The fights over how Republicans’ Obamacare repeal legislation changes or eliminates ACA-related provisions have made the loudest noise as the legislation has moved forward on Capitol Hill. But its biggest provision — both in terms of budgetary impact and long-term effect on the health care system — is its overhaul of Medicaid, a transformation that Republicans have sought long before the Affordable Care Act was passed in 2010.

Given the legislative limits GOP lawmakers face in fully repealing Obamacare and the struggles they’re having landing on a consensus ACA alternative, one could argue that the Obamacare repeal push is actually a trojan horse for the much more sweeping conversion of Medicaid, from an unlimited match rate into a system where federal funding will be limited on a per-enrollee-basis. Republicans are under immense political pressure, after years of campaign promises, to dismantle the ACA. But rather than tackle the 2010 bill on its own, they’ve used repealing it as a vehicle to attempt what they’ve wanted to do to Medicaid all along.

That’s the message, at least implicitly, congressional GOP leaders are signaling as rank-and-file have become nervous about the bill, the American Health Care Act.



Senate Majority Leader Mitch McConnell (R-KY), defending the bill from a nasty score from CBO, called it the “most significant entitlement reform in history.”

House Speaker Paul Ryan (R-WI), in a press conference last week, stressed that the legislation sought to “modernize the Medicaid program along the lines that we as Republicans have been talking about for years.”

House Ways and Means Chair Kevin Brady (R-TX), when asked by reporters about the internal disagreements over the bill, argued, “For Republicans, not many of us have had a chance to cut taxes by nearly a trillion dollars, cut spending by more than that, reduce the deficit by over $300 billion and finally start to return control of Medicaid to states where they can design it for their communities, not Washington: that is a pretty good day’s work.”

There’s also the legislation itself:

Yes, it shifts around the ACA’s tax credits, it tweaks a few of its market reforms and it repeals an overwhelming number of its taxes.

But the bill’s major pay-for, to the tune of nearly a trillion dollars, is its overhaul of Medicaid and that’s where most of its coverage losses come from too. The Congressional Budget Office said this week that 14 million people would lose their coverage due to the legislation’s Medicaid provisions, though it’s unclear how many of those are a result of the phase out of Medicaid’s expanded eligibility versus its transformation of the larger program into a per-enrollee block grant.

Either way, that uninsured number stands to get bigger as we get beyond the 10-year window for which the CBO scored, according to Robin Rudowitz, associate director for the Kaiser Family Foundation’s Program on Medicaid and the Uninsured.

“The change to the per capita financing system is a much bigger, fundamental change to the program,” she said, compared to the expansion phaseout that so far has gotten more pushback from GOP moderates.

That’s because the metric Republicans propose to increase the amount of funding the feds give states per enrollee over time does not increase as quickly as health care costs rise, nor does it anticipate other unanticipated hikes in per enrollee costs, like the introduction of a new but very expensive drugs.

With the feds offering a smaller and smaller share of the total costs to cover a state’s Medicaid program, the state will have the choice of either finding new revenue — via tax hikes or cuts elsewhere in their budgets — or making cuts to the program, such as offering fewer benefits or imposing cost-sharing or work requirements (which the Department of Health and Humans Services, under Secretary Tom Price, is already practically begging states to do.)

Taking Medicaid in this direction is a decades-old goal of the conservative movement.

Republicans have wanted it “probably since the beginning of time,” said Joseph Antos, a health policy expert at the right-leaning American Enterprise Institute. It’s an idea that first caught on in the academic world when conservatives in the 1970s and 1980s became concerned with how states were using the program, he told TPM. Politically, for Republicans, it’s always been a major challenge to take on given the pressure lawmakers, particularly in the Senate, come under from their governors who don’t want to lose the funding, he said.

The closest Republicans came was under the Clinton administration, when House Speaker Newt Gingrich made a legislative push to block-grant the system that fell apart due squabbling over the funding formulas between states. The current bill takes a fairly simple approach, calculating the per enrollee formula according to which of five broad demographic categories — children; the elderly; blind and disabled persons; pregnant women and parents; or working adults — he or she fits in.

“By fixing it just according to the demographic rather than likely health usage, you really expose the state,” Antos said.

It’s already getting tough pushback from governors, advocates, hospitals and even the health insurance industry.

The American Hospitals Association said in a letter to lawmakers that “it appears that the effort to restructure the Medicaid program will have the effect of making significant reductions in a program that provides services to our most vulnerable populations,” while a top insurance industry trade group told key Republican House leaders the per-capita caps “could result in unnecessary disruptions in the coverage and care beneficiaries depend on.”

“We are very concerned that a shift to block grants or per capita caps for Medicaid would remove flexibility from states as a result of reduced federal funding. States would most likely make decisions based mainly on fiscal reasons rather than the health care needs of vulnerable populations and the stability of the insurance market,” Massachusetts’ Republican Gov. Charlie Baker wrote in a letter to lawmakers in January, before the official plan was released.

Because the federal government hasn’t put a hard limit on the funding it’s willing to offer under the current Medicaid program, states have been creative in how they use the program, funneling Medicaid funding towards everything from the HIV/AIDS crisis to the opioid addiction epidemic. Medicaid pays for the care of about two-thirds of seniors in nursing homes, and more reform-minded states have also used it to encourage home- or community-based care of the elderly, a more cost-effective system. It’s been pivotal for providing support for disabled people, whose health care costs are especially high. They make up about 15 percent of Medicaid enrollees but 42 percent of its spending.

“Medicaid has played multiple roles in the health care system,” Rudowitz said. “We don’t know how states will respond, but a lot if these key things are at risk.”

The breadth of what Medicaid touches goes to show what a drastic change it will be in the long-term to ask states to take over an increasingly larger share of the program. But it also motivates the Republicans’ criticisms of the program in its current form, since states are less exposed if they seek to expand the scope of their coverage.

“They think that the current finance system let’s states be lazy about reforming the way they run their own health systems,” Antos said.