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ACA Lawsuit Threatens Tens of Millions of Medicaid, Medicare Beneficiaries

On Medicaid and Medicare’s 54th birthday, tens of millions of beneficiaries face direct harm from litigation seeking to overturn the Affordable Care Act (ACA) — which strengthened both programs and updated how they operate, transforming Medicaid’s eligibility rules and Medicare’s payment systems.

A federal appeals court recently heard oral arguments in Texas v. United States, the lawsuit in which the Trump Administration and 18 Republican attorneys general are asking the courts to invalidate the entire ACA. A district court did so, but its legal reasoning was weak, and even some of the ACA’s most committed opponents predict that higher courts will ultimately overturn the decision. But, if upheld, the decision would have severe consequences not only for those covered through the ACA marketplaces or benefiting from its protections for people with pre-existing conditions, but also for Medicaid and Medicare beneficiaries.

Most significant, the ACA gave states the option to expand Medicaid to adults with incomes below 138 percent of the poverty line, and states have extended coverage to almost 13 million people who would lose it if the court’s decision prevails.

On top of that, overturning the ACA would jeopardize states’ ability to administer their Medicaid programs even for those who remain eligible. The ACA required states to transform how they determine Medicaid eligibility for most enrollees, streamlining the process for both states and enrollees. If the law were overturned, states would have to return to the old — and more complicated — ways of processing and determining Medicaid eligibility. Not only would this harm beneficiaries, it could also be a significant challenge for states, given the dramatic technology changes they’ve made to their eligibility systems to comply with the ACA. It’s unclear how states could determine Medicaid eligibility if they suddenly had to return to pre-ACA rules.

For Medicaid, as we’ve explained, overturning the law also would:

  • Roll back coverage for about 1.5 million children, as well as for people aged 19 to 26 who were formerly in foster care.

  • Make it harder for seniors and people with disabilities to get care in their homes and communities. 

  • Raise federal and state costs for prescription drugs by undoing reforms to Medicaid’s drug rebate. 

  • Discourage states from promoting preventive services by eliminating federal incentives to offer services such as immunizations and tobacco cessation programs at no cost for beneficiaries.

Invalidating the entire ACA would also cause disruption in Medicare, calling into question all of the law’s changes to that program. In particular, the ACA altered Medicare’s annual payment updates to hospitals, skilled nursing facilities, and certain other health care providers, as well as payments to Medicare Advantage health plans. If the court’s decision stands, all of these payments would have to change, creating confusion and uncertainty for months or years until the Centers for Medicare & Medicaid Services (CMS) could establish new regulations to reset all of these rates.

Meanwhile, overturning the ACA would also jeopardize such Medicare improvements as:

  • Closing the prescription drug “donut hole.” In 2020 seniors would pay 100 percent instead of 25 percent of the cost of brand-name drugs that fall into the Medicare Part D coverage gap.

  • Providing preventive services without cost-sharing. The ACA eliminated beneficiary coinsurance for most preventive services, such as screenings, and added coverage of an annual wellness visit.

  • Strengthening Medicare’s financing. ACA payment reforms and revenue increases strengthened the financial status of Medicare’s Hospital Insurance trust fund. Before the ACA, Medicare’s trustees projected that the trust fund would become insolvent in 2017. They now project it will remain solvent through 2026. The ACA also eliminated four-fifths of the fund’s long-run shortfall.

In both Medicaid and Medicare, overturning the ACA would also jeopardize delivery system reform and other health care quality improvement initiatives. The court decision would effectively shut down CMS’ Center for Medicare and Medicaid Innovation, ending demonstration projects designed to improve the delivery of care to Medicaid and Medicare beneficiaries while lowering costs for both states and the federal government. It would also eliminate successful incentives for hospitals to prevent avoidable readmissions and hospital-acquired conditions.