Where Medicaid Stands: From the AHCA to State Waivers

PLEASE NOTE: This is an unedited transcript. Please refer to the video to confirm exact quotes. KARL EISENHOWER: Good afternoon and welcome. We’re glad you could join us today. My name is Karl Eisenhower. I’m the Communications Director at the Alliance for Health Reform. Today’s webinar is a project of the Alliance for Health Reform, the National Institute for Health Care Management Foundation and in collaboration-excuse me, get my presentation going here-in collaboration with the Association for Health Care Journalists. Today, we’ll be discussing Medicaid, which is the largest public source of health coverage in the United States. As a part of this discussion, we will focus on how Medicaid changed under the Affordable Care Act, how it would change again under the House Bill, the American Health Care Act, and under the Trump budget that was released yesterday. We’ll also look at how states have used waivers granted by the Centers for Medicare and Medicaid Services, and what new waivers we can expect under the Trump administration. We’re very fortunate to have on our panel today, Robin Rudowitz from the Kaiser Family Foundation, Chris Pope from the Manhattan Institute, Hemi Tewarson from the National Governors Association, Tony Leys from the Des Moines Register, and again, my name is Karl Eisenhower. We’ll do a little housekeeping here real quickly. On the right-hand side of your screen, you’ll see a little toolbar with an orange arrow. You can use to open and close the webinar tool settings, download handouts, which include the presentation, and that’s how you’ll send us questions for the Q…A segment at the end of the webinar. There are additional handouts for this webinar that are available on our website. Our website is allhealth.org. Finally, if you’re new to this topic or other topics in health policy, we want to make sure you know about the Alliance’s Sourcebook on the Essentials of Health Policy. It provides background on health policy issues and current data. The Sourcebook now is a purely electronic publication, and it lives on the allhealth.org website. Thanks to support from the NIHCM Foundation, we’re able to make continuous updates throughout the year. Okay. Our first speaker-give me one moment here-our first speaker is Robin Rudowitz from the Kaiser Family Foundation, who will give us an overview of how Medicaid works and where it stands today. Robin, I’ll pull up your presentation and hand off to you. ROBIN RUDOWITZ: Great. Good afternoon, everyone, and thank you so much for the invitation to participate in this webinar. There are certainly a lot of things going on with Medicaid. I’m going to try to provide an overview of the program and highlight some of the key issues in the next eight minutes or so. It’s a lot to cover and I’ll move quickly, and then I look forward to the discussion and questions from those of you who are listening. I wanted to start-so, next slide-I wanted to start by reminding folks about the two foundational aspects of the Medicaid program that have been in place since the program was enacted in 1965. First, Medicaid is a double entitlement. It’s an entitlement to eligible individuals for coverage, and it’s also a guarantee to states for federal matching dollars. And, second, unlike Medicare, which is administered by the federal government, Medicaid is a partnership between the states and the federal government. The federal government sets core program requirements, and then states have a considerable amount of flexibility to administer their programs. Next slide. Medicaid has a number of key roles in our health care system. It provides coverage to one in five Americans, assistance to 10 million low-income Medicare beneficiaries. It’s the largest payer of long-term services, so that includes nursing homes as well as community-based long-term care. Medicaid accounts for one in six of all health care dollars spent in the U.S., and is an important revenue source for safety net hospitals and clinics. And, as we already mentioned, it’s an important source of financing for states. Prior to the ACA-next slide-prior to the ACA, eligibility for Medicaid was based on income and categorical requirements. So, a person had to be pregnant or have a disability or be a child to be eligible, and many adults were excluded from coverage. The Medicaid expansion in the ACA was designed to fill gaps in coverage for low-income people, and the ACA also included enhanced federal funding for that new coverage. As a result of the Supreme Court ruling, the Medicaid expansion effectively became a state option, and there are now 32 states that are implementing the Medicaid expansion. While the Medicaid program is not perfect, you may sometimes hear that access in Medicaid is poor. However, looking at this slide and data show that nationally, Medicaid is comparable to private insurance for access and satisfaction metrics. And, far better compared to those who are uninsured. Congress is currently debating the American Health Care Act, and that was passed in the House. There were two really key changes for Medicaid included in the bill. The AHCA would end the enhanced match for newly enrolled expansion adults as of January 1, 2020. And, it would also cap federal Medicaid matching dollars through a block grant or a per capita cap. To understand some of the effects of these changes, this slide provides a snapshot of the coverage and financing tied to the Medicaid expansion. As of the beginning of 2016, there were 14 million people in the expansion group, 11 million who were made newly eligible by the ACA. And, in fiscal year 2015, the expansion accounted for $73 billion in funding, the vast majority of which were from the federal government. Research collected from over 100 studies released since the implementation of the ACA in 2014 shows that the Medicaid expansion has resulted in changes beyond the Medicaid program, including a reduction in the uninsured, increased access to care and financial security for new enrollees, reductions in uncompensated care for hospitals and savings in other areas of state budgets. Studies also point to net fiscal benefit for states from implementing the expansion. So, the other major change included in the AHCA for Medicaid, and was also included in the president’s budget that was released yesterday, is the conversion of Medicaid to a block grant or a per capita cap. These policies are generally designed to cap federal spending and generate savings relative to current law projections of Medicaid and savings typically grow over time. These policies could shift costs to states if spending exceeds the amounts of the capped funding. So, inflationary growth factors typically do not account for unexpected costs for new drugs like the new Hep C drugs or costs to respond to health care epidemics like the new crisis related to the opioid epidemic, or changes in case mix for enrollees such as the rapidly growing elderly population. Block grants or per capita cap policies typically choose a base year and impose a uniform growth rate to the base across states. This creates two issues. First, due to the current flexibility in the program, state spending varies significantly across states. In 2011, per enrollee spending varied from a low of about $4,000 in Nevada to over $11,000 in Massachusetts. This state variation is even more pronounced when you look across different Medicaid enrollment groups. And, second, Medicaid spending growth varies across states. So, from 2001 to 2011, average annual growth and spending for Medicaid averaged about 3.7%, but was over 5% in 14 states. We are, of course, all waiting for the new CBO estimate that will be released later this afternoon. But, the current CBO score of the AHCA projected 839 billion in federal savings for Medicaid and a reduction in enrollment of 14 million by 2026. The president’s budget released yesterday included additional cuts to the Medicaid program. Taken together, if they were additive, which we’re not 100% sure that they are, that could mean up to 1.3 trillion in reductions for the Medicaid program over the next 10 years. Reductions in federal financing could leave states with difficult choices, cut Medicaid or fill gaps in federal spending with new revenues or other reductions in state spending. States with certain characteristics may face more challenges than others in making these choices. I am running out of time, but beyond the legislation, I wanted to talk a little bit about waivers. So, there’s been a lot of attention to Section 1115 Medicaid Demonstration Waivers. These are not new. Most states have a waiver in place, sometimes more than one waiver. Next slide. What is new are some of the things that states are asking for. More states are seeking waivers to impose work requirements as a condition of eligibility for Medicaid. This is something that has never been approved through waivers. When thinking about a Medicaid work requirement, it is important to consider the data that show 59% of adult Medicaid enrollees are working, and among those not working, 35% report the reason why they’re not working is related to illness or disability, or another 28% say they have caretaker responsibilities. States are also seeking more waivers to impose premiums and cost-sharing, and here there’s a large body of research that suggests that these policies result in coverage losses as well as decreased use of services. So, to wrap up, I just want to leave you with two slides. This one is from our polling data that shows that Medicaid is not unpopular, but an important program to more than half of all Americans. And, finally, I’ve gone over a lot of data and statistics, but behind all these numbers are people, and there’s really no better way to understand those numbers than to watch some of these short videos that show different faces of the Medicaid program and all of these videos are available on our website. KARL EISENHOWER: Robin, thank you. I’m going to switch presentations here. Both the American Health Care Act, as Robin mentioned, and the Trump budget propose shifting Medicaid to a system of per capita caps. And, Chris, I don’t know, I don’t think I’ve got the first slide of your presentation here. Excuse me, everybody. So, Christopher Pope from the Manhattan Institute will explain the thinking behind per capita caps and how they would work. Chris? CHRISTOPHER POPE: Thank you, Karl. Thank you, Robin. It’s great to be able to be here this afternoon with you all. So, I’d like to start talking about, really, the context for all this, which is the challenge of cost in the Medicaid program. Medicaid is, obviously, a unique program with the management and the financing is split, the management of the program done by the states and the financing of mostly by the federal government with the states pitching in funds as well. There is, the big focus, I think, the motivation for the per capita caps is the inequity between the states, and what I’ll look at here is really what exactly are the highest states getting. So, what it is at the margin, the Medicaid spending is going at. Well, what is it that we are essentially getting more of from a state spends more than the average in the Medicaid program? And, then I’ll assess the per capita cap that the House put forward as a way to address the spending challenge in Medicaid. And, really, address it relative to what one might hope an ideal per capita cap system might look like or potentially what the Senate might come up with. So, if we look at the background of the program, this is really just looking at the changes in federal spending over the past 50 years or so. And, you’ll notice the two very steep upward lines here, Medicare and Medicaid programs relative to all of the federal spending. They’re increasingly crowding out other budget priorities. Defense has been reduced substantially since the ’60s. And, you’ll see that these are ordered and that other priorities are increasingly being squeezed. Medicaid figure here is obviously just the federal figure, but it’s increased steadily as projected increase well into the future as well. So, the challenges that are unique to Medicaid is that it’s, we talk a lot about third party payment in health care, where insurers are essentially paying for the bulk of the care rather than patients and providers arranging pricing directly. Well, in Medicaid, we have a fourth party, which is the federal government that’s essentially paying for the states to administer, for patients to choose providers, and then for providers to receive funds. So, there’s an additional player here, which adds complexity to the cost of the program and the task of providing cost-effective care. There is no objective cost that’s covered. There is no set of fees that kind of delimits the way that Medicare Advantage does per individual, per kind of diagnostic group, how much they essentially have to purchase care. And, there’s also been a challenge over the past couple of decades with states really trying to classify spending as part of Medicaid to get federal matching funds for things that they were doing anyway. They want to have federal funds be provided to essentially claim additional revenues. We also have the problem that, from a federal taxpayer point of view, the management of the programs really at arms-length. It’s hard to kind of figure out what exactly is the value that’s being gained. Is Massachusetts getting better value for its Medicaid program than North Dakota? There are so many variables in play that it’s really hard to kind of assess that question. And, then there’s also the fundamental problem distribution that the allocation to the states are really in many ways the inverse of needs. So, this is, in theory, what Medicaid is intended to do. It’s intended to provide the highest rate of assistance to the poorest states. The states with the highest matching funds are the ones with the lowest economic output per capita, for the lowest tax basis. And, in practice, we see the federal subsidies to states go the other way. The states that are the wealthiest states get higher per capita subsidies from the federal government for its Medicaid program. That’s really the opposite of what the program was intended originally to operate according to. So, it’s often quite complicated, because Medicaid is so multi-dimensional to track exactly what’s going on. So, I’ve really picked out two states, Alabama and Connecticut as an example of a high spending and then low spending states. Alabama has much higher percentage of its population under the poverty level than Connecticut, but it receives a much lower subsidy from the federal government for its Medicaid program than Connecticut. And, related to that, one might argue in consequence of that, Connecticut is able to enroll a much larger proportion of its population. Now, the matching fund system does provide higher rate of matching funds to the poorer states than wealthier states, but really, all states live under budget constraints, and so it’s often the wealthiest states that are able to put forward the most funds to essentially matching funds from the federal government. Every state would like as much matched as it could, and it’s the wealthiest that are able to take best advantage of that. So, what are these states spending their money on? What distinguishes them? Surprisingly, actually, if you look at hospital care, despite the fact that Connecticut is an expansion state, that Alabama is not, that one might expect Alabama to sort of run like a tighter program with much narrower access to providers, hospital care spending doesn’t vary that much between those two states. There’s a slightly greater variation with other medical providers such as physicians, dentists, drugs, medical equipment, but the real larger share of the disparity between a high-spending and low-spending Medicaid state is really on long-term care. It’s the extent of the long-term care entitlement that accounts for the greatest in the variation. So, we often talk about Medicaid primarily as a medical program for low-income individuals. When we’re talking about interstate variation, it’s really the long-term care costs that are driving a large amount of the differences between what the wealthier states are getting and what the poorer states are getting. So, what is this per capita cap proposal? Well, some of, one of the things to bear in mind that I think the media hasn’t sufficiently touched on is that per capita caps do nothing to constraint future congresses. It’s being changed in the budget legislation this year. It could be changed in future years’ budgets every year, so it doesn’t, it doesn’t really alter the path in a great sense. But, what it does do is it prevents states unilaterally expanding their benefits beyond the current spending path in any current year. And, that really will sort of the first time establish a real discussion about priorities in the program. Now, one might expect that the lower spending states like Alabama are unlikely to much constrained if all that they’re doing is really bringing up their spending towards the national average. One might imagine Congress to essentially make future Congresses to accommodate that spending. But, for the first time, it will mean that the above-average states, the states that already have expanded their Medicaid benefits and eligibility far beyond the national levels, that they for the first time will be forced to justify the spending, and they might have good reasons for it and reasons that will persuade future Congresses. But, for the first time, we’ll be able to have a discussion about whether that’s an appropriate thing for them to be doing. The rhetoric of the deep cuts to Medicaid really is, really shouldn’t be applied to the per capita caps. The average, so the cap is tied to the medical consumer price index, which is a rate that’s been growing at 3.7% since 1999. Current enrollee spending in the Medicaid program has been growing at 2% over that same time, over the past, most of the past two decades. And, so for the most part, it really wouldn’t have been much of a constraint to states spending. It really, the only occasions when states are going to trigger these caps are essentially when they’re legislating to expand their benefits. In a recession, there will be an influx of healthier beneficiaries into each state’s program, so that actually will automatically reduce their per enrollee spending by increasing the denominator. So, there’s a built-in cyclical stabilizer into per capita caps. There are a few tweaks that I think really will be worthwhile as the Senate begins to consider what revisions it might make to the House’s version. Firstly, defining per capita as per enrollee is problematic, because states pretty simply could just increase their enrollment and get around the caps. They could enroll normally costly beneficiaries to really loosen any impact that the caps might have, and the caps might end up being completely ineffective as a result. And, secondly, the point that Robin mentioned earlier, that low-spending and high-spending states are constrained equally by the caps. I think, when you consider maybe the fact that Congress might essentially loosen caps or kind of invent waivers from caps, I think that’s unlikely to be such a huge concern. But, I think there really would be a justification having a slower growth rate in the per capita caps for relatively higher spending, but it’s relative to the lower-spending states. Okay. Thank you. KARL EISENHOWER: Chris, thank you very much. As Chris and Robin both discussed, Medicaid is a state and federal partnership. So, we want to make sure we focus on the state perspective. That’s why we’ve invited Hemi Tewarson from the National Governors Association to discuss what governors are doing and how states are responding to the changes coming from Washington. Hemi? HEMI TEWARSON: Great. Thank you. And, I’m really happy to be here today. So, I’m going to try to keep my presentation to my eight minutes, but I wanted to just start out with just, for those of you that aren’t familiar with the National Governors Association-next slide, please-we are the oldest organization serving governors. We are a bipartisan organization, so our chair is Governor McAuliffe, who’s in Virginia, in a state that has not expanded Medicaid, Democrat. And, then our vice-chair is Governor Sandoval, a Republican governor in a state that has expanded Medicaid. So, I think it really does provide us with a unique perspective on the current debate going on in the Congress. One of the things I just wanted to clarify from my remarks, I am on the Center for Best Practices side. We have two parts of the organization. It’s the Office of Government Relations, which is really the lobbying arm of NGA. And, then the Center for Best Practices, where I’m the Division Director, where we’re really about, you know, helping governors succeed by bringing evidence-based practices forward, and really, you know, breaking down complex challenges into actionable steps that they can actually make progress in their programs. Next slide, please. Well, let’s get to the current conversation. So, you know, I think we’ve heard some really wonderful facts from the last two presenters. I just wanted to highlight a couple of facts that we think are often sort of most asked about and raised in conversations that we have with governors and their staff. One is really about sort of the scope of Medicaid. They, you know, it covers roughly 68 million, one of five Americans, and covering one in two births nationally. So, from a governor’s perspective, it is, you know, one of the primarily in their state for many of their residents. In terms of spending, you know, the spending continues to rise. In 2016, nationally, Medicaid totaled $576 billion, but the stat that we focused on from a C perspective is that Medicaid accounted for approximately 29% of all state spending. So, in a particular state, on average, it’s anywhere from between 25% and 30% of the state budget. And, from a governor’s perspective, that is a very large budget item that is always fraught with conversations each year when they have to balance their budget and decide, okay, what do I need to invest in Medicaid compared to sort of all the other programs that they have to finance. One of the things that I also wanted to focus on, on that slide was, you know, Medicaid is the largest single payer for behavior health and long-term services and support. And, so from a state perspective, it is, you know, they view that program as critical in terms of addressing behavior health needs, including the opioid epidemic and I’ll talk a little bit about that later. But, also long-term services and support, so, you know, because Medicare doesn’t cover those services, Medicaid is there for a really large part of the population. And, you know, as what you just heard in that last presentation, that is one of the, you know, cost drivers for the program currently. But, yet, Medicaid is responsible. Okay. Oh, back one slide, please. So, one of the things that I wanted to talk about is how governors are active on health reform. You know, there are certain principles we here at the NGA have shared collectively from, you know, the bipartisan set of governors that we serve. And, one of the things that, you know, as we talk about how to improve the Medicaid program and, you know, congressional efforts to do that, you know, I think, you know, governors are in agreement there can be improvements made to the program. But, one of the things that we have constantly sort of been talking about is, you know, the responsibility for rural populations should be shared between the federal government and the states. And, so, you know, all of the reforms that are being talked about should not be merely a cost-shift to the states, because frankly, if it is a cost-shift to the states, the states aren’t going to have the budget to sustain all of the different changes and different-they’ll have to make different choices. Next slide, please. In thinking about kind of the path we’re on, I’m not going to spend too much time on this, because we all are pretty familiar with this, but, you know, right now, we’re in the repeal and replace conversation and see where that’s going to go in the Senate. There’s also a second piece that I wanted to talk a little bit about in terms of administration actions and, you know, primarily, frankly, through flexibility, through waivers that are, that are being offered by the current administration. The states are very excited about and figuring out different ways to use that, and that’s sort of this third phase of other legislative action, which, I think, you know, it’s all to be determined, depending on what happens in phase one. Okay. Next slide, please. So, in thinking about the impact of all of these reforms, you know, there’s a lot of things that we’re talking about with governors and their staff. One is, you know, what is the states’ current federal match rate, that’s going to be an impact. Have they expanded Medicaid? What is their current Medicaid eligibility criteria? What does their population growth and demographics look like? What benefits are they currently covering? What’s the regional cost of health care and what’s their trajectory in terms of their, you know, growth rate? What is the role of managed care, and then how are they effectively, you know, helping to finance their programs through things like provider taxes? These are all pieces that are very relevant to states. And, you know, in terms of talking about an impact of a potential per capita cap or block grant, I think they’re, you know, slightly different scenarios, depending on these factors on the individual states. Okay. Next slide, please. So, one of the things I thought might be helpful is to just provide two examples of states. And, this is all publicly available information so, you know, I’m not sharing any secrets. But, you know, one state, Ohio, a state that’s expanded Medicaid, had, you know, crunched a number of different scenarios about what would happen if, you know, the current form of the American Health Care Act was actually enacted. And, this is basically what they predicted. One would be if they kept their expansion to 138% of the FPL, the regular F map, 123,000 people would lose coverage, $6.4 billion would be reduced in total Medicaid spending. And, they would be required to raise $7.8 billion in state share. If they were to limit the expansion to 100%, because they couldn’t afford that $7.8 billion in increase, there would be a higher number of people losing coverage, 284,000, with 14 billion reduction in total Medicaid spend, and then they would have to raise 4.9 billion. If they phase out the expansion altogether in their state, 750,000 people would lose coverage, 37 billion would be reduced in total Medicaid spending, and they would still have to, and then they have $3.7 billion decrease in their state share. So, that’s just to show the choices between, you know, you know, raising the sort of state revenue side and if they’re not able to do that kind of the choices that they have to make on the coverage side, just on the Medicaid expansion piece. Next slide, please. I also wanted to show you a scenario for a state that has not expanded, Virginia. And, they actually took a look at the per capita cap proposal and ran their own numbers to make some projections. And, they project that they would have a $1.8 billion reduction in Medicaid funding between 2020 and 2026. They predicted that they would either have to raise taxes to increase the state share spending, or the flip side would be they’d have to figure out a solution around cutting enrollment, benefits and provider payments. So, I think a question kind of comes up with, okay, you know, CPI medical growth rate that we just heard about in the last presentation, why wouldn’t they be, why wouldn’t that be enough? Because, this is a state that isn’t sort of facing the Medicaid expansion question. Let’s see, actually two slides ahead, I want to skip to the drug costs. One of the things that governors are about, a number of governors, are there are certain growth areas that are trending above CPI medical. And, one of them is drug cost. So, on this chart, it just shows you have the average CPI medical versus the percent increase in Medicaid prescription drug spend compares. And, you can see on the top line in 2014, there was a much higher growth rate for the drug costs than CPI medical. And, some of that was due to Hepatitis C, the high cost of that drug. I think states are concerned about, you know, what is the next innovator drug that’s going to be out there that we can’t predict in our budgets, and that we would be essentially at risk for if we were in a situation like a per capita cap or block grant. And, so one of the things in, you know, thinking about ideas for, you know, reform proposals is how do you provide some protections for states for those types of scenarios when they really are things that out of their control. What kind of tools can they get? If you can go back one slide. The other thing I wanted to raise was the opioid epidemic that is really a hot, probably a top priority other than health reform for governors right now. You know, research has shown that the opioid epidemic has a disproportionate impact on Medicaid beneficiaries. Medicaid beneficiaries are prescribed painkillers at twice the rate of non-Medicaid patients, and are at three to six times the risk of prescription painkiller overdoses. In this chart, you see 30% of adults with opioid addiction have Medicaid, 20% are uninsured and, you know, through the Medicaid program they are covering a range of over 650,000 non-eligible adults with opioid addiction and covering a range of treatment. So, one of the same questions that, you know, the governors, especially in the states that have expanded Medicaid, where they’re providing a lot of sort of behavioral health and substance abuse treatment, if those individuals were to lose access to coverage, would that limit our ability to really continue to address this crisis? So, that is something that is on the mind and in many of our conversations. Next slide, please. And, we can go past that, I got that one already. So, I wanted to just take a minute to talk about waivers. And, so, you know, this administration has really welcomed and opened the door for states in saying that, you know, there’s a lot of opportunity for new flexibility and really wanted to engage with state ideas. And, so, you know, there was an executive order issued, as you probably know, on January 20th, and then a letter from Secretary Price to the states on March 14th that really addressed, you know, the ability of doing these types of waivers and state plan amendments. And, one of the things I think the states that we’ve been working with have really focused are, you know, there are the states that are interested in more work requirements that Robin mentioned, Wisconsin, Maine, Kentucky, a couple of those to mention. But, there are also other states thinking about how can we use waivers more creatively? Are there areas, you know, from our perspective, we work on social determinants of health, because we really believe that some of the reason we have such high spend in the inpatient and emergency department is because of all the other needs that a person may be experiencing. And, so, you know, ideas around how do we better use the system to help address those needs through, you know, you know, funding, thinking about new innovations is something that a number of other states are thinking about. So, I think, you know, states are really welcoming the opportunity for new flexibility and really looking forward to it. I think the one question for them continues to be sort of what is the backdrop of federal reform and how is that all going to work together. So, I want to stop there, because I’m probably at my eight minutes, and so thank you. KARL EISENHOWER: All right, Hemi. Thank you very much. Our next speaker is Tony Leys. We’re very fortunate to have a journalist who have been covering health care since 2000 for the Des Moines Register, and he’s going to talk to us about how he has approa