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Senate Bill’s Medicaid Cuts Would Be Even Deeper than House Cuts

Update, June 26: We’ve revised these posts to reflect the text of the Senate bill released June 22.

As we explained, the Senate health bill would lower the annual increase in state Medicaid funding under a per capita cap to the general inflation rate for all populations starting in 2025, which is well below the House-passed bill’s already inadequate growth rate. That means states would have to absorb much deeper cuts in federal Medicaid funding over the long run than under the highly damaging House bill.

How much deeper? Multiple estimates suggest that the long-run cuts to Medicaid from a per capita cap indexed to general inflation could be several times larger — or more — than the already severe cuts under the House cap:

  • The Urban Institute estimates that the House bill would force states to raise their own spending by $371 billion over ten years in order to maintain their existing Medicaid programs. But earlier Urban estimates find that states would need to raise their own spending by $841 billion over ten years — 2.3 times more — under a per capita cap that grew only with general inflation.
  • The Brookings Institution estimates that the House bill’s per capita cap, if implemented in 2004, would have lowered federal Medicaid funding for states by $17.8 billion in 2011. Based on these Brookings estimates, the Center for American Progress estimates that the federal cut in 2011 would have been $46.4 billion — 2.6 times more — under a per capita cap that grew only with general inflation.

    Put another way, the Brookings analysis found that states would have had to raise their own spending in 2011 by 11 percent, on average — and by far more in some states — to offset the federal cuts resulting from the House bill. Under a cap indexed to general inflation, that figure jumps to 29 percent. Neither of these increases is likely, so states would instead have to cut Medicaid eligibility, benefits, provider payments, or a combination of all three.

The House bill would already produce large federal cuts. Altogether, it would cut federal Medicaid spending by $834 billion over ten years and reduce enrollment by 14 million by 2026, relative to current law. That’s in part because the Congressional Budget Office (CBO) expects Medicaid per beneficiary costs to rise by an average of 4.4 percent a year over the next decade, while the House bill’s per capita cap would take a state’s spending per beneficiary in fiscal year 2016 and increase it annually through 2019 only by the medical care component of the Consumer Price Index (M-CPI), which CBO expects to grow by 3.7 percent per year. Starting in 2020, when the cap takes effect, it would grow by a mix of M-CPI or M-CPI plus 1 percentage point, depending on the beneficiary group.

States would also be responsible for all Medicaid costs that exceed the cap, including higher costs resulting from a new epidemic or breakthrough treatment and demographic changes like the aging of the population.

Under the Senate bill, the per capita cap would grow for all populations by only general inflation starting in 2025. CBO projects general inflation to grow by only 2.4 percent a year.