With a pandemic spreading, society locked down, kids at home, and millions of layoffs, working families are navigating enough challenges right now. But hidden in the hundreds of pages of the recently passed $2.2 trillion coronavirus relief legislation is a combustible policy prescription that’s about to bring mayhem to healthcare for the middle class.
Of course, Congress was right to craft a robust national response to the health and economic fallout of the coronavirus. And legislators were right to focus on strengthening our safety net for the truly needy: After all, that’s what it exists for.
To that end, Congress increased the federal government’s share of most of the costs for Medicaid — the program was designed for low-income seniors and individuals with disabilities — by bumping up the federal medical assistance percentage to provide billions in additional funding for states.
But as with most federal funding, there are strings attached. Along with other provisions, Congress has planted the seed for Medicaid’s invasion of the middle class.
First, to receive the money, states must not change their program standards or adjust local contributions, nor can they remove anyone from Medicaid without the federal government’s permission even if enrollees aren’t eligible.
Yet Medicaid was already crushing state budgets before the coronavirus crisis. With an economic fallout that could far surpass the Great Recession, leaders are now facing impossible decisions with or without the federal aid.
But incredibly, these restrictions block federal aid to the states that use Medicaid’s flexibility the most, including those with laws that ensure regular eligibility checks to preserve aid for the truly needy. Gov. Andrew Cuomo, in the eye of the storm, recently voiced his frustration with these restrictions.
And that’s just the first domino that will fall.
The second domino seems unrelated at first: Congress substantially expanded benefits and eligibility for unemployment. In January, the average benefit was $370 per week. Now, individuals will receive an additional $600 per week. In other words, the average unemployed worker will receive more than $50,000 a year in benefits, putting a family of two at three times the poverty line. This is certainly generous, but it too comes with strings attached.
The third domino, at the intersection of unemployment and Medicaid, will make this clear, and it’s where the mayhem will begin.
Congress will effectively force up to 50 million citizens out of the private healthcare market and into Medicaid. The law now mandates that states must disregard this additional unemployment income in determining eligibility for Medicaid, unlike regular unemployment benefits.
And because Congress has made these individuals artificially eligible for Medicaid and because Obamacare already makes anyone eligible for Medicaid ineligible for premium subsidies in the private healthcare market, Congress is about to cause a massive distortion in healthcare coverage for middle-class families. Even when individuals return to work, become ineligible for Medicaid from higher incomes, and have access to private health coverage, states are barred from removing them from the program.
In this time of need, taking away flexibility is not the right solution. Patients on Medicaid have much more limited access to care. And because Medicaid reimburses providers at significantly lower payment rates, often below the actual cost of treatment, hospitals will struggle even more than they are already.
Although we face an economic fallout worse than the Great Recession, it’s important to remember that nothing like this has ever been done before. The effect on healthcare and welfare will be colossal. Obamacare expanded Medicaid to able-bodied adults up to 138% of the poverty line — not three times the poverty line, as this latest change will do. Congress’s package after the Great Recession mandated that states disregard $25 per week in additional unemployment benefits, not $600 per week.
If we aren’t careful, this mayhem will spread Medicaid’s problems to middle-class families. State budgets will be consumed for years to come, and single-payer healthcare will establish a foothold when we can least afford it. Even worse, if Congress’s response to the Great Recession is any indication, the sunset provisions on these restrictions could extend for years after the emergency.
Remember all the promises that Obamacare would help families facing medical and financial emergencies and do nothing to damage private healthcare? Remember how all the provisions buried in the 900-page bill that undercut those promises gradually emerged after the bill was passed?
Working families remember. And it’s about to happen again.
Scott Centorino is a senior fellow at the Foundation for Government Accountability.
