Actuaries: Medicaid Caps Will Not Reduce Spending but Transfer Costs to Providers, Insurers, Employers and Individuals

Add the American Academy of Actuaries to the list of experts expressing concerns about the proposed Medicaid caps. In a June 30th letter to the Senate, the experts on insurance risks described how the proposed Medicaid changes would impact states and beneficiaries.

In describing the Medicaid caps generally, the Actuaries write that the House and Senate proposals would solidify historical decisions states have made regarding things such as covered populations and provider payment. Specifically, they write that basing the caps on historical costs, “could be regarded as rewarding states with richer programs while limiting the ability for states with leaner programs to expand coverage or increase provider reimbursement rates to be equitable with other states.” They go on to say that the approach “penalize[s] states with the most efficient programs, because states with historically less-efficient programs would presumably have greater opportunities for savings to avoid state budget overruns.”

The Actuaries also describe the methodology of the caps, in particular the growth rates. Readers of SayAhhh! already know that there’s much ado about the growth rates – whether low as proposed or even lower later down the road. Changing Medicaid into a capped program allows Congress to easily dial for dollars as needed and that means shifting more and more costs to states.

The Actuaries write that health care costs are “driven not just by unit cost increases [like the number of people enrolled], but also by utilization increases, new treatments (e.g., costly biological drugs recently made available), and unexpected events such as natural disaster or pandemics” and the growth rates will make it difficult for states to sustain or improve their current programs. “Efforts to close budget gaps including eligibility and benefit changes may reduce Medicaid spending, but they will not reduce total spending; the cost of care will be transferred to providers, insurers, employers, and to the individuals who seek needed care.”

The experts agree. The Medicaid caps are unsustainable and will result in harmful and irreversible changes.