GOP proposal includes reductions in health care expenditures

Over the weekend the House Committee on Energy and Commerce released a proposal describing how it would achieve the expenditure goals for the Reconciliation Bill. In lieu of direct cuts of payments, the proposal focuses on modifying rules for determining eligibility for the program, including imposing a work requirement.

Eligibility

The proposal would increase the frequency of eligibility review for the expansion population and would increase the home equity threshold to qualify for long term care. It also would discontinue federal funding for Medicaid enrollees before their citizenship has been verified and reduce the federal matching funds for states that opt to enroll undocumented immigrants in Medicaid.

There are several social policy provisions as well. Included in the proposal are restrictions on payments for gender-affirming care and abortions.

The most significant element of the proposal is a work requirement. Under the proposal, to qualify for Medicaid, individuals between 19 and 64 (excluding pregnant women and the disabled) must “engage with the community” for at least 80 hours per month. Community engagement includes working, community service, or school.

Funding

Under the American Rescue Plan Act signed by President Biden, expansion states were afforded a five percent increase in federal matching for Medicaid beneficiaries. This proposal will end that funding increase.

The committee also proposes to reduce federal matching to states that choose to enroll undocumented immigrants in Medicaid. Currently, states are forbidden from using federal funds for undocumented immigrants, but some states use state money to do so. This provision would reduce federal funding to these states.

Provider taxes and state directed payments

Among states, the usage of provider taxes has risen substantially. Provider taxes allow states to increase their matching rates with little cost to themselves or their constituents. Because states will tax providers and then remit those payments back to the providers for services rendered, providers ultimately paid no taxes while states collected increased matching funds from the federal government.

Several experts have been calling on Congress to address this problem. This proposal would freeze provider taxes at their current level and include language to guide HHS in evaluating provider taxes going forward.

State directed payments were the vehicle by which the enhanced matching funds were paid back to the providers. Some experts had claimed that, as a result, Medicaid in these states was reimbursing hospitals at levels approaching much higher commercial payment rates. The committee’s proposal would limit reimbursements to hospitals for Medicaid services to be no greater than Medicare’s reimbursement rate.

Cost sharing

The House proposal would also force states that have expanded Medicaid to require cost-sharing for adults in the expansion population with incomes greater than 100 percent of the federal poverty level.

Conclusion

Over the past ten years, Medicaid has grown considerably in both enrollment and cost. After the surge in enrollment caused by the pandemic, President Biden and many states instituted reforms that incentivized keeping current beneficiaries enrolled and enrolling more in an effort to secure additional funding from the federal government.

The federal government is facing an enormous financial burden in the next fifty years, and our leaders need to ensure that every dollar is spent prudently. A program that is paid for by the federal government, as Medicaid increasingly is, but administered by the states, creates opportunities for funding abuse, and elected representatives need to continuously monitor and adjust to prevent it. The proposal put out over the weekend works toward that objective.