Urban Institute: AHCA's Medicaid cuts will strain states

Medicaid on paper and a stethoscope
Cuts to federal Medicaid funding are likely to significantly strain state budgets, especially in states that expanded the program, according to a new report. Image: Getty/designer491

The American Health Care Act's proposed cuts to Medicaid would have huge repercussions at the state level, particularly in states that expanded the program under the Affordable Care Act, according to a new analysis.

A report from the Urban Institute found that state Medicaid spending would increase by 16.1% under the Republican bill, which would place per capita caps on funding. If the bill is adapted to further resemble House Speaker Paul Ryan’s 2016 “A Better Way” proposal, state spending on Medicaid would jump by 29.7%.

Overall, the per capita cap in the AHCA could cut $734 billion from Medicaid between 2019 and 2028.

The financial strain would be especially felt in states that expanded Medicaid, according to the report, as leaders in those regions would have to decide between spending significantly more to cover that population or dropping coverage. Though the report didn’t estimate how many people overall could lose coverage under the bill, it noted that if expansion states dropped coverage for enrollees, 8 million people would lose coverage by 2028.

RELATED: States face major funding and coverage cuts under GOP healthcare plan, warns report presented to governors

“Coverage gains are in jeopardy with this proposed reduction in federal support for Medicaid,” Katherine Hempstead, senior adviser at the Robert Wood Johnson Foundation, said in an emailed announcement. “Given the size of the proposed cuts, many states will likely struggle to maintain coverage gains and provide services for Medicaid enrollees.”

Medicaid managed care insurers, meanwhile, have qualms about the bill’s changes to Medicaid funding. In an interview with Bloomberg, Jeff Myers, CEO of the Medicaid Health Plans of America, said the group had “serious concerns” about cuts to the program. Instead, he said, its members, which includes major payers like Aetna, Cigna and UnitedHealth, support moving Medicaid to per capita caps over a longer period of time. 

The group even got creative when expressing its opinion trough social media:

“It’s hard to be supportive seeing the size of cuts,” Myers told Bloomberg. “It does call into question whether those services can be provided or whether states are going to see massive disruption.”

The cuts to Medicaid have also drawn ire from a handful of Republican governors in states who expanded the program. In a letter (PDF) sent to Ryan and Senate Majority Leader Mitch McConnell late last week, four GOP governors—John Kasich of Ohio, Rick Snyder of Michigan, Brian Sandoval of Nevada and Asa Hutchinson of Arkansas—said the bill, which has since been adjusted, does not “does not meet [the] test” of meeting the Medicaid population’s needs.

“It provides almost no new flexibility for states, does not ensure the resources necessary to make sure no one is left out, and shifts significant new costs to states,” the governors wrote.

In their own counter proposal, attached to the letter, the four governors suggested that efforts to dismantle the ACA should center, at least for now, on stabilizing the individual markets. Future Medicaid reform, they wrote, should not be “one-size-fits-all,” as states need to have the flexibility to tailor their approach to Medicaid to their individual populations.

RELATED: GOP governors plot to preserve Medicaid expansion

House Republican leaders have made notable adjustments to the bill in response to a barrage of criticism, but changes revealed Monday night were designed more to appease the hard right wing of the party and not necessarily the states concerned about Medicaid.

Under the amendments to the bill, states that have not yet expanded Medicaid would be prohibited doing so before the expansion is phased out in 2020. The changes would also allow states to enforce work requirements for Medicaid enrollees, and would allow them to opt into a traditional block-grant structure for the program.