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House GOP Health Bill’s Per Capita Cap Threatens Everyone’s Medicaid Coverage

By converting Medicaid to a per capita cap or block grant, the House-passed Republican bill to repeal the Affordable Care Act threatens coverage for all Medicaid beneficiaries. Here’s why:

Under the House bill, the federal government starting in 2020 would no longer pay a fixed percentage of states’ overall Medicaid costs, as it does now. Instead, it would pay only a fixed amount per beneficiary, with the amount set to grow at a slower rate than the projected growth in Medicaid costs. States would therefore see less federal Medicaid funding than under current law, with the cuts growing each year.

The per capita cap establishes separate funding caps for seniors, people with disabilities, children, other adults, and adult expansion enrollees, and states receive an overall amount of funding that’s the sum of each population’s per capita cap multiplied by actual Medicaid enrollment in each such population group. That means that even if the cap amount for one group was adequate, a state would still face a substantial overall federal funding shortfall if the cap amounts for other groups were increasingly inadequate. And, to compensate for a substantial overall federal funding shortfall, a state would have to cut Medicaid across its entire program — regardless of how much each population’s per capita cap contributed to the total funding cut in that year.

House Republicans purported to protect seniors and people with disabilities by providing a “more generous” growth rate for those groups’ caps starting in 2020 than the growth rate it provided for children and other adults. But seniors and people with disabilities would still face eligibility and benefit cuts because the overall cap was inadequate. Moreover, Medicaid costs are already much higher for seniors and people with disabilities and, in coming decades, average health and long-term care costs for seniors will rise significantly as baby boomers move into very old age. Those 85 and older cost 2.5 times more than younger seniors. The per capita cap locks in current Medicaid spending per beneficiary (as of 2016) and thus won’t adjust for this cost growth, so states will have to cut Medicaid deeply to balance their budgets.

Even excluding populations or benefits from the cap wouldn’t protect them from cuts. The House bill, for example, excludes from the cap spending related to the Medicare Savings Programs (MSPs) — which help low-income Medicare beneficiaries with Medicare premiums and cost-sharing, and for which some seniors on Medicaid are eligible. The MSPs would still be vulnerable to cuts that states would make in response to the per capita cap and, as a result, seniors on Medicaid who benefit from these programs would still be adversely affected.

In essence, no one with Medicaid coverage can or will be protected from the large and growing Medicaid cuts that states will have to make due to federal funding shortfalls under the overall per capita cap. Nor can any benefit that Medicaid provides be protected.