The American Health Care Act Makes Unsustainable Cuts to Medicaid

The American Health Care Act Makes Unsustainable Cuts to Medicaid


Recent policy conversations related to the American Health Care Act (AHCA) have focused on  proposals that would eliminate the Affordable Care Act’s critical protection for people with preexisting conditions. This  controversial proposal has drawn  a lot of attention for good reason. Eliminating this important protection, which keeps insurance companies in the individual (non-group) market from considering health status when making coverage decisions, could hurt millions—especially older adults who tend to develop more health conditions as they age.

But the preexisting condition protection is not the only serious concern. The proposed legislation would also make huge cuts to Medicaid by taking  $880 billion out of the program by 2026. How?  By, among other things, fundamentally changing the way the program is funded. Under the AHCA, Medicaid funding would move from a federal guarantee to match all legitimate state expenditures on health care and long-term services and supports (LTSS) for eligible beneficiaries, to a capped payment system that would give states a fixed dollar amount per enrolled beneficiary.[i]  Although per enrollee caps respond to changes in enrollment, they do not respond to increases in health care costs attributable to medical or pharmaceutical innovation, nor do they respond to other changes in the health care environment that could affect per enrollee spending. Health care costs, we all know, are notorious for their rapid rise. The result: an ever-widening gap between cost and funding.

The impact of such a huge loss of federal Medicaid funds on people with disabilities and poor seniors will be devastating—especially for 11 million Medicare beneficiaries who are also eligible for Medicaid. These individuals—called dual eligibles, or duals—are the poorest and sickest of all Medicare beneficiaries and rely on Medicaid for critical LTSS services, like help with toileting, bathing, and eating.

Faced with major losses of federal funding for their Medicaid programs,  states would have limited options. They could plug the funding hole with state revenues, which is unlikely given competing demands on state budgets. States could also cut provider rates, which could lead to significant access problems for beneficiaires because many providers may choose not to serve the Medicaid population. States could also eliminate optional eligibility categories, including some that provide access to LTSS. Finally, states could reduce or eliminate access to optional services, including home and community-based LTSS. Limiting access to needed LTSS for dual eligibles will most surely result in increased use of emergency room and hospital services, ultimately shifting costs to the Medicare program—creating a “pay me now or pay me later” situation for the federal government.

Rather than take billions  of dollars out of Medicaid and shift significant costs to Medicare and states, it is time to have a reasoned conversation about how to improve the program in ways that don’t leave gaping holes in the health care safety net that millions of people  and their family caregivers rely on.

[i] States have the option of receiving block grant funding for children and non-elderly, non-disabled adults. Block grants are fixed amounts of money that do not respond to changes in enrollment or program costs.

 

 

Lynda Flowers is a Senior Strategic Policy Adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

 

 

 

 



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The American Health Care Act Makes Unsustainable Cuts to Medicaid

The American Health Care Act Makes Unsustainable Cuts to Medicaid


Recent policy conversations related to the American Health Care Act (AHCA) have focused on  proposals that would eliminate the Affordable Care Act’s critical protection for people with preexisting conditions. This  controversial proposal has drawn  a lot of attention for good reason. Eliminating this important protection, which keeps insurance companies in the individual (non-group) market from considering health status when making coverage decisions, could hurt millions—especially older adults who tend to develop more health conditions as they age.

But the preexisting condition protection is not the only serious concern. The proposed legislation would also make huge cuts to Medicaid by taking almost $1 trillion (or 25 percent of all Medicaid dollars in 2016) out of the program by 2026. How?  By fundamentally changing the way the program is funded. Under the AHCA, Medicaid funding would move from a federal guarantee to match all legitimate state expenditures on health care and long-term services and supports (LTSS) for eligible beneficiaries, to a capped payment system that would give states a fixed dollar amount per enrolled beneficiary [i]. Although per enrollee caps respond to changes in enrollment, they do not respond to increases in health care costs attributable to medical or pharmaceutical innovation, nor do they respond to other changes in the health care environment that could affect per enrollee spending. Health care costs, we all know, are notorious for their rapid rise. The result: an ever-widening gap between cost and funding.

The impact of such a huge loss of federal Medicaid funds on people with disabilities and poor seniors will be devastating—especially for 11 million Medicare beneficiaries who are also eligible for Medicaid. These individuals—called dual eligibles, or duals—are the poorest and sickest of all Medicare beneficiaries and rely on Medicaid for critical LTSS services, like help with toileting, bathing, and eating.

Faced with major losses of federal funding for their Medicaid programs,  states would have limited options. They could plug the funding hole with state revenues, which is unlikely given competing demands on state budgets. States could also cut provider rates, which could lead to significant access problems for beneficiaires because many providers may choose not to serve the Medicaid population. States could also eliminate optional eligibility categories, including some that provide access to LTSS. Finally, states could reduce or eliminate access to optional services, including home and community-based LTSS. Limiting access to needed LTSS for dual eligibles will most surely result in increased use of emergency room and hospital services, ultimately shifting costs to the Medicare program—creating a “pay me now or pay me later” situation for the federal government.

Rather than take millions  of dollars out of Medicaid and shift significant costs to Medicare, it is time to have a reasoned conversation about how to improve the program in ways that don’t leave gaping holes in the health care safety net that millions of people  and their family caregivers rely on.

 

[i] States have the option of receiving block grant funding for children and non-elderly, non-disabled adults. Block grants are fixed amounts of money that do not respond to changes in enrollment or program costs.

 

 

Lynda Flowers is a Senior Strategic Policy Adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

 

 



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MacArthur Amendment to AHCA Means Higher Premiums for Age and Pre-existing Conditions

MacArthur Amendment to AHCA Means Higher Premiums for Age and Pre-existing Conditions


We already know that health insurance legislation known as the American Health Care Act (AHCA), is a bad deal for older Americans ages 50-64. For people who purchase coverage on their own in the individual (nongroup) market and are not yet eligible for Medicare, the bill would significantly increase premiums for all older adults and spike costs dramatically for lower- and moderate-income older adults.

Now a bad bill just got worse. The House is considering a new amendment introduced by Representative MacArthur that would make the legislation even more harmful for older consumers. The MacArthur amendment establishes state waivers that would allow insurance companies to charge older Americans and people with pre-existing health conditions higher premiums and weakens critical consumer protections.

Even Higher Premiums for Older Adults

AARP strongly opposes the AHCA for weakening the 3:1 limit on age rating in current law, which prohibits insurance companies from charging older adults more than three times the premium a younger person pays for the same coverage. The AHCA would allow insurance companies to charge older adults significantly higher rates — up to five times more than younger adults. The MacArthur amendment goes further by allowing states to set even higher limits – so that older adults can be charged six times, or more, what they charge younger adults.

Because of these changes, lower- and moderate- income older adults, who would receive significantly less tax credit assistance under the bill, would end up paying significantly higher premiums than under current law. Since the MacArthur amendment would allow insurers in waiver states to charge older adults even higher prices for health insurance, their premiums will increase higher than what we previously estimated.

Loss of Protections for People with Pre-existing Conditions

The amendment would also allow insurance companies to return to charging people with pre-existing conditions higher rates based on their health status – something that was previously common practice among insurers but prohibited by the ACA. If a person experiences a break in insurance coverage, insurers in waiver states could be free once again to charge people with pre-existing conditions significantly higher, and potentially cost-prohibitive, rates. This would hit the older adult population hard, since 40 percent of 50- to 64- year olds have a pre-existing condition.

Reduced Coverage and Fewer Choices for Older Adults and People with Pre-existing Conditions

The MacArthur amendment allows states to waive federal standards for minimum coverage (known as Essential Health Benefits) and instead set their own standards. Under current law, insurance companies have to sell plans that include basic comprehensive coverage, requiring benefits such as prescription drugs, rehabilitative services, and mental health care. Under this amendment, states could set standards that allow insurers to sell less comprehensive, potentially even “skimpy” coverage.

Once a state chooses to eliminate the requirement that policies include certain benefits, it is unlikely that those benefits would be offered at all in the individual market in that state. The result would be less choice and reduced access to needed services for people with pre-existing conditions and health needs.

Weaker Protections Against Lifetime and Annual Limits – Even for Those with Employer Sponsored Coverage

The MacArthur amendment’s language allowing states to weaken Essential Health Benefit requirements also weakens another related set of consumer protections – the ACA’s limits on annual out-of-pocket spending and ban against lifetime and annual insurance limits. For example, as a result of the ACA, 105 million Americans, including people with employer based coverage, benefited from the law’s ban on lifetime limits, providing consumers with critical protection from the risk of medical bankruptcy. Under the MacArthur amendment, waived essential health benefits would no longer be included in these protections. This would be particularly harmful for people with pre-existing conditions or people who develop serious health problems if the services they need once again become subject to such limits.

The MacArthur amendment, simply put, makes a bad bill even worse.

Photo: istock

 

Jane Sung is a senior strategic policy adviser with AARP’s Public Policy Institute (PPI), where she focuses on health insurance coverage among adults ages 50 and older, private health insurance market reforms, retiree coverage, Medicare supplement insurance and Medicare Advantage.

 

 

 

 



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State High-Risk Pools Failed Consumers in the Past—and They’d Fail Them Again

State High-Risk Pools Failed Consumers in the Past—and They’d Fail Them Again


Photo courtesy of iStock

The  American Health Care Act (AHCA) threatens to do away with the Affordable Care Act’s (ACA) protection for people with preexisting health conditions. This provision prevents insurance companies from denying these individuals coverage.

Eliminating this protection would force millions of Americans to—once again—rely on state high-risk pools. State high-risk pools are supposed to provide access to health insurance for people who cannot get coverage in the individual health insurance market because of preexisting health conditions.

State high-risk pools may sound like a good idea but, in reality, they are fraught with problems. One of the biggest lessons learned from experience with state high-risk pools: steep premiums that put coverage out of reach for millions. In the past, monthly premiums in state high-risk pools could be up to 200 percent higher than in the individual (non-group) market. Consequently, only a small fraction of those with preexisting conditions could afford to buy a plan. Yet, these premiums—high as they were—only covered about half  the amount needed to pay enrollee claims. Most states tried to close the financial gap through taxes on providers and government subsidies, but even those efforts proved insufficient. We project that if states return to pre-ACA high risk pools in 2019, premiums for people with pre-existing conditions could be as high as $25,700 annually.¹

Another problem with state high-risk pools was that they typically offered skimpy coverage. For example, people who bought insurance through high-risk pools in nearly all states that offered them had to wait between six and 12 months before their preexisting conditions were covered. In addition, many had annual dollar limits on coverage for prescription drugs and behavioral health services.

The AHCA would provide $100 billion over nine years to fund—among other things—state high-risk pools. This level of funding is woefully inadequate to meet the need. One study estimates that it would cost at least $178 billion a year to adequately fund high-risk pools today. In the current policy environment, it is unlikely that the federal government will provide the necessary funding to make state high-risk pools work for the millions of people with a preexisting condition.

Bringing back insurers’ ability to consider preexisting conditions would hit older people especially hard—since people tend to have more health problems as they age; but younger people could be hurt by these policies too. Thus, the ban on preexisting conditions is an important protection for people of all ages. It’s time to stop recycling bad policies and come up with solutions that work for everybody.

 

Lynda Flowers is a senior strategic policy adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

 

 

 

 

Claire Noel-Miller is a senior strategic policy adviser for the AARP Public Policy Institute, where she provides expertise in quantitative research methods applied to a variety of health policy issues related to older adults.

 

 

 

 

 

[1] Calculations by AARP Public Policy Institute. Estimate derived as follows: State-specific average premium data in 2010 obtained by dividing total premium revenues over total enrollment in each state high-risk pool. The average premium was inflated to 2019, when the AHCA would allow high-risk pools, using actual and projected per capita growth rates from direct purchased private health insurance from CMS Office of the Actuaries.

 

 



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