The impact of the Senate GOP health-care bill on Medicaid enrollees and financing is one of the major points of debate in the Senate. Previously, we awarded Three Pinocchios to President Trump’s claim that the Senate proposal, the Better Care Reconciliation Act (BCRA), actually increases Medicaid spending.

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Is McConnell’s claim accurate?

The Facts

The Senate bill would phase out the Medicaid expansions under the Affordable Care Act (“Obamacare”) by reducing the federal match for newly eligible adults, place a cap on the federal reimbursements to states, and lead to fewer people being enrolled than under current law. So far, 31 states and the District of Columbia have expanded Medicaid eligibility.

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Like all health insurance markets, Medicaid is constantly churning enrollees. So people on Medicaid by the time the BCRA takes effect would not be the same population of people who are “currently” on Medicaid. Some people may leave Medicaid if, for example, they had access to employer health insurance. They may not be able to get back on Medicaid if they sought to later, if the eligibility changes.

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The nonpartisan Congressional Budget Office estimates the BCRA would lead to 15 million fewer Medicaid enrollees by 2026 than there would be if current law stayed in place. Medicaid spending would be reduced by $772 billion over 10 years, from 2017 to 2026, compared to the current law.

The cap on federal reimbursements begins in fiscal 2020, and the reduction in federal matching rates for newly eligible adults in expansion states starts in fiscal 2021. Under Obamacare, the federal government initially paid 100 percent of the states’ costs for the newly eligible population. That match will phase down to 90 percent by 2020 and beyond. Under BCRA, that match would be phased down to an average of 57 percent, according to CBO.

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The bill does not require or direct states to change Medicaid, and states run their own Medicaid programs. This is the crux of McConnell’s argument.

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States can make choices that are best for them regardless of BCRA, and it doesn’t mean that federal law would “cause” these changes, explained McConnell’s staff. Some states would choose to keep their current level of Medicaid coverage, and change their state budget priorities to make that work.

But some states would scale back or eliminate coverage for newly insured Medicaid populations because of the financing changes in BCRA, according to CBO. Other enrollees would become eligible for subsidies for the individual market or could choose to enroll in their employers’ insurance if they have the option.

“With less federal reimbursement for Medicaid, states would need to decide whether to commit more of their own resources to finance the program at current-law levels or to reduce spending by cutting payments to health-care providers and health plans, eliminating optional services, restricting eligibility for enrollment through work requirements and other changes, or (to the extent feasible) arriving at more efficient methods for delivering services,” CBO found.

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The BCRA would eliminate penalties on people who do not purchase health insurance. CBO found that eliminating the mandate would not lead current enrollees to disenroll from Medicaid, but that some people would choose not to re-apply in the future.

Experts say decreased federal reimbursement would place pressure on states to make changes on who and what they cover, and how they pay providers. Some states already are considering cuts due to state budget gaps. States have no easy options when responding to cuts to federal matches, according to the nonpartisan Kaiser Family Foundation.

Kaiser Family Foundation’s president and chief executive Drew Altman wrote about the reality gap in such rhetoric, in an op-ed in The Washington Post: “There is no way states can replace funds of this magnitude. … The idea that a phaseout would give states time to plan and adjust is driven by a belief that states can operate Medicaid with far less money if they have greater flexibility. In this case, with funding cuts this large, it’s simply wishful thinking.”

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Moreover, at least seven expansion states have “trigger” laws under their expansion legislation. These laws require states to reduce or eliminate eligibility or benefits if enhanced federal funding is reduced.

McConnell’s staff noted that states still chose to expand Medicaid before Obamacare, even with lower federal matches. But at the time, there wasn’t really a pathway for Medicaid eligibility for adults without dependents (the population newly eligible under Obamacare), except through Medicaid waivers that are budget-neutral to the federal government. That means the scope of eligible enrollees and federal financing was different pre-Obamacare than under Obamacare, where states expanded with the incentive of getting 90-plus percent of federal matching funds.

The Pinocchio Test

McConnell says the Senate GOP health overhaul bill does not “cause” anyone “currently” on Medicaid to no longer be covered. “Currently” is a key word, because there is a constant churn in the Medicaid population. The population that is currently enrolled in Medicaid would not be the same population by the time BCRA takes effect.

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His staff explained that the BCRA does not mandate any states to change or cut their Medicaid program, and people losing coverage would be a state choice, not something “caused” by the proposal. But this is misleading. Mandate or not, the Senate GOP health bill would decrease federal reimbursement for Medicaid, and states would need to decide how to move forward with less federal money. This would create pressures on states to cut or eliminate coverage for certain populations, and some people would “come off” Medicaid.

McConnell pushed the envelope here. The reality is that BCRA is the potential intervening factor for whatever choices states would make in response, and CBO estimated it would lead to 15 million fewer Medicaid enrollees by 2026, compared to current law. We award Three Pinocchios.

Three Pinocchios

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