Report: State Medicaid Enrollment Cuts Would Be Steep Under House Bill

Thirty states (including Washington, D.C.) could cut their Medicaid enrollment by up to 20 percent or more due to huge Medicaid cuts in the House bill to repeal the Affordable Care Act (ACA), and twenty of them could each cut theirs by up to 30 percent, new Urban Institute estimates show (see table). The emerging Senate Republican health bill is expected to largely adopt as-is the House’s Medicaid provisions, which would effectively end the ACA’s Medicaid expansion and radically restructure Medicaid by converting it to a per capita cap or block grant. (The Senate may actually be considering deepening the House’s Medicaid cuts.) The Urban estimates, thus, offer a good picture of what’s at stake for individual states and millions of low-income Medicaid recipients under either the House or Senate ACA repeal legislation.

All told, states could cut Medicaid enrollment by as much as 14.8 million or nearly 25 percent by 2022 if they dropped the Medicaid expansion and made other enrollment cuts due to the per capita cap or block grant. Eliminating the Medicaid expansion could cause 12 million newly eligible adults to lose coverage; the per capita cap could wipe out coverage for another 2.8 million. Kentucky could experience the biggest percentage enrollment cut of any state, at 48 percent.

To avoid cutting enrollment in the face of such large Medicaid cuts, states would have to raise their own Medicaid spending by $371 billion or 13.2 percent over ten years, compared to projected spending under current law. The necessary spending increase would be as high as 49 percent in New Mexico. That, however, would require states to either significantly raise taxes or deeply cut other parts of their budget (like education) by those amounts. States would far likelier drop the expansion and cut eligibility, benefits, and provider payments in the rest of their Medicaid programs.

While states could try to avoid deep enrollment cuts by focusing their Medicaid cuts mainly on provider payments and optional benefits, that would prove highly challenging, Urban explains. Provider payments in Medicaid are already relatively low. Dropping dental or vision coverage would produce few savings, and dropping prescription drug coverage would likely raise costs in such other areas as hospital inpatient care and emergency room care. As a result, states would likely have no choice but to significantly cut Medicaid eligibility, driving enrollment losses of the size that Urban projects.

In fact, as Urban notes, its estimates may understate the harmful impact of the House bill’s Medicaid provisions. For example, if new drugs, treatments, or other technological innovations fuel faster growth in per-beneficiary Medicaid spending than is now projected, the federal funding cuts needed to comply with a per capita cap (and the resulting coverage losses) would be even greater. Also, the per capita cap doesn’t account for the continued aging of the elderly population — as more seniors move from “young-old” to “old-old” age (85 and older) and their health and long-term care costs rise — and that, too, would increase the size of the funding cuts over the long run. Moreover, once the per capita cap were enacted into law, federal policymakers could easily lower its annual growth rate in the future to achieve additional savings. In addition, the Urban estimates don’t account for expected variation in states’ Medicaid per-beneficiary spending growth, which would fuel disproportionately larger cuts in some states.

Finally, Urban does not account for the fact that other states could adopt the Medicaid expansion in the future, which would further increase the enrollment losses (relative to current law) if the President and Congress subsequently ended the expansion.