The Senate Health Care Bill is Just as Bad as the House Version

The Senate Health Care bill, released on Thursday, jeopardizes Montanans’ health and well-being by deeply cutting Medicaid, raising premiums for many Montanans, and causing tens of thousands of hard-working Montanans to lose their insurance. The Senate took the deeply flawed House-passed American Health Care Act (AHCA) and “tweaked it.” In some ways, the Senate bill is even worse than the House AHCA.

While details are still emerging about the Senate bill, let’s take a look at the most important provisions, and how they affect everyday Montanans:

First, the Senate bill would end Montana’s bipartisan Medicaid Expansion program, causing nearly 80,000 people to lose access to care.

Montana’s bipartisan Medicaid expansion program is the first of its kind in the country by utilizing a third-party administrator to provide health care coverage to nearly 80,000 Montanans. The Senate bill will effectively end Montana’s Medicaid expansion program in 2021, by ratcheting down federal matching funds well below what ACA provided. Most of those newly enrolled are working at low wages and will be left with little or no options for affordable health insurance.

Second, the Senate Bill drastically cuts and caps the traditional Medicaid program.

Over 216,000 Montanans rely on Medicaid for health care including people with disabilities, seniors, and families with children. Eight in ten Montanans on Medicaid live in working households. Many of these hard-working Montanans, however, work at jobs that do not provide insurance. Despite the outcry over the House’s deep cuts to Medicaid (over $800 billion by 2026), the Senate bill’s cuts are even harsher over the long run than the House bill. Under the House version, Montana is expected to lose $4.8 billion in federal Medicaid funding – 35 percent of its current law funding – between 2020 and 2026. We have yet to see a full analysis of the Senate proposal by Congressional Budget Office, but the bill appears to cut an even greater amount of federal Medicaid funds over time.

Third, the Senate bill would raise premiums and deductibles for thousands of Montanans who buy insurance on the marketplace.

The Senate bill pulls the rug out from under Montanans who rely on the marketplace for reasonable health care coverage. Because Montana is a rural state, health care costs are higher here than in other parts of the country. While the Senate version does take into account income and regional costs of insurance (similar to what ACA does), the level of tax credits and assistance is below that in the ACA for many middle-income Montanans. Insurance costs, especially for older Montanans, would rise sharply under the Senate bill. Montanans would also likely face higher deductibles and out-of-pocket costs under the Senate bill. Approximately 117,000 Montanans rely on the Marketplace for affordable coverage, and many are in danger of seeing their insurance costs rise to unaffordable levels.

Fourth, the Senate bill allows states to strip away important consumer protections for people with pre-existing conditions and others most in need of care.

While the Senate version does not include the House proposal to allow states to waive protections for preexisting conditions, there are a number of other provisions that could have a devastating impact on the over 420,000 Montanans that live with a pre-existing condition. The Senate bill would allow states to waive certain protections, such as the ACA’s requirement that insurance plans limit people’s total out-of-pocket costs, which will disproportionately hurt those with pre-existing conditions. The Senate bill also allows states to waive certain health benefits, including access to, to maternity care, mental health care, or substance abuse treatment. With the opioid crisis spreading across Montana, a bill that reduces access to health care will only make the problem worse.

Conclusion

Because we are still waiting on a CBO score, it’s unclear exactly how many Montanans will lose insurance coverage under the Senate Bill. But make no mistake – this bill, like the one in the House, reduces coverage, increases health costs for many, strips consumer protections, and endangers Medicaid as well as the state’s own finances.

Montana’s senators should not support this bill due to the devastation it would cause for tens of thousands of Montanans. Anything less would break their promise to the people of this state.

House vs Senate Bill Checklist - Final[2]

Wonky Word: Substance Use Disorders (SUDs)

The debate continues around the House-passed American Health Care Act (AHCA) and now the Senate’s effort to craft a similar bill that will effectively end Medicaid expansion, dramatically cut Medicaid funding, and result in loss of coverage for millions of Americans. In our effort to continue to provide information on AHCA, we provided details earlier this week on what Essential Health Benefits (EHBs) are. One of these ten EHBs is mental health and substance use disorder (SUD) services, which includes behavioral health treatment. Substance use disorder, also known as drug use disorder, is a condition in which the use of one or more psychoactive substances leads to a clinically significant impairment or distress.

Substance use disorders are a nationwide problem, and Montana is all too familiar with alcohol and drug abuse. Montana residents have a higher rate of alcohol dependence or abuse than the national average, as well as a higher rate of untreated illicit drug dependence or abuse.

At the end of May, the Montana Department of Justice announced a new effort through the office’s Aid Montana initiative to gather input from Montanans regarding how best to address substance abuse. Over the summer, the Montana Department of Justice will partner with the Montana Healthcare Foundation to hold six listening sessions across the state to hear real life experiences of individuals affected by substance abuse.

These listening sessions should provide great feedback; however, there is one thing we already know: the Affordable Care Act and Medicaid Expansion funding provide the foundation to effectively addressing substance use disorders. The ACA and the state’s Medicaid expansion provide critical resources and services to those Montana residents battling addiction personally and the family members impacted by drug and alcohol abuse.

While we do not know what will be included in the Senate’s version, press reports indicate the Senate is sticking fairly close the House-passed bill, which would land a devastating blow to mental health and opioid addiction treatment due to the following components of the bill:

  • Dramatic cuts to Medicaid will cut billions in federal funds provided for substance use disorder treatment. Since 2015, Medicaid has become our state’s primary payer for SUD treatment services and Montana’s most potent
tool in combatting alcoholism, methamphetamine use, opioid abuse and overdose, and the myriad social consequences of addiction. In fact, since the passage of Medicaid expansion, Montana has seen a XX% increase in federal dollars going toward SUD treatment. A radical restructure of Medicaid, by converting it to a per capita cap will result in the loss of nearly $5 billion in federal Medicaid funds.  To compensate, Montana would have little choice but to cut eligibility, cut payments to hospitals and doctors, and/or cut benefits — including behavioral health services.
  • A return to pre-ACA coverage could result in the elimination of mental health and substance use treatment in private insurance plans. The AHCA allows states to waive certain essential health benefits, and this includes mental health and substance use treatment. Prior to ACA, almost no state required insurance companies to cover these services, and it is likely states will again start waiving these benefits.

As in most states, substance use disorder is a serious and growing public health problem in Montana. We can face this problem head on by maintaining the crucial federal Medicaid funds to pay for substance use disorder treatment. We can’t afford to lose this lifeline to recovery in Montana.

Wonky Word: Essential Health Benefits 

During recent weeks, you have probably heard the term Essential Health Benefits repeatedly as Congress continue efforts to repeal and replace the Affordable Care Act (ACA). Right now, the Senate GOP leadership is cooking up their version of a health care bill behind closed doors and could take a vote before the July 4th recess.

The House-passed GOP plan eliminates Medicaid expansion and dramatically cuts Medicaid funding. Congress is also considering measures to allow states to waive the essential health benefit rules within the ACA. What are “Essential Health Benefits” and why have they become so central in the debate around health insurance coverage in America?

Essential Health Benefits (EHBs), also called federal minimum benefit standards, are at heart of the ACA. EHBs outline a set of ten categories of services that health insurance plans must cover at minimum. States must also provide EHB to beneficiaries eligible under the ACA’s Medicaid expansion, and plans may offer additional benefits such as dental and vision coverage.

Prior to the ACA, it was up to each respective state to determine what benefits (called insurance mandates) had to be included in insurance plans. Not surprisingly, states differed widely in terms comprehensiveness required, and no specific benefit was deemed essential in all 50 states and Washington, D.C.

EHBs provide coverage that offers viable protection against some of the most basic health care costs Americans experience and were designed to provide marketplace consumers with insurance coverage similar to the coverage of employer-sponsored insurance and Medicaid.

So, every health plan must cover the following services1: 

  • Ambulatory patient services (outpatient care you get without being admitted to a hospital)
  • Emergency services
  • Hospitalization (like surgery and overnight stays)
  • Pregnancy, maternity, and newborn care (both before and after birth)
  • Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
  • Prescription drugs
  • Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits)
  • And these two additional benefits:
    • Birth control coverage (contraceptive methods and counseling for all women)
    • Breastfeeding coverage (breastfeeding equipment and counseling for pregnant and nursing women)

Before the ACA, most health insurance frequently did not cover these basic services. For example, in 2011, among people in the individual market:

  • 62 percent had plans that didn’t cover maternity care;
  • 34 percent had plans that didn’t cover substance use treatment;
  • 18 percent had plans that didn’t cover mental health; and
  • 9 percent had plans that didn’t cover prescription drugs.

Under the GOP’s replacement plan, comprehensive insurance, with benefits like maternity or mental-health coverage, could become unaffordable—if not unavailable.

If the Essential Health Benefit standards were eliminated, individual and small-group market plans would quickly revert to the pre-ACA status quo and would likely:

  • Leave people who have pre-existing conditions without the coverage they need. People with pre-existing conditions — who need services like substance abuse treatment,mental health services, or comprehensive prescription drug coverage — often wouldn’t be able to find the coverage they need at any price, much less an affordable one.
  • Charge women more than men for coverage. In practice, eliminating Essential Health Benefit requirements means that women would once again be charged more than men, since they’d have to pay more for plans with maternity coverage — if they could even find a plan.
  • Burden even insured people with unaffordable bills and medical bankruptcies. Before the ACA, millions of people had health insurance that wouldn’t actually cover them if they got sick. Plans often had annual and lifetime limits on coverage and no limits on individuals’ out-of-pocket costs, and they omitted key services.The ACA fixed this by prohibiting annual and lifetime limits and setting an annual limit on what enrollees can be required to pay out-of-pocket for deductibles and other cost-sharing. Eliminating the Essential Health Benefit standards would make these rules meaningless.

Myth Busting: What is really at stake with Medicaid and AHCA

Last week there were two articles quoting Senator Daines on health care and the continued effort in the Senate to repeal and replace the Affordable Care Act: Senator Daines Urged To Protect Medicaid and Daines and Tester weigh in on status of ‘Obamacare’ repeal in U.S. Senate. Some of the statements made about Medicaid were inaccurate, and we want to provide additional context on how Medicaid works and its importance to accessing health services in Montana.

MYTH #1: The original Medicaid program focused on those in deep poverty and seniors below the age of 65.

FACT: In fact, before passage of ACA, Medicaid left out many low-income individuals, including most seniors living in poverty. Montana’s bipartisan Medicaid expansion provides health coverage to those exact populations.

Before the Affordable Care Act and Montana passed Medicaid expansion, Medicaid did not cover the very poor unless they were disabled or had children under the age of 18-years-old. This left tens of thousands of Montanans below the poverty line uninsured. Additionally, Medicaid did not take care of older adults who were under 65 unless they qualified due to a disability, meaning that low-income seniors between 50-64 often did not qualify for Medicaid.

Montana’s bipartisan Medicaid Expansion plan has provided access to health care coverage to nearly 80,000 low-income Montanans, including seniors, adults, and others.

 

MYTH #2: Congress should give states more flexibility to administer their Medicaid programs.

FACT: States already have significant flexibility in how they run their Medicaid program, and cuts to federal Medicaid funding will only make it harder for states to provide access to coverage and benefits.

In exchange for the federal funds, states must meet federal standards that reflect the program’s role covering a low-income population with limited resources and often complex health needs. The federal standards largely focus on requiring states to cover certain groups, such as poor children and pregnant women, as well as certain core benefits.

However, states can choose to cover additional groups, offer enhanced benefits, and already have wide latitude over many aspects of the program, particularly how they pay providers and structure their delivery systems. States can use Section 1115 waiver authority to vary from the federal standards and state options to address different priorities and emerging issues.

The programs across states vary widely in terms of who is eligible, what benefits are covered, what premiums and cost sharing are charged, and how providers are paid and care is delivered.

 

MYTH #3: Medicaid expansion can be protected if the phase out of the higher federal match occurs over several years.

FACT: Any phase-out of the higher federal match for Medicaid expansion will end Medicaid expansion in Montana.

The House-passed AHCA eliminates the higher match of federal funds for those who would be newly enrolled after 2019. The Senate is considering a longer phase-out, but to be clear: this has the same effect. CBO estimates that more than two-thirds of those enrolled in the Medicaid expansion would fall off the program within two years and that fewer than 5 percent would remain on Medicaid after six years. For those who see their income drop after phase out, the state would not receive the higher match and would most likely no longer be able to afford to continue to provide Medicaid to this population.

 

MYTH #4: Medicaid creates a disincentive to individuals to seek employment or employment opportunities with higher wages.

FACT: Among adults with Medicaid coverage—those most likely to be in the workforce—nearly 8 in 10 live in working families, and a majority are working themselves.

Nearly half of working Medicaid enrollees are employed by small businesses, and many work in low-wage industries that do not offer employer-paid insurance. Since the majority of Medicaid expansion enrollees are low-wage workers, Medicaid expansion prevents them from falling into the coverage gap; it helps them cope with high turnover in the low-wage labor market.

Medicaid expansion and the tax credits and subsidies under ACA provide a smoother transition to private Marketplace coverage. This has been particularly important for Montanans living in rural communities, accessing Medicaid and insurance on the marketplace at a greater rate. When their earnings rise or they get a new job, they can transition to employer coverage or the ACA marketplaces. Under ACA, the tax credits and subsidies provide significant support to lower costs for marketplace coverage. And families have the security of knowing that Medicaid will be there for them again if they lose their job, see their hours cut, or face financial crisis. Additionally, when they no longer qualify for Medicaid but live at 139% of the poverty rate, individuals can currently qualify for a tax subsidy to help pay the health insurance premium.

By eliminating Medicaid expansion and cutting tax credits for low-income families, the AHCA (and likely any iteration from the Senate) will create a situation where many families may have to choose between employment and keeping health insurance. For example, a family who earns $20,000 in Montana will see their premium paid after tax credit rise by 295% for a total of $3,690. That is the equivalent of 15% of that family’s income.

Mother’s Day: What Moms need is health care

We hope moms and moms-to-be around the state had a wonderful Mother’s Day.

Because we love our moms and we are a female-led organization, our team spent time looking into how the House GOP bill to repeal and replace the Affordable Care Act (ACA) might affect women, and moms specifically.

The ACA changed the landscape for women’s health insurance coverage. As we await the Senate’s version of a bill, it is crucial to understand the particular damage that ACA repeal poses for women’s health and economic security.

We know that much attention has been given to the provision of the AHCA that allows states to waive the “essential health benefits” coverage for individual market plans. Which basically means that pregnancy, c-sections, or injuries from domestic violence are included as pre-existing conditions and subject moms and women to significantly higher premiums.

However the issue of fundamentally changing Medicaid is equally as detrimental to moms in our state and country. As it stands, the House health bill would have devastating consequences for the nearly 40 million women across the country who rely on Medicaid. In Montana, 129,200 women are enrolled in Medicaid and 35% of births are financed by Medicaid.

The House-passed bill would slash Medicaid by more than $800 billion over ten years by effectively eliminating Medicaid expansion to low-income adults and imposing a “per capita cap” on the program.

Women would bear a disproportionate impact of these cuts because they are not only the majority of Medicaid beneficiaries, but are also the primary utilizers of family planning and maternity care, benefits that could be eliminated with devastating federal cuts to Medicaid.

In addition, Medicaid expansion gave many women not raising children access to coverage and offered continuous coverage to new mothers who had qualified while pregnant but would not have qualified after their pregnancy. Ending the expansion would take these benefits away.

There are a few other benefits the ACA gave women that could be lost with repeal. One is breastfeeding. The ACA covers lactation support and counseling, equipment and supplies, such as pumps, and infrastructure, such as pump rooms and break time. The other is access to birth control which provides health benefits for women and children, improves women’s ability to control whether and when they have a child, and fosters women’s ability to participate in education and the workforce on an equal footing with men. The ACA was a total game-changer when it comes to access to birth control for women because it removed the cost barriers. Women no longer have to pay out-of-pocket costs or choose between paying for birth control and paying for other necessities, like groceries and utilities.

The ACA and Medicaid have been hugely beneficial for women’s health. With the potential repeal hanging above us, women – and mom’s – have a lot to lose. While the future is uncertain, we want to make sure that women and moms continue to have access to affordable health care. We encourage all moms, women, and the men in their lives to contact our Montana Senators and tell them to reject any health bill that causes people to lose coverage, caps or cuts Medicaid, ends the Medicaid expansion, or takes away critical protections.

The New House Health Care Plan Makes a Bad Bill Even Worse

While Montana still is without a congressional representative, the House is poised to vote on a bill tomorrow, which could result in 259,000 Montanans either losing their coverage or facing increased out-of-pocket costs for health insurance.

Press reports have indicated House leadership continues to try to cobble together votes to repeal ACA, and we could see a vote on a newer version of the GOP plan as early as tomorrow or Saturday. The revised version does nothing to address the 24 million Americans who will lose coverage or the cut of over $800 billion in federal Medicaid dollars. Instead, the amended GOP plan makes a bad bill even worse, in three ways:

  • Gutting protections for Montanans with pre-existing conditions: The new proposal would allow states to eliminate protections for those with pre-existing condition. Insurance companies would now have the power to deny coverage based on pre-existing conditions except in states that choose to prohibit it. 426,400 Montanans have pre-existing conditions and risk losing the coverage they desperately need.
  • Eliminating coverage for services, like maternity care, mental and substance use treatment, and prescription drugs: The new version of the GOP plan would also allow states to waive Essential Health Benefits standards that require plans to cover services such as mental health and substance use treatment. It would also do away with guaranteed maternity care coverage, effectively allowing plans to charge women more for insurance than men.
  • Reinstate annual and lifetime limits on health care: The ACA prohibits plans from limits on coverage that are Essential Health Benefits. If states are allowed to eliminate the Essential Health Benefit standards, plans could likely place caps on coverage for those services, such as emergency services, impatient care, and prescription drugs. Before ACA, over 330,000 Montanans – most with employer coverage – faced lifetime limits on health services. The new, worse GOP plan could put in place these same practices, which means even those Montanans who can afford coverage could be one major illness away from bankruptcy.

This new bill is in no way a compromise or an improvement. Instead, it only further exacerbates the problems it would create for millions of Americans. This flawed proposal would: shift of over $3 billion in Medicaid costs to the state, end Montana’s bipartisan plan to expand Medicaid covering over 71,000 Montanans, and raise premiums and health care costs on tens of thousands of Montana families. D.C. politicians must take note – the GOP plan is a dangerous move that is wrong for Montana.

 

Indian Country Suicide Prevention Receives Attention and Investment

Maybe it’s our relative isolation and inability to easily access sufficient mental and behavior healthcare. Or maybe it’s the elevation or the sigma we often associate with depression. Whatever the reason, Montana has had one of the highest suicide rates in the country for almost forty years.

According to a report by the Montana Department of Health and Human Services, Montana ranked first in the nation for suicides in 2014. Nationally, whites have the highest rate of suicide, followed by American Indians. In Montana, this trend is reversed. Between 2014 and 2015, the American Indian suicide rate was 35.5 (per 100,000 people) compared to 28.1 for whites.

The same report notes that American Indian youth ages 11-17 are especially at risk. In fact, they are almost four times more likely to die by suicide than their white counterparts in Montana. Further, youth suicidal risk assessments for 2015 also show that American Indian youth living in urban areas are more likely than reservation-residing American Indian youth to seriously consider, plan, and attempt suicide.

We know that suicide has been a major public health concern in Montana for years, and particularly in Indian Country. This is why we applaud the legislature’s recent passage of House Bill 118, which invests $1 million in statewide suicide prevention efforts. Of this, $250,000 goes expressly to implement the action steps outlined in the Montana Native Youth Suicide Reduction Plan (MNYSRP). The Indian-owned consulting firm, Kauffman & Associates, in collaboration with both reservation and urban-based tribal communities in Montana, as well as the five urban Indian Health organizations created MNYSRP. MNYSRP came about as a result of an initiative developed by Governor Bullock in 2015, which was funded through the 64th Montana Legislative session.

An official bill signing has been scheduled for Tuesday, April 25, 2017 at 3pm.

Blog Series: Who Has the Most to Lose With a Capped System

Who has the most to lose from capping Medicaid spending?

In yesterday’s blog, we talked about some of the recent proposals by Congress to impose a block grant or per capita cap on federal Medicaid spending. We also wrote about the disastrous impact it would have on state budgets and ability to provide affordable health coverage for families. Today, we are going to take a deeper look at who has the most to lose under a capped system.

As a quick refresher, if Congress votes to cap the federal government’s contribution to states’ Medicaid programs through either a block grant or per capita cap, states will then have to take up a greater share of their Medicaid costs as health care costs increase, to the tune of over $560 billion over the next decade. In turn, states would likely face significant budgetary pressure to begin cutting Medicaid services, critical to millions of families across the country.

Impact on the State Budget

As Montana sees diminishing contributions from the federal government, our state will have to pick up an increasingly larger share of costs. This could put a significant strain on the state’s budget, making it likely that at some point the state will have to reduce benefits. As the state’s share of Medicaid costs grows, Montana would be faced with difficult decisions to limit Medicaid costs moving forward, including: (i) cuts to the level of benefits under Medicaid; (ii) cuts to the number of Montanans enrolled in Medicaid; and/or (iii) cuts to Medicaid payments made to doctors, hospitals and other providers. All of these options will hurt Montana families trying to access Medicaid coverage.

Block Grant

Cuts to benefits

Medicaid currently provides more benefits than private insurance, and does so at a significantly lower cost for beneficiaries. While proponents of block grants tout the “flexibility” that states will have, the flexibility essentially means that states will be able to cut important services. For example, to save costs, states may cut a pediatric benefit known as Early Periodic Screening, Diagnostic, and Treatment (EPSDT) that assesses the health and development of children and covers the services they need. Covering fewer services is a shortsighted move that would reduce the overall health and well being of thousands of Montanans and potentially lead to much larger statewide health care costs down the road.

Cuts to enrollees

Montana would most likely have to cut the number of people it enrolls through Medicaid, including some of the most vulnerable recipients.

Those most at risk of losing coverage would be the over 70,000 Montanans who have gained affordable coverage through the Montana HELP Act, the state’s Medicaid expansion program. Congressional House legislation could effectively end Medicaid expansion, by eliminating the current 90% federal match after 2019. The Health and Economic Livelihood Partnership (HELP) Act, designed with bipartisan support, has expanded health care to over 70,000 Montanans, who now risk losing that coverage.

Montana currently provides Medicaid to pregnant women with incomes up to 150 percent of the federal poverty level (FPL), even though federal law only requires coverage up to 138 percent. As costs rise, Montana may be forced to drop coverage for pregnant women with incomes above the federal minimum.

Cuts to payments for doctors, nurses, health care clinics, and hospitals

Spending caps could also mean that Montana would have to reduce the payments it sends to providers. The Urban Institute has estimated that block grants could cause states to reduce reimbursements, which are already lower than what private insurance pays, to providers by more than 30 percent. In turn, this could cause a decrease in the number of providers willing to accept Medicaid payment for services. For rural Montanans, fewer providers could drastically reduce their ability to access affordable health care.

Block granting Medicaid or implementing per capita spending caps would wreak havoc in Montana and reduce our ability to provide comprehensive, affordable health care coverage to people in need. Capping Medicaid spending does nothing to improve health care, but rather only limits Montana’s options and flexibility.

Blog Series: Medicaid Block Grants and Per Capita Caps

This week, House Republicans are aiming to begin marking up the repeal of ACA. House leaders have announced a plan that would drastically alter states’ Medicaid programs by putting a cap on the federal contribution for Medicaid. This change could significantly reduce access to health care for tens of thousands of Montanans. Nationally, these changes could result in cutting federal Medicaid support by over $560 billion over the next decade.

There are two ways that the federal government can cap spending – Medicaid block grants and per capita caps. Both of these measures would limit the amount of money the federal government sends to states for Medicaid, while increasing cost for state governments.

These two options are structured differently, but have similar long-term results.

How does Medicaid spending work now? Currently, Montana receives a fixed share of its Medicaid costs from the federal government. On average, a state receives about 64 percent of this cost. (Under Medicaid expansion, which has helped over 70,000 Montanans get access to health coverage, the federal share is even higher, a minimum of 90%.) In the past, if a state spends more on Medicaid one year, say due to a bad flu season, the federal government would send more money, keeping the percentage the same.

Under a block grant, states would receive a fixed amount of federal funds for Medicaid. Anything above that amount, the state would be responsible for paying. Under a block grant, Congress eliminates the set federal matching rates, and instead, the states will receive a total fixed amount of funds to run their Medicaid programs.

Per Capita Cap

A per capita cap is similar, but instead of setting a dollar limit for the entire Medicaid program, it would cap the amount of spending per beneficiary. If a beneficiary’s health needs exceeds that capped amount, the state would be responsible for the entire amount of those costs. The per capita cap would likely be set using current per-beneficiary spending and grow only slightly over time using an inflationary adjustment (but highly unlikely to keep pace with rising health care costs).

So why are spending caps so dangerous?

On a federal level, block grants and per capita caps are designed to do the same thing: create savings for the federal government in the long run, primarily by passing the cost along to the states. They achieve this by setting a cap below what the federal government is projected to spend, and then increase that cost each year only slightly, at or less than the rate of inflation. As noted above, health care costs have grown faster than inflation. The cost of Montana’s Medicaid program would increase over time, but the federal contribution would not. After a few years, the federal government would be contributing a much smaller percentage than it is now, leaving Montana holding the bag.

We have historical evidence of how disastrous block granting can be for social safety net programs critical to low-income families. The most direct example of block granting is the federal Temporary Assistance for Needy Families (TANF) program, which Congress implemented in 1996 to replace the Aid to Families with Dependent Children (AFDC). Because federal support was capped, the TANF program in Montana now serves about 13 of every 100 families experiencing poverty in the state. Before TANF, AFDC served 63 of 100 Montana families living in poverty.

Why would health care costs increase?

Historically, health care costs have increased faster than inflation. Although the rate at which they have increased has slowed down, lawmakers cannot be sure if this slowdown is permanent or temporary, especially while they make other changes to the Affordable Care Act.

Montana also has a rapidly aging population, and the health care costs for older adults is significantly more expensive than it is for younger adults. By 2030, Montana is expected to be the fifth oldest state in the nation, and many older Montanans are served through the Medicaid program.

Last, with new diseases and new treatments, per-beneficiary costs could increase. For example, if researchers discover a new treatment for cancer, people’s lives could be saved but costs could increase. Similarly, if there is an outbreak of a new disease – such as Zika, or an epidemic similar to HIV/AIDS in the 1980s – per-person treatment costs could increase.

So what happens?

If the amount of money the federal government sends is capped, the state would have to either spend more of its own money, or reduce the amount of health care it provides. This could leave thousands of Montanans without access to affordable health care.

Tomorrow, we will talk about who has the most to lose from putting a cap on Medicaid spending.

Blog Series: What ACA Repeal Could Mean to Health Care Providers

In the coming weeks, Congressional House members could begin committee work on the effort to repeal the Affordable Care Act (ACA). MBPC released a report last month on the detrimental impact of repeal on those who risk losing insurance coverage, including the over 71,000 Montanans who have gained coverage through Medicaid expansion. Montana is experiencing record levels of Montanans with insurance, but that could change quickly as families lose access to Medicaid and adequate subsidies to pay for insurance through the exchanges. A more recent report from the Urban Institute describes the impact of repeal on Montana’s hospitals and medical providers. This report assumes partial repeal similar to that passed by Congress in 2016 (and vetoed by President Obama), which included the elimination of Medicaid expansion, the individual and employer mandates, and Marketplace subsidies.

We don’t yet have full details on what exactly the House will take up this week, but Urban report provides a glimpse at how repeal of ACA could impact hospitals and providers across the state. If Congress does choose to eliminate these aspects of the ACA, Montana providers could face nearly one billion dollars less of health care spending in 2019, putting additional pressure on uncompensated care costs and those with insurance.

 

Estimated total Health Care Spending in Montana for 2019 (in millions)
  ACA ACA Repealed through Reconciliation Difference
Total Health Care Spending 5,636 4,664 -972
Hospitals 2,111 1,722 -390
Physician Practices 857 740 -117
Over Services 1,366 1,125 -241
Prescription drugs 1,301 1,077 -224

When fewer people have health insurance, health care spending decreases because people either forego care or are unable to pay in full. Statewide, health care providers stand to lose $972 million in 2019 with the loss of Medicaid expansion, the individual mandate, and existing health care subsidies.

From 2019-2028, these costs would add up. If the ACA were kept in place, Montana insurers would spend an estimated $71.3 billion on health care over this time period. But if the ACA is repealed without an adequate replacement plan included, this spending could decrease by $13.6 billion.

If someone is unable to forego medical care without insurance, and are unable to pay out of pocket, hospitals and other providers are left to pick up the tab. In 2019, uncompensated care would rise by $481 million across the state. Between 2019-2028, this figure would rise to over $5 billion.

Someone must pay for uncompensated care, meaning hospitals and other providers shift the cost to private insurance companies. This “cost-shift” forces insurance companies to raise their premiums, passing the burden along to those with insurance.

Reduction in health care spending would also result in the loss of jobs across the state. In 2019, Montana could lose up to 8,000 jobs, according to the Commonwealth Fund. Three thousand of these jobs would be in the health care sector.

Repeal of the ACA could have dramatic effects for Montana’s economy, from rising health care costs to lost jobs. For more information about the effects of repeal, be sure to read MBPC’s latest report: 142,000 Montanans Face Uncertainty of Health Coverage with Threat of ACA Repeal.