New CBO analysis predicts 35% Medicaid spending cut by 2036 under Senate bill

Medicaid
A new CBO report estimates that the Senate bill would cut Medicaid spending by 35% as of 2036, relative to current law. (Getty/juststock)

Medicaid was already a major sticking point in the Senate’s push to pass a healthcare bill, and a new Congressional Budget Office analysis may make Republicans’ job even harder.  

The analysis, which the CBO released Thursday, estimates the effects of the Better Care Reconciliation Act on Medicaid spending through a longer term than its initial score of the bill, at the request of Senators Bernie Sanders, I-Vt., and Ron Wyden, D-Ore.

While the CBO’s original score predicted that the bill would result in the government spending 26% less on Medicaid than under current law, the new report estimates the cut would be even greater—35%—by 2036.

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Here’s why: Starting in 2020, the Senate’s bill would move Medicaid from an open-ended funding structure to a per capita cap arrangement, which limits growth in per-enrollee Medicaid spending for nondisabled children and adults to no more than the medical care component of the consumer price index (CPI-M). For disabled adults and elderly patients, payment growth cannot  exceed CPI-M plus one percentage point starting in 2020.

But starting in 2025, the growth rate in per-enrollee Medicaid payments will be pegged to the consumer price index for all urban consumers, known as CPI-U. Because that essentially lowers the growth rate even further, “in 2025 and beyond, the differences between spending growth for Medicaid under current law and the growth rate of the per capita caps for all groups would be substantial,” according to the CBO.

Medicaid spending is projected to be 2% of GDP in 2017 and 2.4% by 2036, the report adds. But given the projected 35% reduction in Medicaid spending by 2036, Medicaid spending under the Senate’s bill would actually be just 1.6% of GDP by that year.

The agency also speculates about how states would react to such cuts, saying that after the next decade, they would not only have to get more efficient at delivering Medicaid services, but “decide whether to commit more of their own resources, cut payments to healthcare providers and health plans, eliminate optional services, restrict eligibility for enrollment, or adopt some combination of those approaches.”

Even before the Senate officially released its bill, a bipartisan group of governors sent a letter to the chamber’s leadership urging them to reconsider the deep Medicaid cuts included in the House bill—which are even deeper in the long term under the Senate’s measure.

The Senate bill's cuts to Medicaid have become a matter of debate after President Donald Trump tweeted a chart that claimed spending for the program would actually increase as a result of the legislation:

That graph, however, shows only that the overall amount spent on Medicaid will—unsurprisingly—increase in the next decade, not how the Senate's bill would affect that growth rate relative to current law. In fact, Medicaid funding will be reduced by $160 billion in 2026 under the Senate bill compared with projections under current law, according to the CBO. 

The Senate delayed voting on its bill this week after GOP leaders failed to garner enough votes among skeptical conservatives and moderates in the party. Aides have said Senate Majority Leader Mitch McConnell hoped to revise the bill and get a new CBO score as soon as Friday.