6 ways Graham-Cassidy would overhaul Medicaid

Topics: Politics and Policy, Health Care Legislation, Federal Government, Health Care Reform, Insurance, Medicaid

By Josh Zeitlin, Editor

Graham-Cassidy is far more than a bill to repeal and replace major portions of the Affordable Care Act (ACA)—it would also fundamentally alter Medicaid, with major implications for providers and patients.

In total, the Congressional Budget Office (CBO) on Monday estimated that Graham-Cassidy's changes would cut Medicaid spending by about $1 trillion between 2017 and 2026 and lead to millions of fewer program enrollees.

Here are six things you need to know about how Graham-Cassidy would change Medicaid.

1. The ACA's Medicaid expansion would end.

Beginning in 2020, Graham-Cassidy would end the ACA's Medicaid expansion.

In this regard, it goes further than prior GOP reform bills, including the Better Care Reconciliation Act (BCRA) and the House-passed American Health Care Act. Those bills would have ended the ACA's provisions that pay states for 90 percent of the costs of Medicaid expansion, but would have continued to allow states to enroll adults with incomes up to 138 percent of the federal poverty level (FPL) in Medicaid while receiving funding at the traditional federal matching rate of 50 to 75 percent.

2. States would receive block grants to support health care for lower-income individuals—but only until 2026.

Graham-Cassidy would redirect a portion of the funding from ending the ACA's Medicaid expansion and insurance subsides to provide block grants to states for 2020-2026. States could largely use the funds at they see fit for several purposes related to health care, although at least half of the funding would need to go toward providing assistance to residents with incomes between 50 and 300 percent of FPL. Up to 20 percent of the funds could go toward providing private coverage to traditional, non-expansion Medicaid beneficiaries.

The block grant funding would expire after 2026, leaving significant questions about how—or whether—states would fund such initiatives in future years.

3. Federal Medicaid funding would be subject to per capita caps.

Medicaid since its inception in 1965 has been funded through a federal/state matching program in which the federal government reimburses states at a set rate for every dollar spent on Medicaid. This means that as state expenses increase, federal funds automatically rise to match state spending, with no cap.

Under Graham-Cassidy, that would change. Beginning in 2020, the bill would institute a per-beneficiary cap on federal Medicaid funds, meaning federal funding would no longer automatically rise with increases to benefits, reimbursement rates, or cost of care.

Between 2020 and 2024, Graham-Cassidy would:

  • For elderly beneficiaries and adults with disabilities, set a cap growth rate of CPI-M+1 percentage point for 2020 to 2024 and a growth rate of CPI-M for 2025 on;
  • For adults without disabilities and children, set a cap growth rate of CPI-M for 2020 to 2024 and a growth rate of CPI-U for 2025 on.

The slower growth rate from 2025 on means those lower caps are largely not reflected in CBO's estimate that Graham-Cassidy would cut Medicaid spending by $1 trillion through 2026—but we have a pretty good idea of what CBO's estimate for future years would look like.

Here's what CBO projected about how Medicaid spending would change under the BCRA, which had the same per capita cap growth rates as Graham-Cassidy:

4. Medicaid would no longer provide up to 3 months of retroactive coverage for many beneficiaries.

Since Medicaid's enactment in 1965, the program has paid medical expenses that individuals incur up to three months prior to their initial application if they would have been eligible during that period. Dylan Scott writes for Vox, "That's an important benefit, as many people don't sign up for Medicaid until they have a medical incident and start racking up bills."

HHS has allowed three states (Arkansas, Indiana, and New Hampshire) to waive retroactive eligibility, but only for their Medicaid expansion populations.

Under Graham-Cassidy, starting in FY 2018, Medicaid would provide retroactive coverage for only two months for children and adults without disabilities. It would continue to provide retroactive coverage for three months for elderly individuals and those eligible based on a disability.

5. States could formally review their Medicaid expansion beneficiaries' eligibility more frequently.

Under the ACA, states must formally review eligibility for those who gained coverage via Medicaid expansion exactly once every 12 months—no more, and no less.

That process doesn't require any action by the beneficiary so long as states can verify eligibility "based on reliable information" that is available to them, such as through state and federal databases. In instances where that isn't possible, states have to provide beneficiaries with a renewal form listing the information needed to maintain eligibility.

Under Graham-Cassidy, states would have the option to formally review eligibility for Medicaid expansion at least once every six months, and would receive additional federal funds if they chose to do so.

Beneficiaries throughout a given year already are required to notify states if their life circumstances change in ways that could affect eligibility, such as if they get a new job or have a change in family size, at which point states can also review eligibility.

Proponents of the Graham-Cassidy change, including Forbes opinion editor Avik Roy and Josh Archambault, a senior fellow at the Foundation for Government Accountability, say it would improve Medicaid by helping states cull their programs of individuals who have moved or are no longer eligible. That way, Roy told ProPublica, states can "make sure that the people who are enrolled in the Medicaid program are the people who the program is meant to help."

However, Charles Ornstein writes for ProPublica that "health policy researchers say there's ample evidence that adding paperwork and administrative burdens on beneficiaries in Medicaid increases turnover," mostly because "poor people move frequently and often face a host of challenges that make them less likely to turn in required paperwork."

California officials also told Ornstein that most individuals in their state quickly report changes in life circumstances that might affect eligibility.

6. States could implement work requirements for Medicaid beneficiaries without needing federal approval.

Under current law, states can request time-limited waivers from the HHS secretary that require certain individuals to work as a condition of Medicaid eligibility. The secretary can grant and renew those so-called Section 1115 waivers if they "promote the objectives" of the Medicaid program and do not increase federal Medicaid spending.

The Obama administration rejected several states' requests for such waivers. The Trump administration has not approved any such waivers, although it has signaled an openness to doing so, ProPublica reports.

Graham-Cassidy would establish a state option to require most nonelderly, nonpregnant adults without disabilities to work as a condition of eligibility and would provide additional funding for administrative costs related to work requirements.