Trumpcare Would Cripple Medicaid

by Benjamin Studebaker

A couple weeks ago, we talked about how the American Health Care Act (Trumpcare) would undermine the Affordable Care Act (Obamacare) by weakening the individual mandate and distributing flat subsidies indexed to age rather than income. The CBO confirmed the level of damage this would do, estimating that 24 million additional Americans would lose coverage by 2026, increasing the uninsured population from 28 million to 52 million. But these projected losses are not wholly attributed to the changes to the mandate and the subsidies–they are also attributed to a provision of Trumpcare which block grants Medicaid. So today I want to talk about how Trumpcare changes the way Medicaid works.

Medicaid currently covers 72.5 million Americans. There are a variety of groups that states must cover under federal law, but individual states may expand Medicaid coverage beyond this. Obamacare offered federal funding to states to enable them to expand Medicaid coverage to all adults with an income up to 133% of the federal poverty level (or 138%, depending on how it’s calculated). For 2016, this worked out to about $21,000 for a couple or $32,000 for a family of four.  However, many US states declined to accept federal money to provide coverage to these additional low income groups. As of this year, 19 states still have refused to expand coverage:

By expanding Medicaid, Obamacare aimed to prevent more low income people from having to buy health insurance on the exchanges, where they would require extraordinarily heavy subsidies. The law assumed that states would expand Medicaid, and made no provision to provide further subsidies to those below the 133% threshold. Because many states refused expansion, these people are now caught in a no man’s land between Medicaid and the exchanges–unable to get Medicaid and unable to afford insurance even with the subsidies currently available.

This gap amounts to at least 2.6 million people (some estimates put it at 5 million or more), most of whom live in the south:

One way to improve Obamacare might be to explicitly add these people to the traditional mandatory Medicaid coverage groups. This might get around the Supreme Court decision which permitted states to defect without losing their federal funding.

But Trumpcare doesn’t do this–instead, the Republican bill proposes to block grant Medicaid to the states. This means that instead of treating Medicaid as something to which people who meet the eligibility criteria are entitled, with the federal government covering a fixed percentage of the cost, Medicaid would exist as a fixed amount of money handed by the federal government to the states for the states to spend on healthcare as they see fit with few restrictions.

Because the grants would be fixed and likely indexed to little more than ordinary inflation, they would not account for changes in medical costs which outpace the inflation rate. Indeed, they might not even account for changes in population size. In the last several years, Medicaid spending has increased at rates ranging from 4.5% to 10.5%, all significantly higher than the inflation rate, which has ranged from 0.73% to 2.07%. This means that Medicaid spending would gradually fall increasingly short over time, leaving states to decide which poor people to kick out.

The result, according to the CBO, is likely to be a cut in Medicaid spending of about 25% (about $880 billion) over the next decade with a reduction of Medicaid enrollment by 17% over the same period, revoking healthcare for 14 million poor people. This is a significant Medicaid cut.

President Trump explicitly promised not to do this to Medicaid:

There is video footage:

Lots of video footage:

He is not ignorant of what his law does–he knows it cuts coverage for low income people:

And he knows that this isn’t the only issue where he’s gone astray. As he says in that video:

A lot of things are inconsistent. But these things have to be negotiated.

If the president wants a bill which provides coverage to everyone, why would he begin negotiating with a bill that makes large cuts? That would be very foolish–you never give things away right at the beginning of a negotiation. Either Trump is very foolish or he thinks we are. You don’t win concessions from conservatives on entitlement reform by cheer-leading their bill on Twitter:

You certainly don’t win concessions by telling Republicans (some of whom might be your allies in opposing these cuts) that they might lose their seats if they don’t support the bill as written, as Trump has done:

Trump should be threatening to veto this bill in public–it demands he violate a core campaign promise. Instead he’s chosen to abandon his supporters and tether himself to establishment Republican orthodoxy. It’s up to to the rest of us to stick up for those President Trump has left behind…