Adam Searing: But, Yulia, you'll let us know when we're ready to go.
Adam Searing: Yeah, we're live, and we can.
Adam Searing: Okay. Alright, alright, thanks, Yulia, and Hello, everyone
Adam Searing: welcome. My name is Adam Searion, and I'm an attorney on the faculty here at the Georgetown University Center for Children and families. I want to welcome everyone, and there are a lot of everyone's to our inaugural child. Medicaid Policy Institute. Webinar.
Adam Searing: the Cmpi. As we've envisioned it, seeks to educate child health advocates, providers, other stakeholders and policymakers on the fundamentals of the Medicaid program and its importance to children, families, and other low income individuals, however, major Medicaid cuts and changes being discussed right now in Congress mean that we've decided to throw open the doors
Adam Searing: to the public for our Institute, at least for the 1st few sessions and have our 1st sessions for our new Institute focused on Medicaid structure financing and potential changes that could be in store. Today, we're going to focus on Medicaid structure, financing and potential cuts. And at this same time next week we're going to have another webinar focused on how different Federal
Adam Searing: proposals to restructure. Medicaid can have significant effects on state budgets. Excuse me, we're going to be recording and posting this webinar on our website, so you can share and look at it later and feel free to sign up on our website for our next webinar next week. Right now I'll turn it over to our executive director and master ceremonies for this call Joan Alker to kick us off.
Joan Alker: Thanks so much, Adam, and I've got some slides we're going to pull up. I want to start by welcoming everybody. Today. We're excited that we've had so much interest in this webinar.
Joan Alker: and, as Adam mentioned, it will be recorded and posted.
Joan Alker: We've got. I'm going to do a short intro, and then I'm going to hand it off to my colleagues, and I'll tell you about them in a minute.
Joan Alker: and then we will take your questions because we have such a large group today, we are only going to take the questions in the Q&A or the chat function. We will not be taking any live questions, so everybody will be muted during this webinar.
Joan Alker: and we will post our slides as well as the recording.
Joan Alker: So with that, let's start with a brief tour of a very top line overview of what Medicaid does
Joan Alker: and why it's so important.
Joan Alker: And you know, of course, we've just finished a Presidential election campaign.
Joan Alker: and we heard virtually nothing from either major party candidate about Medicaid.
Joan Alker: During the discussion
Joan Alker: we heard from President Elect Trump that he would protect Medicare and social security and defense from budget cuts, but he did not include Medicaid in that list.
Joan Alker: We also heard a fair amount of discussion about the affordable Care Act, and
Joan Alker: also a promise from President elect trump not to repeal the affordable care. Act again. We heard nothing about Medicaid.
Joan Alker: but when you look at. And this is the intention of this slide
Joan Alker: of federally subsidized health care programs. And of course, Medicaid is a Federal State program.
Joan Alker: Medicaid is serving by far the largest number of people, as you can see here of the various sources.
Joan Alker: So it's incredibly important. I often call it the Sleeper issue.
Joan Alker: Let's go to the next slide.
Joan Alker: Putting some numbers on that.
Joan Alker: Over. 1 5th of Americans are insured
Joan Alker: through the Medicaid program over 70 million people
Joan Alker: and the biggest single largest group of folks who get their health insurance through Medicaid are children.
Joan Alker: but Medicaid covers a wide diversity of kinds of people.
Joan Alker: parents and other low income. Adults are the next largest group.
Joan Alker: People with disabilities and seniors are also covered through Medicaid.
Joan Alker: And then and we'll come back to this. You see the estimates that the Federal Government
Joan Alker: will spend a little over 600 billion dollars on Medicaid this year
Joan Alker: about two-thirds of the total spending, which, of course, States match.
Joan Alker: Let's go to the next slide.
Joan Alker: So, as we just talked about, children are the single largest group of Enrollees in Medicaid with parents and other adults being also large groups of enrollees.
Joan Alker: But that's not where the majority of the spending goes.
Joan Alker: So you can see from this slide that about 18 and a half percent.
Joan Alker: Our beneficiaries are seniors and people with disabilities.
Joan Alker: but they are comprising a slight majority of the spending, whereas children, even though they are 38% of the enrollment
Joan Alker: are only under 13% of the spending.
Joan Alker: And that's because seniors and people with disabilities
Joan Alker: are receiving in the case of people disabilities, acute care. But also we can go to the next slide. Long-term care
Joan Alker: and medicaid is the largest funder of long-term care services.
Joan Alker: which is a huge and important role. Medicaid plays, particularly as we have an aging population.
Joan Alker: a role that will become only more important and burdensome over the years
Joan Alker: And Medicaid is also covering the so-called dual eligibles. Those are folks who are on Medicare.
Joan Alker: but they're low income seniors, and they're having various aspects of their cost sharing covered by Medicaid
Joan Alker: Medicaid is also the largest funder of substance, abuse, treatment, mental health services.
Joan Alker: Addressing the many challenges the country is facing on those fronts
Joan Alker: a Medicaid and Chip covers nearly half of all children
Joan Alker: depending on where you live. Medicaid's probably covering 40 to 50% of all births in your state.
Joan Alker: Medicaid plays a key role in all kinds of challenges and disasters, our country faces responding in hurricanes, pandemics.
Joan Alker: Medicaid has been the largest funder, for example, of HIV aid services
Joan Alker: and Medicaid's role is even more important in rural areas next slide.
Joan Alker: So here you can see breaking down by race and ethnicity
Joan Alker: that Medicaid is a very important coverage source
Joan Alker: for many Americans, but it's disproportionately important
Joan Alker: for Black and Hispanic and American Indian Alaskan native populations go to the next slide.
Joan Alker: so we did not hear about Medicaid during the election, but we're hearing about it now.
Joan Alker: and unfortunately, as you can see from these many headlines.
Joan Alker: many, many discussions are going on right now about cutting Medicaid.
Joan Alker: And if you go to the next slide
Joan Alker: of course we're we're living in a world we have the
Joan Alker: department of Government efficiency, Doge talking about cutting 1 3rd of Federal spending
Joan Alker: various conversations going on in the hill.
Joan Alker: And unfortunately, as you can see from this slide, because social security and Medicare have supposedly were taken off the table by President Trump
Joan Alker: in defense spending that Medicaid is the next up for a budget cuts.
Joan Alker: And that's why we're here today. So to help us understand what this means. I have 2 of my wonderful colleagues joining me today.
Joan Alker: and the 1st person I'm going to introduce to you is my colleague, Ann Dwyer. She is an associate research professor of the practice here at the Mccourt School of public policy.
Joan Alker: She's been with us at Ccf. For about 4 years, and prior to that she was the Senior Health Counsel in the Us. Senate Finance committee for 8 years.
Joan Alker: So Ann has a great deal of experience working on major
Joan Alker: health legislation of the last 10 or 15 years, and she's going to talk to us about what's going to happen in Congress? When and how do we interpret and understand what they're going to do? And then, after she's done, Anne is going to pass it to another colleague, Edwin Park, known to many of you, I'm sure, who was a research professor here at the Mccourt School public policy. He's been with us at Ccf. For about 8 years now, and prior to that
Joan Alker: he worked for many years at the center of budget and policy priorities. He has also worked on the hill in the White House, and has is a leading expert on Medicaid financing.
Joan Alker: So with that, I'm going to hand it to Ann, and then do queue up Q. And a. We'll go to Q. And a. After the presentations are over. So, Ann, take it away.
Anne Dwyer: Thank you so much, John, for that helpful overview and important overview.
Anne Dwyer: as Joe mentioned before, I pass it on to my colleague, Edwin Park, to walk through the specifics of Medicaid financing and the likely threats. In 2025 we thought it would be helpful to take a step back and talk a little bit about timing and process when it comes to budget reconciliation, which, as we will discuss today, is really the vehicle where we would anticipate many of the threats that we'll discuss could lie ahead and could be included. So with that, could we go to the next slide, please.
Anne Dwyer: So I'll talk about the specifics of reconciliation in a moment. But as a reminder, budget reconciliation generally is a special process that allows certain legislation to move forward with approval from a simple majority of Senators, rather than being subject to the filibuster
Anne Dwyer: and the usual 3 fifths or 60 vote threshold. In the Senate.
Anne Dwyer: However, before Congress can consider a budget reconciliation legislation, it must 1st develop a budget resolution.
Anne Dwyer: And I want to talk a little bit about why this particular part of the process is so important, and especially right. Now, as we really think about timing.
Anne Dwyer: So the Budget resolution, which is done through the Budget committees in the House and the Senate establishes overall spending and revenue levels by various budget functions for the current or upcoming fiscal year.
Anne Dwyer: The resolution can also include instructions to various authorizing committees to make Reconciliation Bill with recommendations, as they're often referred to to meet certain mandatory spending increases or decreases revenue increases or decreases and or deficit increases or reduction.
Anne Dwyer: In addition, the budget resolution could contain general reconciliation instructions without specifying committee targets or combine committee instructions with broader overall directives.
Anne Dwyer: So that's a bit of a mouthful, especially for all. Some of us that don't live in the budget world day in and day out and out, but all in all, as noted by the Congressional Research Service, the Budget Resolution serves as a Congressional statement in broad terms regarding appropriate revenue.
Anne Dwyer: spending and debt policies and broad terms is key here because the budget resolution isn't the document where you're going to find the specific legislative policies that Edwin might touch on. For example, as you can see in this language on the slide from an instruction to the Senate Finance Committee from fiscal year 2022 budget resolution.
Anne Dwyer: The resolution is really focused on spending and revenue targets. The instruction example on the slide is one sentence, but one really important sentence. While we're not going to see policy specifics in a budget resolution. The resolution is critical because it establishes targets for increases or decreases in mandatory spending and revenues. Committees are then committed to when considering budget reconciliation legislation.
Anne Dwyer: This could include specific dollar amounts or could involve ceilings or floors, as we see here on the slide.
Anne Dwyer: So, for example, a Budget resolution could include an instruction to the Senate Finance Committee. The committee with jurisdiction over medicaid
Anne Dwyer: mandatory spending by a certain amount. In addition, the budget resolution could set overall reconciliation deficit targets. So Reconciliation Bill could not add to the deficit by more than a certain amount.
Anne Dwyer: Congress is then bound by these numbers as part of the Budget reconciliation process. Otherwise the bill loses its privileged reconciliation status, and thus its simple majority threshold in the Senate.
Anne Dwyer: As a result inclusion of a large overall deficit reduction number in the Budget Resolution, or a large mandatory spending reduction target for a committee like Senate Finance would likely require the committee to make dramatic cuts to programs under its jurisdiction.
Anne Dwyer: Your risk
Anne Dwyer: by, and large Medicaid financing policies have clear budgetary effects that can also generate big savings, and that can often be dialed up or down this along with public comments around. No cuts to medicare social security cannot be part of the budget reconciliation process due to other rules taken together means any major health cuts would fall predominantly on Medicaid alongside the Aca's marketplace subsidies.
Anne Dwyer: and ultimately why the budget resolution, and the numbers included, including whether or not those numbers assume large Medicaid cuts are so important.
Anne Dwyer: Next slide, please.
Anne Dwyer: And this is also why the Budget resolution and its timing as we enter the 119th Congress is so critical when we talk about the broader budget reconciliation process
Anne Dwyer: similar to a Reconciliation Bill. The resolution must be agreed to by both Chambers, and is also governed by special rules in the House and the Senate that are designed to speed consideration, including limited debate, time, and no Senate filibuster. Thus a simple majority vote. In the Senate.
Anne Dwyer: However, the Budget resolution is not sent to the President for their approval or veto, and thus could be passed relatively quickly in the new Congress without waiting until inauguration on January 20, th
Anne Dwyer: so, as a reminder the 119th Congress begins on January 3.rd So that's just a few weeks away. So this means we could see action on a budget resolution. This very important document which, as I mentioned, the numbers, really matter here, it's what the committees and Congress are then committed to. We could see action on that right out of the gate in the New Year
Anne Dwyer: next slide, please.
Anne Dwyer: So, going back to process shortly after passage of a Budget resolution, we could expect the instructed authorizing committees to submit their legislative recommendations to their respective budget committees.
Anne Dwyer: The Budget Committees within incorporate the legislative recommendations into an omnibus budget. Reconciliation Bill my colleague Edwin Park will talk more about some of the specific policy threats when it comes to Medicaid. But this bill, the Reconciliation Bill, is where we would see the actual legislative proposals and policies.
Anne Dwyer: Reconciliation bills are subject to what is known as the bird rule in the Senate, which prohibits certain types of extraneous measures, like those that are outside the committee's jurisdiction, or with no budgetary effects, or that worsen the deficit when the committee has not achieved its reconciliation target, and a few other rules and exceptions. This special rule allows these extraneous provisions to potentially be struck from the bill.
Anne Dwyer: So it is an important consideration. However, the bird process. I will note many Medicaid financing provisions have passed the bird test in multiple reconciliation bills. So while it's an important process, there are lots of examples where Medicaid financing met the bird test and have been able to move on
Anne Dwyer: in terms of timing of the Budget Reconciliation Bill. This process could also move relatively quickly.
Anne Dwyer: So I was doing some math yesterday, and, according to kind of my calculations, in 2017 the 115th Congress introduced, debated, and finalized the Tax Cuts and Jobs Act
Anne Dwyer: Reconciliation Bill within 2 months of the Budget Resolution adoption. So as a result, we could see a reconciliation process completed by late winter or early spring.
Anne Dwyer: Next slide, please.
Anne Dwyer: Furthermore, while I won't go into all the details on this slide, in addition to threats to Medicaid financing, posed by a potential Reconciliation Bill early next year. There are also a number of subsequent threats to have on the radar. So this includes the debt ceiling. A potential second budget Reconciliation Bill later, in 2025 and end of your appropriations. So the Debt, Ceiling and Appropriation bills still require 60 votes in the Senate.
Anne Dwyer: however, a second Reconciliation Bill would again receive privileged status. This is also where we could see cuts to Medicaid if they're not included in the 1st Reconciliation Bill, or if additional cuts are pursued.
Anne Dwyer: So with that backdrop process and the importance of timing related to this discussion, I want to hand it over to my colleague, Edwin Park, who can help us drill down more into the Medicaid financing policy specifics, including likely threats.
Edwin Park: Thanks, Ann. Let me share my screen and hopefully, this will work.
Edwin Park: and you can see my slides. So I'll talk about the specific Federal threats to Medicaid financing next year. It could come up as early as that 1st Reconciliation bill that Ann was discussing.
Edwin Park: Now I'll start
Edwin Park: by talking about how Medicaid financing works today. Right now, Medicaid is a mandatory spending program. It's not subject to annual appropriations by Congress. It has open ended financing.
Edwin Park: The Federal Government picks up a fixed percentage of State's Medicaid costs. Whatever those costs are, whether costs go up, whether costs go down. The Federal Government shares in those costs.
Edwin Park: Now there is a regular Federal matching rate. It's called the fmap that varies by State, but it's calculated by a formula that looks at States relative per capita income as it compares to the nation overall.
Edwin Park: This is a Federal State financial partnership, where states have to contribute a portion of the cost of Medicaid with the Federal Government picking up the rest.
Edwin Park: Now there are certain types of Medicaid spending or Medicaid eligibility groups that are subject to special matching rates. On average, the regular fmap is about 57%, but some types of spending receive higher or lower matching rates. For example, the Medicaid expansion has a permanent matching rate of 90%.
Edwin Park: General administration is 50%. There are other types of functions, including, you know, investments and eligibility and enrollment systems and claim systems that have a 90% match
Edwin Park: and a 75% match thereafter for operations. But in general the regular fmap governs and applies to most Medicaid spending.
Edwin Park: Now you can see here a slide illustrating how the Federal Government and States currently share in Medicaid costs. So if we have a State that has a 50% matching rate. There's $100 in claims, costs, Federal government kicks in $50 and States have to contribute the remaining $50 if costs go up by 20%. So it's $120 in claims costs.
Edwin Park: The Federal Government will share in that additional cost equally in the case of a 50% fmap State. So the Federal Government provides an additional $10 for those costs with the State having to contribute the rest.
Edwin Park: Now, Medicaid, because of this Federal financing structure, is the largest source of federal funding for States. Nationally, on average, Medicaid constitutes 56.4% of all the Federal funds that come into state budgets. Some States have a much higher percentage of 70% plus.
Edwin Park: Now with that as background, I'll spend most of my time on the likely cuts to Federal Medicaid financing. That would be under consideration as early as this 1st reconciliation bill. I'll talk about 4 buckets of the types of cuts, block grants and per capita caps. Elimination reduction of that, 90% expansion matching rate elimination, reduction of a minimum matching rate
Edwin Park: elimination or restriction of State use of provider taxes. This is based on a scan of various proposals from Republican Congressional leaders,
Edwin Park: as well as outside conservative groups that are influential and likely will be influential with the incoming trump administration.
Edwin Park: and they all have a shared approach which is either making large Medicaid cost shifts to state by reducing Federal funding or making it harder for States to finance their share of Medicaid costs as well.
Edwin Park: So let's start with that 1st bucket block grants and per capita caps.
Edwin Park: Now, how does a Medicaid block Grant differ from the current financing structure
Edwin Park: instead of the Federal Government picking up a fixed percentage of States Medicaid costs, there'd be a cap on Federal funding imposed on an aggregate basis. States would be responsible for 100% of all costs above the cap. No additional Federal funding in excess of the cap would be available. Now. Some block Grant proposals include a single block. Grant. Some may have multiple block grants that apply across different types of of spending or eligibility groups.
Edwin Park: but they have the intent block grants of reducing Federal Medicaid, spending over time in general. They produce large and growing cuts because they fail to keep pace with growth in Medicaid costs, due to things like enrollment, and health care costs
Edwin Park: a per capita cap is a variant of this kind of cap, where, instead of a cap overall in the aggregate, it'd be a cap on Federal funding on a per beneficiary basis. Again, states responsible for all costs above that per beneficiary cap.
Edwin Park: Some per capita cap proposals like block grants include multiple caps for certain eligibility groups, but similarly results in large and growing Federal Medicaid funding cuts as the cap amounts are set in ways to fail to keep pace with rising healthcare costs
Edwin Park: the difference from block grant is unlike a block grant or per capita cap would adjust for changes in enrollment. For example, if the number of beneficiaries increases.
Edwin Park: Now, here's an illustration of how block grants and per capita caps leave States responsible for all costs above the cap.
Edwin Park: Remember the previous slide about the current financing structure, 50% fmap state $100 in claims costs
Edwin Park: picked up $50 by the Federal Government, $50 by States. If costs rise by 20% to $100 $120. Excuse me.
Edwin Park: the Federal Government may not increase its funding, so it stays at $50, and so states are absorbing all of that increased Medicaid costs, so that full $20 would have to be borne by States under this kind of cap.
Edwin Park: Now, why do caps produce large and growing Federal Medicaid funding cuts? It's because the cap amounts, as I explained, you know, fail to keep pace with anticipated cost growth annually.
Edwin Park: and like a savings account, compounds interest, or any other investment compounds interest. The cuts compound each year where you have a difference between how the caps grow and and how Federal Medicaid spending demands rise for State programs
Edwin Park: in general. This is accomplished by growing those caps annually adjusting them
Edwin Park: by a rate significantly slower or lower than what's expected in terms of projected Medicaid spending.
Edwin Park: So if you look at some of the proposals from 2017 from the failed repeal and replace plans, the block grants and per capita caps that were included in those bills that ultimately failed.
Edwin Park: Had a some adjustments that equal general inflation. The Consumer price Index. If you look at what the Congressional Budget Office expects moving forward over the next 10 years, general inflation is expected to grow annually by about 2.2%.
Edwin Park: But Cbo projects that Federal Medicaid spending overall is expected to grow nationally by 5.1% a year.
Edwin Park: Similarly, if you compare general inflation Cpi to Cbo's expected growth in costs on a per beneficiary basis by eligibility group, you can see that kids, the expansion adults, parents, and other non-expansion adults. It's between 4 and 5%
Edwin Park: seniors, people with disabilities. Their Medicaid spending is expected to grow a little bit more slowly, but still in excess of general inflation.
Edwin Park: because of that gap between expected growth in Medicaid costs and general inflation. As an illustration.
Edwin Park: here's another way to look at it. The magnitude of the cuts expected under these kind of proposals the Congressional Budget Office, a couple of years ago put out what's called a budget options list, which estimated the impact of some illustrative block grants per capita caps. They were annually adjusted by general inflation. Starting in fiscal year 2025, but you can see over a 10 year period between 2023, and 2032
Edwin Park: cbo expected block grants per capita caps would cut Federal Medicaid spending it
Edwin Park: overall by 900 billion dollars plus over a 10 year period. The actual deficit changes would be a little less because some people losing Medicaid coverage would end up in the marketplace under the Affordable Care Act.
Edwin Park: But this includes the effect of states cutting their medicaid programs in response to the block grants and per capita caps because of this big cost shift. So it gives you a sense of how large the savings can be, and they can even be larger if the growth rates are set for the caps below. Even general inflation.
Edwin Park: Now the Medicaid funding cuts would likely be even larger in practice. And that's because the caps don't automatically adjust. They don't adjust for any unanticipated cost growth.
Edwin Park: So federal funding, unlike the current financing system does not automatically increase, so medicaid costs rise faster than anticipated. There could be a higher overall cost growth. There could be unexpected cost increases like higher enrollment, due to a recession or a natural disaster.
Edwin Park: Higher spending per beneficiary, new disease, a pandemic, a new but expensive drug therapy that comes to the market. Those can all lead to spikes in costs that are not anticipated. For example, when the Congressional Budget Office estimates the savings as a result of a block, grant or per capita cap being enacted into law
Edwin Park: to give a sense visually of
Edwin Park: what this looks like. I'll look at sort of illustrations of how this would occur on the next couple of slides. Looking again, that same illustration of $100 in claims costs, let's say, a block granted per capita cap reduces Federal funding for that $100 in claims costs by by 20%. So instead of $50
Edwin Park: in a 50% matching state, it's $40.
Edwin Park: But let's say those claims costs rise unexpectedly at even higher level $120 instead of $100. It's a 20% increase in in costs.
Edwin Park: The Federal Government does not increase any of its funding under a cap.
Edwin Park: It's already down a 5th because of the way the block grants per capita caps produce savings. States are not only responsible for the expected cost shift, but also for the full amount of the increased costs that were previously unanticipated by by policymakers in the Congressional Budget Office.
Edwin Park: Here you can see what happens if
Edwin Park: the Us. Healthcare system experiences higher healthcare cost growth overall in general healthcare costs have been growing relatively, modestly, but you can see that the per capita cap or block grant cuts could even be larger.
Edwin Park: You could have unanticipated short term cost growth, like I mentioned, related to recession. A new cost per beneficiary because there's a new treatment, a new medical device, a new drug therapy that creates a spike that's permanently built into the base of the cuts, and so the cuts are larger over the long run than they otherwise would be.
Edwin Park: How States fare individually under these block grants per capita caps depends on a number of factors. All States will face funding reductions under these kind of proposals, but some States could be
Edwin Park: particularly in hard, for a number of different reasons, variation, and their levels of spending their annual growth. If they have higher expected annual growth on a per beneficiary basis, they could be particularly hurt by cuts, differences across populations, differences over time. Some States may have low spending growth or lower spending per beneficiary. And that may change over 10 year period. And we've seen that historically.
Edwin Park: states, even even states with current lower than average spending overall on a per beneficiary basis can be particularly affected because they're locked into those spending levels and growth rates moving forward because the initial cap. In the 1st year a block on a per capita cap takes effect are based on current or historical spending or spending trends.
Edwin Park: In addition, it's always important to look at how other Federal programs have fared when they've been similarly capped, converted into block grants and other forms of caps. At best they've suffered neglect where policymakers stopped paying attention to those programs. But at worst they suffered additional severe cuts. We know that
Edwin Park: there's going to be growing deficit and debt pressures, particularly if the 2017 trump tax cuts are extended or made permanent, and that will put pressure on finding additional spending cuts in the future. And it's very easy for policymakers. Once a block grant or per capita cap is enacted
Edwin Park: to produce additional Federal savings by simply going in and adjusting the annual adjustment rate for the block granted per capita cap on either a permanent or temporary basis. So let's say, the caps are increased by general inflation. It could be Cpi minus a percentage point minus half a percentage points very easy to draft. Once the block granted per capita cap has been designed, drafted, and enacted.
Edwin Park: So on that get go to the second bucket of potential financing cuts. And this relates to the Medicaid expansion. As I mentioned, the Federal Government picks up 90% of the cost of the expansion on a permanent basis. In addition for states that have not yet adopted the expansion, they get a temporary 2 year increase in their regular fmap.
Edwin Park: There are a variety of proposals that have been put forward from House Republican leaders, for example, others
Edwin Park: to cut the Medicaid expansion, so that only the reg percentage, so that only the regular fmap would apply, whatever that may be. So if you remember, on average, the regular fmap is about 57%
Edwin Park: states instead of getting 90% would get whatever their regular matching rate is. This could be an immediate reduction. It could be a phase down of the matching rate, but the intent is to cause States to drop the Medicaid expansion without explicitly repealing the expansion itself.
Edwin Park: Now this would involve a major cost shift to states that would make keeping the Medicaid expansion likely fiscally unsustainable for most States and over time. And this is actually the approach of one of the Repeal and place bills that failed. In 2017 the House passed Repeal Bill, which did not explicitly get rid of the Medicaid expansion, but eliminated that expansion fmap.
Edwin Park: In addition, there are a number of States that have so-called trigger laws. 9 States that have adopted the expansion have attached
Edwin Park: to their legislation at the State level authorizing the Medicaid expansion a trigger where the expansion is automatically turned off. If the expansion fmap is reduced or eliminated. In general, it's any reduction, though. The state of Arizona, for example, there's a threshold of 80%.
Edwin Park: In addition, some States 3 States have
Edwin Park: in their legislation related to the expansion giving the authority to the Medicaid agency to restrict or drop the expansion. Once the expansion fmap is lowered or requires legislative reconsideration.
Edwin Park: So you can see here, looking again at the same $100 in cost illustration, you know, a big difference in how much States would have to contribute to the cost of expansion relative to the 10% they do today.
Edwin Park: Now, if you look at one specific state, California
Edwin Park: in fiscal year 2023. The cost expansion overall was about 34 billion dollars. You know, obviously a big figure.
Edwin Park: So because of that, 90% matching rate, the State only contribute a little under 3.5 billion dollars to that cost. Now, at the regular fmap, which is only 50% in California.
Edwin Park: they would have had to pay 13.7 billion dollars more just for a single year.
Edwin Park: So you know, that would mean the State would be increasing its spending nearly 5 times
Edwin Park: now the magnitude of the cuts, according to Cbo, again, very large, 750 billion dollars reduction over 10 years. This includes the impact of State behavior and response, such as dropping the expansion or non-expansion states, not adopting in the future. But the important thing to note here is
Edwin Park: just like with those illustrative cuts estimated by the Congressional Budget office for the block grant per capita cap. You can't add these cuts together because they obviously interact. If you are undercutting the expansion by eliminating the expansion fmap. Then that's a much smaller Medicaid program that would be subject to a block grant per capita cap. So there are interactions, but certainly it gives you a sense of how large the cuts would be over time.
Edwin Park: Now the 3rd bucket
Edwin Park: there's a minimum matching rate. No State can have an fmap below 50% under the formula. Some states would have F Maps below 50% due to their higher than average per capita income relative to the rest of the country. There are 10 states that have the minimum fmap of 50%
Edwin Park: addition. The District of Columbia has a statutory requirement of 70%, but would otherwise be receiving that 50% fmap.
Edwin Park: There are proposals to eliminate or lower that minimum fmap phase it down, maybe do it immediately.
Edwin Park: but again, this would have the effect of shifting costs to those States that are currently receiving that minimum F map. You can see here some estimated F maps if that minimum was eliminated. You know, some States would fall to, you know, 2426% range DC potentially could fall all the way to 0.
Edwin Park: And you can see here another of these illustrating graphs, the State of New Hampshire, currently 50% state would have to, you know. Pick up 8.3% more, 8.3 percentage points more of that of that $100 in illustrative claims costs.
Edwin Park: Now the magnitude of the cuts, again, are very large, even though it affect a relatively smaller number of States.
Edwin Park: According to the Congressional Budget Office, they expected Federal Medicaid spending to fall by 667 billion dollars over 10 years includes the impact of State behavior response, such as cutting optional benefits, provider rates.
Edwin Park: They estimated that over that 10 year period as many as 13 States could be possibly affected, though they did not identify them, and the fmaps would fall anywhere from just below 50% all the way down to 4%, which is likely the District of Columbia.
Edwin Park: Finally, the 4th bucket of
Edwin Park: potential Medicaid cuts that could be considered next year relate to provider taxes.
Edwin Park: States, of course, under the Federal finance structure, that matching structure they have to contribute to the share their share of the cost of the Medicaid program, but they have significant flexibility in how they come up with those financing sources at the state level
Edwin Park: they can use, among other revenue sources, in addition to, for example, income taxes or sales, taxes, revenues from taxes or assessments imposed on healthcare providers like hospitals, nursing homes and managed care plans. There's longstanding statutory rules about how those provider taxes have to be set up. But they're generally 3 requirements. They have to be uniform across providers broad, based across providers, and must not hold providers harmless. For example.
Edwin Park: where every dollar of of taxes is returned in the explicitly, in the form of higher medicaid payments, and additional local governments and public providers, like public hospitals, can help contribute to Medicaid costs as well through so-called intergovernmental transfers and certified public expenditures.
Edwin Park: States increasingly rely on provider taxes. All States. But the State of Alaska have at least one provider taxes. And you can see here, the vast majority of States have taxes on hospitals and nursing homes, but also other providers as well.
Edwin Park: Now, provider. Taxes have also been critical in supporting adoption of the Medicaid expansion
Edwin Park: over the past 10 years. New provider taxes increases in existing provider taxes were often paired with the Medicaid expansion to help finance that 10% State match and that includes most recently North Carolina.
Edwin Park: there are a variety of proposals to eliminate restrict state use of provider taxes. Some would eliminate State use of provider taxes outright, some would relate to how States comply with various requirements for provider taxes. Some would prohibit prohibit new taxes or increases of existing taxes. It's, you know, very complex in terms of these proposals.
Edwin Park: but they would have a huge effect if these kind of proposals were enacted. Here again, to give you a sense of magnitude is a Congressional Budget office estimate of an illustrative provider tax provision which relates to how States comply with the whole harmless prohibition. There's a safe harbor where taxes are considered to be in compliance, if they don't exceed more than 6% of patient revenues.
Edwin Park: If you got rid of that safe harbor entirely, it would reduce Medicaid spending by more than 600 billion dollars. Cbo expects a variety of State responses
Edwin Park: dropping the Medicaid expansion, cutting provider payments, optional benefits, non-expansion states, not adopting the expansion in the future. But Cbo does assume that States would not be able to replace more than half of the provider tax revenues lost. And even then that probably is an optimistic assumption.
Edwin Park: So I'll close here by talking about how States would likely respond to cost shifts of this type
Edwin Park: now States would have to either dramatically raise taxes or severely cut other parts of their budget if they wanted to protect their Medicaid programs that would particularly affect K. Through 12 education and higher education which constitutes the bulk of their general fund budgets 43% of their general fund budgets overall
Edwin Park: in addition.
Edwin Park: At the same time, if there's a restriction or elimination of provider taxes that would make it far harder for States to maintain their current state spending, let alone raise revenues to compensate for the loss in Federal funding to some extent.
Edwin Park: so it's far more likely States would have to make deep and damaging cuts to their medicaid programs. For example, optional eligibility, optional benefits, slashing provider and plan payment rates.
Edwin Park: But, as will will be discussed in next week's webinar.
Edwin Park: these kind of cost ship proposals, block grants and protect capital caps in particular, are often paired with new authorities for States to cut their Medicaid programs in ways that are not currently permitted.
Edwin Park: Examples can include
Edwin Park: making harder for eligible people to to enroll in the program, stay enrolled in the program like work, reporting requirements, no longer having to cut mandatory eligibility, benefits capping enrollment right now all eligible individuals are entitled to enroll time limits are like time caps, as we see in the Tana program, higher premiums and cost sharing that aren't currently permitted.
Edwin Park: restrictive closed drug formularies, for example, all, nearly all FDA approved drugs have to be covered
Edwin Park: that will be discussed in in next week's webinar, but it gives you a sense of how the types of cuts you know, may vary. It could be sort of existing flexibility. States have
Edwin Park: new tools that are given to States on how to cut, but certainly States would have no choice but to cut their Medicaid programs in a very draconian fashion, because of the major cost shifts to States under these types of proposals, as well as restrictions on their ability to finance how much they can contribute to the cost of of Medicaid moving forward.
Edwin Park: So with that I will stop and stop sharing my screen and target, turn it back over to Joan.
Joan Alker: Great. Thank you so much, Ann and Edwin. We just covered a extraordinary amount of material, and we've got about 15 min left for questions. We have a lot of good questions in the queue.
Joan Alker: so let me start with some of those. So the 1st question is, would the Government be able to cut Medicaid benefits to those under the age of 18.
Joan Alker: So let me start, and then I'm going to see if my colleagues want to jump in. So is 1st off, as Edwin mentioned next week we're having same time same bat Channel, another webinar that is going to go into some of the kinds of new ways to cut that States might have
Joan Alker: but I do want to flag that that, as Anne outlined, you know right now we're in this conversation in a big picture conversation.
Joan Alker: because Congress right now, and members of the Republican caucus are right now, having conversations about what to cut and where to go and how much to cut.
Joan Alker: And the budget resolution is about that big picture conversation.
Joan Alker: and where resources will go and where they will not go.
Joan Alker: and one of the things that is very, very important when you think about all the roles Medicaid plays is that it's serving all these different vulnerable populations. Right. We talked about children, people with disabilities.
Joan Alker: seniors in nursing homes
Joan Alker: and and any huge cuts such as Edwin has described, while technically they might not be directed at. Children
Joan Alker: would impact state budgets very, very dramatically.
Joan Alker: And so that's 1 of the reasons we think it's really important right now to everybody
Joan Alker: to be talking about the full range of what Medicaid does, so that we don't see these vulnerable populations pitted against one another.
Joan Alker: and the answer to the question is. It depends how Congress writes the bill and what kind of cuts we're looking at. But let me see if Ann or Edwin want to answer anything more. There.
Edwin Park: Yeah, I think.
Anne Dwyer: His wallet.
Edwin Park: Oh, go ahead! Go ahead and.
Anne Dwyer: I was just gonna add an example in case helpful. And I'll put a link in the chat. So in 2017 the Congressional Budget Office did multiple analyses of the kind of repeal and replace after reconciliation bills and different languages that were coming on at the time, and they did an analysis of what the
Anne Dwyer: the approach, which was a capped approach that also impacted children would mean in terms of Medicaid cuts over the 1st decade and the second decade. So the 1st decade, it was a 26% cut to the Medicaid program again. This included children in these caps. The second decade by 2036 at the time, 35% cut to the Medicaid program. It's hard to imagine that level of cut.
Anne Dwyer: Everyone would be impacted in some way it would be impossible to do a 35% cut, I think, without
Anne Dwyer: without all populations being impacted in some way. That would be. That is a dramatic cut. So I just want I'll put a link to that analysis in the chat. But these were real discussions that were happening in 2017. So it's it's very possible that that could come back up on the radar next year.
Joan Alker: Edwin, do you want to add to that.
Edwin Park: Yeah, you know, I think it'll it'll vary based on how States respond individually, how the legislation designed. But certainly with these massive cost shifts to States.
Edwin Park: You know, optional eligibility for kids could be affected. If there are additional
Edwin Park: you know, ways to cut that are, you know, allowed for States. It could be cutting mandatory eligibility for kids, cutting mandatory benefits like the Epstt benefit, raising premiums and cost sharing, imposing them on kids that are generally exempt today from premiums and cost sharing. They're all examples, I think it would, you know, vary quite a bit. But certainly kids, as Ann said
Edwin Park: would be would would be definitely face loss of coverage, loss of access to needed care.
Joan Alker: Yeah. And I'm going to add a question right now that we have in the chat that's related to this. The question is, When do the Covid Phe protections preventing States from reducing or cutting services for children expire. And
Joan Alker: yeah, this, I think, relates to the maintenance of effort for children's income eligibility. So, Edwin, do you want to address that.
Edwin Park: So the the continuous coverage protection expired in the spring of last year. April first.st
Edwin Park: There was the
Edwin Park: fmap increase that was attached to that that was phased down by the end of of last year.
Joan Alker: And then, just I think the other issue is that there is protection in place which predated
Joan Alker: covid protecting income eligibility levels for.
Edwin Park: Oh, yes, yeah. So that that provision is, prevent States from cutting eligibility
Edwin Park: and certain types of procedural additional procedural hoops for eligible people to enroll that make things more restrictive, that protection is in place through September 30th of 2029. But of course that kind of moe protection. If you have, these major structural changes could be amended as part of any Medicaid cuts, package, and reconciliation.
Joan Alker: Great thanks, Edwin. I'm gonna merge the next 2 questions, and I'm gonna hand this to you. And for a 1st
Joan Alker: response one attendee is asking, how are state governments receiving the proposed cuts? I can't imagine states taking up the need, especially for long-term supports and services.
Joan Alker: The other question is given that 20% of Americans are in Medicaid. Why would Senate leaders
Joan Alker: vote against their constituents? Safety net? So Ann.
Anne Dwyer: Yeah. So I think on the 1st one, on the long term services and supports and home and community based services in particular, which I saw a few just looking at the chat.
Anne Dwyer: A few folks,
Anne Dwyer: you know, respond to and ask questions about again. I think the details will matter, but by and large, when States are faced with big cuts to the Medicaid program, often optional benefits, optional populations, provider payments are kind of the top top things that we usually see when they're dealing with budget difficulties
Anne Dwyer: and many home and community-based services are optional services under the Medicaid program. So I think sadly. Those services, I think, would be at the top of the risk in terms of risk which Cms put out data last week.
Anne Dwyer: Now states, we spend more on home and community based services than institutional services or residential services for long term services and supports in the Us. Which is great progress, that we are moving to home and community based settings. But again, those services are definitely at risk.
Anne Dwyer: Why, I wish I knew the answer to the second question of why, you know, given Medicaid is an incredibly popular program. As you mentioned Joan, half of children on the program. It's the primary parent behavioral health services in the Us. You know, we have an opioid epidemic. Children's Mental health crisis plays a really incredibly important role. So it is a little bit, mind boggling. Why this program, which is such an important
Anne Dwyer: is so important to so many children and families, would be on the chopping block.
Anne Dwyer: As I mentioned in my remarks.
Anne Dwyer: Because social security would not, is not part of the reconciliation process, and because comments have been made about no cuts to Medicare.
Anne Dwyer: If there is a big deficit reduction number that doesn't leave much else right in terms of health care. That's Medicaid Aca ship, which is a much smaller program. And so I think just inherently, because Medicaid is kind of left, and you can make financing changes that produce. As I put the link in the chat, big budgetary effects, obviously big consequences as well. It is a program that we often see put on the table. So it's just important to be tracking what's going on.
Joan Alker: Right. And to that point, as Ann talked about, this may move very quickly, and the Budget resolution could be done in January, and if there won't be a specific proposal there to analyze how this can affect your state. But there could be a big number, and that's why it's really important to educate folks on the importance of Medicaid right now.
Joan Alker: Okay, let's go to the next question, which is, how is Obamacare funded? And I'll just say that Obamacare is many things, and and one big piece of it is the Medicaid expansion which Edwin talked about the enhanced match. But then, of course, the other big piece is the Aca subsidies for the marketplace, and those, of course, are expiring. And, Edwin, it might be good for you to just talk through the interactions there, and what we're expecting on that side.
Edwin Park: Sure. So you obviously have the aca medicaid expansion that's funded like the rest of the Medicaid program.
Edwin Park: The Aca marketplace subsidies are what are called refundable tax credits. The
Edwin Park: refundable part of the tax credit, which is the bulk of the spending related to the marketplace subsidies, is considered mandatory spending. So, as Anne mentioned. That would be considered, you know, health spending that could be potentially cut. You know, under the jurisdiction of the Finance Committee, for example. But those refundable credits like
Edwin Park: Medicaid mandatory spending are are not subject to annual appropriations. They are provided, you know, on a permanent basis, open ended financing basis as as a refundable tax credit.
Edwin Park: The enhanced subsidies that originally
Edwin Park: enacted as part of the American Rescue Plan act
Edwin Park: that increase the subsidies available for the marketplace. They do expire at the end of calendar year 2025. The loss of those subsidies would, you know, result in 4 million few people enrolled in marketplace plans several 1 million more uninsured.
Edwin Park: But the expiration of those marketplace subsidy enhancements do not
Edwin Park: count towards deficit reduction or spending reductions, because they're already scheduled to expire so they wouldn't constitute you know, savings or spending reduction. That, for example could be required by a reconciliation instruction in a budget. Resolution.
Joan Alker: Thanks, Edwin. So I'm gonna whiz through because we have a lot of questions.
Joan Alker: William's question about how do we respond? If policymakers want to reduce health care spending. What do we say? I'm going to defer that question to next week's webinar when we're going to get into more detail about cuts, but I think you fit on the kernel of an answer here, which is, we have a healthcare cost problem, not necessarily a Medicaid problem, because Medicaid is very lean.
Joan Alker: Next big question I wanted to get to, because I think this is important, and also relates to some other things that could happen. How long will it take to pass legislation that restricts the use of provider taxes of the kind received by California and being sought by New York? If no statutory change regulations could be revised.
Joan Alker: However. Given the Supreme Court's elimination, chevron deference, the regulations could take a few years. So that's a kind of interaction with statutory and and regulatory change. So, Edwin, you want to start on that, and then in jump in.
Edwin Park: Sure if provider taxes or changes are included in a Budget recognition Bill, you know, and laid out the timeline. It could be you know, early to mid spring such a.
Edwin Park: you know, Bill, including the provision, could be enacted.
Edwin Park: How the you know how long it would take to take effect would depend on the legislation. The details of it. It could be immediate. It could be a year from now. It will be slower on the administrative side of things. If it's an attempt by the incoming trump administration to promulgate rules that restrict
Edwin Park: states existing ability to use provider taxes.
Edwin Park: The Trump Administration did propose such restrictions as part of the so-called Medicaid fiscal accountability rule or Amfar, they ultimately did not finalize that before the
Edwin Park: end of the 1st Trump administration. There may be some executive orders and other financial actions taken by the trump administration
Edwin Park: that likely or could be, you know that likely are unconstitutional would not be permitted under law. But there's, you know, publicly expressed intent to make it harder for States to draw down Federal funding in ways that the trump administration would not
Edwin Park: approve of, and that could potentially apply to things like provider taxes. But the last bucket, of course, would be States who are submitting waivers or State plan amendments for approval related to provider taxes. Certainly there'd be a lot of discretion on the part of the incoming administration, to deny or require changes to those
Edwin Park: submissions.
Joan Alker: Thanks, Edwin, so we have a ton of questions that we're not going to be able to get to. I want to just give our speakers a chance to comment on a variation of a question that's come up a number of times, you know. Is Congress going to do all of these things. Which of these things they're more likely to do? But fundamentally we have a question about if there's a large number in the Budget resolution, as Ann talked about up Top? Is the battle lost?
Joan Alker: And what do we do to address the Budget resolution number before it's approved. So, Ann, I'm going to let you kick off on that one.
Anne Dwyer: Yeah. And I saw that question in the chat. It's a great question, and the answer is absolutely not, is not lost by
Anne Dwyer: a large budget resolution number. It just makes it trickier, right? That they, the large budget resolution. If they are a large number, if it is a deficit, reduction number does place the committees in a position where they are essentially forced or committed to making, you know, recommendations with larger cuts.
Anne Dwyer: That being said, the Budget resolution could come out and have a floor that says you have to reduce the deficit by at least this amount, and this amount could be a lower floor, but they could go above that. So even a lower number in the budget resolution still means that Medicaid could be at risk. And let's even say it is a big number. They make the budget. The recommendations that go and hit that big number with a lot of big changes to Medicaid policy.
Anne Dwyer: That's a similar situation to what we saw in 2017, with the Repeal and replace efforts with efforts to cap and block, Grant, the Medicaid program to institute work requirements and those efforts failed, and that was due in large part to outcry from
Anne Dwyer: stakeholders and individuals on the ground about the importance of the Medicaid program and what it means to them, and what these cuts would mean for children and families, people with disabilities, seniors, and many other populations. So I think that's a good example about. There was still a lot of momentum around that. But ideally
Anne Dwyer: they're not even included in the Budget resolution. It doesn't assume Medicaid cuts, and therefore Medicaid cuts would not be in the Budget Reconciliation Bill, or at least the 1st one. And then, if there's a second Budget Reconciliation Bill, we can have this conversation again if needed. But I think it's just important that I think there's been a lot of focus of what are the particular policies and like, let's wait and see for the language.
Anne Dwyer: Those are all really important questions. But there's there's things that can be done now in terms of education, so we aren't so there isn't. Folks aren't put in a position where it's a large cut, and they feel like they have no option but to try and get to a certain number.
Joan Alker: Right.
Anne Dwyer: Headwind that more to add.
Joan Alker: Yeah, just, I'm going to kick it to Edwin for last word in a sec. But I just want to underscore. Nothing is over till it's over. And all of these big questions are under discussion right now.
Joan Alker: So that's that's where we're at. And and that is why doing this kind of education about the roles Medicaid is playing. Keep our eye on the big picture right now, when we're in this big question of
Joan Alker: allocating resources and cuts. And, Edwin, I'm going to give you the last word. And we are going to take all these questions back. And we do have a lot of fact sheets and products we're developing. So stay tuned. But we will. We'll try to address some of these questions in next week's webinar as well. But, Edwin, I'm going to give you the last word.
Edwin Park: Yeah, I think that, as Joan mentioned, Medicaid threats is a goal here for the incoming Republican Congress. But you know the margins, of course, are very tight in the House to 2215 is the the party difference? The Senate's 53, 47, and as we saw, and as Ann mentioned in 2017, even though it was a protracted process.
Edwin Park: eventually repeal and replace, which again and again included
Edwin Park: elimination of the Medicaid expansion and block grants per capita caps did ultimately fail by one vote in late summer of 2017. So
Edwin Park: you know, it's there's multiple steps in this process. So even though there is a goal of moving as quickly as possible, the process can eventually be slowed down, especially as people understand both the value of Medicaid. The importance of Medicaid, and the implications of these kind of financing changes.
Joan Alker: Thanks so much to everybody, and thanks for joining us. We'll hope to see you next week and and let us know what else we can do to be helpful.
Joan Alker: Have a good rest of your day.