A bill to overhaul Obamacare would substantially cut Medicaid funding to states by $713 billion through 2026 and more than $3.5 trillion over the next 20 years, a new analysis by a healthcare consulting firm found.
The analysis is of the Graham-Cassidy bill, which Republicans are calling their last shot at tackling Obamacare. Avalere Health is the latest to find that the legislation would result in major cuts in funding to all states.
The bill, led by Sens. Lindsey Graham, R-S.C., and Bill Cassidy, R-La., would eliminate Obamacare’s Medicaid expansion in 2020 and take funding for the expansion and subsidies to people on the individual market and give them to states via block grants.
States would see $593 billion in reductions through 2026 due to lower Medicaid funding in the block grants.
States would have another $120 billion cut through 2026 due to the installation of a per capita cap funding system for all of Medicaid. A per capita caps system provides Medicaid funding per beneficiary to a state, and likely results in lower federal funding for the entitlement program that provides healthcare to low-income people.
Funding would become even steeper through 2036, with states losing $3.5 trillion.
Avalere found problems with the block grants that would replace Medicaid expansion funding and funding to lower costs for people on the individual market, which includes Obamacare’s exchanges.
“States are only permitted to use 15 percent of these block grant funds for Medicaid and are therefore limited in their ability to use an existing and currently operational program to provide coverage,” it found.
While Medicaid dollars change, the requirements for program eligibility, scope of coverage, and patient protections don’t.
States would be forced to still meet these requirements with less money, said Avalere Senior Vice President Caroline Pearson.
States can set up their own insurance program for low-income residents, but it would have to be outside of Medicaid. States would have two years to set up their own programs under the bill.
After the Medicaid expansion ends in 2020, the block grant amounts would differ by state. Avalere found that 34 states and the District of Columbia would see substantial reductions in Medicaid funding, with the rest seeing a boost in funding.
The goal is to create funding parity between states that did expand Medicaid and states that did not, so that each state gets the same base amount by 2026. However, the funding would have to be reauthorized after 2026, which may not be a certainty in Congress.
However, analyses have found that overall federal funding to all states would be cut under the bill.
Avalere previously estimated that overall federal funding would be cut by $215 billion through 2026 and the nonpartisan Kaiser Family Foundation found it would be cut $160 billion in the same time period.
