Skip to main content

Health Plan CEO: Senate Bill Worse than House Version on Medicaid

Analysis  |  By Gregory A. Freeman  
   June 28, 2017

"It's not just the expansion population that is being affected by this bill. It's every man woman, and child who is supported by Medicaid," says the CEO of L.A. Care.

The healthcare reform bill offered by Senate Republicans worsens the Medicaid funding burden placed on the states by the earlier House bill, says one health plan CEO, and the effects could be profound.

The cuts in Medicaid funding are so severe that the healthcare industry in some states could see a cascade of unintended consequences, says CEO John Baackes of L.A. Care, which covers more than 2 million Medi-Cal members and is the only publicly operated health plan in the state of California to have a product on the exchange.

Related: Anthem Goes Rogue, Supports Senate Republican Bill

"It's worse than the House bill. While it slows down the implementation of the cuts in funding, by the time you get out 10 years from now, you're in a worse position than we would have been with the House bill, because of the formula that're going to use to determine the government's share of the per-capita cap," Baackes says.

"This takes what was already bad in the House bill and makes it worse."

The Senate bill cuts deeper into Medicaid funds than the House proposed, capping overall federal spending on Medicaid, and providing states a per-beneficiary allotment of money.

Related: Health Plans Call on Congress to Maintain Medicaid Funding

The House bill proposed a similar structure, but the Senate version calls for the federal payments to grow more slowly starting in 2025. States also could opt to receive an annual lump sum of federal money for Medicaid in the form of a block grant.

"Both bills take a period of time. The House version takes one year and the Senate bill another, and says those are your costs and from this time forward we're going to apply the sharing formula to that number," Baackes says.

"That number will be less than what the actual costs are for providing care for the population, so you're creating a shortfall that only accumulates over time. The bill says they're giving the states more flexibility, but in my opinion all they're doing is giving the states more flexibility to raise taxes to pay for it."

Some states, like California, will find it is not feasible to raise taxes enough to make up the shortfall in federal Medicaid funding, Baackes says, and that would force them to cut back on the reimbursement they provide healthcare providers. That would be especially harmful in California and other states where reimbursement already is comparatively low.

"If that starts to happen, providers are going to say 'We're done. We can't do this anymore,'" Baackes says.

"If providers start to drop off and we're still covering the same number of people with fewer dollars, we're going to have people going to emergency rooms for routine care. The emergency rooms will get backed up, and because emergency care is more expensive we'll go through the dollars even faster, forcing even further reductions."

The Senate bill eliminates the individual and employer mandates for having and providing insurance. It also would provide more flexibility on insurance regulations but it does not include the controversial House waivers letting states charge consumers more based on health status and lifting a requirement to cover some essential health benefits.

In a move that should provide some reassurance to health plans struggling to remain profitable under the Affordable Care Act, the Senate bill would continue funding cost-sharing reduction payments through 2019.

All of the ObamaCare taxes would disappear, except for the Cadillac tax levied on expensive employer-provided insurance plans. That tax would be delayed until 2026, however.

The bill also would change the age rating from 3:1 to 5:1, meaning insurers could charge older adults five times as much as younger people.

Baackes says the most important thing about the Senate bill is its expansive effect on Medicaid recipients.

"This bill is going to cut support for 75 million people who are on Medicaid across the country," he says. "It's not just the expansion population that is being affected by this bill. It's every man woman, and child who is supported by Medicaid."

Gregory A. Freeman is a contributing writer for HealthLeaders.


Get the latest on healthcare leadership in your inbox.