeal measure may have hurt the larger effort.

Sen. Lisa Murkowski
AP Photo/J. Scott Applewhite
July 24, 2017, 8 p.m.

For all the focus on Republicans’ stumbling efforts to repeal and replace Obamacare, the bills that the House passed and the Senate is mulling do more than that: They would also drastically reform Medicaid.

That decision by the GOP—to couple major changes to a popular entitlement program with a repeal of the Affordable Care Act—was either a necessary step or one that could blow up the whole effort, depending on which side of the debate you ask.

Sen. Lisa Murkowski, whose vote Republican leaders have been struggling to win, said that trying to do both issues together was a mistake.

“I have said all along that I felt that the Medicaid reforms should have been separate from the effort that we were undertaking with the ACA fixes,” Murkowski said. “Medicaid reform—pretty significant reforms here—they need to be done in a thoughtful and considered way.”

The Senate repeal-and-replace legislation, along with phasing out funding for the Medicaid-expansion population, would also place caps on spending and eventually slow down the growth rate of those caps for the program. Those latter changes are unrelated to Obamacare, but reflect a long-term desire among many key Republicans and conservative intellectuals to rein in Medicaid.

“So Medicaid—sending it back to the states, capping its growth rate—we’ve been dreaming of this … since you and I were drinking at a keg,” House Speaker Paul Ryan said to National Review editor Rich Lowry at a March event.

And Senate Majority Leader Mitch McConnell has called changing Medicaid’s spending caps and growth rate “the most important long-term reform in the bill” and noted, “That is why it has been in each draft we have released.”

But as President George W. Bush learned in 2005 when he tried to add private accounts to Social Security, reforming entitlement programs can be difficult under any circumstances. Medicaid is also broadly popular; a June Kaiser Health Tracking Poll found that 74 percent of the public had a favorable view of the program.

Experts say rolling back the Medicaid expansion was necessary to balance out the tax cuts Republicans wanted to include in their bill. But Rodney Whitlock, a former Republican staffer on the Senate Finance Committee, said that by going further and adding per-capita caps to the legislation, GOP bill authors fueled disagreements that could have been avoided.

“They started at ‘we are’ when they should have done more ‘are we?’” Whitlock said.

Unlike House members, who may not be tied to a district with many Medicaid recipients, senators have to answer to entire states. Handling the implications of the Medicaid changes can put lawmakers in a tough spot between sticking to a campaign promise but not wanting to throw so many people off the rolls.

“If you go back three years, they didn’t realize the [Congressional Budget Office] would describe millions losing coverage and the impact that would have,” said Robert Blendon, professor of health policy and political analysis at Harvard University.

The CBO estimated that under the most recent iteration of the repeal-and-replace legislation, 15 million fewer people will be receiving Medicaid coverage by 2026.

But Blendon added that it will be harder for lawmakers to roll back Medicaid coverage over time. “Whatever they can’t get today, they will not get four years from now,” he said.

The senators now have to come to an agreement on base amounts and how they’re indexed, said Edmund Haislmaier, an expert in health care policy at the Heritage Foundation. But he thinks that the per-capita caps can lead states to be more effective in spending their money.

“My personal view is that if they keep the per-capita caps, I think that’s a fundamental structural reform with different incentives, and I’m less worried about the near-term extra spending to get the votes they need,” Haislmaier said.

One GOP congressman said the caps would move the program in the right direction but are not the full remedy.

“Medicaid reform is not just telling the states, ‘Here’s your check; that’s all you get.’ It needs to be, ‘Here’s your check; now create a system whereby you identify who are the people in greatest need and go out and help them,’” said Rep. Tim Murphy, who sits on the House Energy and Commerce Committee.

Murphy added that he would like to see lawmakers start teeing up other pieces of health reform so that “the American public understands just what we’re talking about.” When asked what he thought of the reduced growth rate that would start in 2025 under the Senate bill, he said: “Whatever we do, we have to do policy changes in how we deliver health care, or otherwise we’re just asking for trouble.”

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