Hospital Impact—Medicaid on the chopping block in 2018

Filling out job application
Cuts to the Medicaid program are supported by a significant number of Americans, but at the same time, many studies support the positive economic value of Medicaid expansion. (Getty/AndreyPopov)
Jonathan H. Burroughs headshot
Jonathan H. Burroughs

Medicare and Medicaid have always been a “work in progress,” as they’ve evolved from entitlement programs for the elderly and the poor in the 1960s to the largest health insurers—public or private—in the nation.

Medicaid is the more controversial program of the two, as its original intent was to provide temporary, safety-net health coverage for the poor and not as a permanent entitlement. This issue has been politicized by both parties as of late with little attention paid to the impact that nonclinical determinants—such as genetics, socioeconomics, environment and lifestyle choices—have on healthcare outcomes and life expectancy.

Democrats support expanding Medicaid under the Affordable Care Act to every state for everyone within 138% of the federal poverty level. Republicans favor increasing beneficiary responsibilities to take greater control and responsibility over their own healthcare and are encouraging states to pursue waivers to experiment with different Medicaid models designed to optimize quality, drive down costs and enable beneficiaries to move toward greater economic self-sufficiency.

President Donald Trump’s proposed budget last May recommended $800 billion in Medicaid cuts as well as cuts in nutritional assistance ($192 billion) and welfare programs ($272 billion). With the passage of the Tax Cuts and Jobs Act adding $1 trillion to the federal deficit, Republicans are making cuts to Medicaid a priority for 2018.

The rise of work requirements

Last month, the Trump administration announced that it would grant states the right to impose work requirements for able-bodied Medicaid recipients. Pregnant women, full-time students, primary caretakers of children under 19, disabled adult dependents and frail elderly individuals would be exempt from these requirements.

There are many complex issues that arise from this proposal, including:

  • The likelihood that it will be challenged in federal court (as is already the case in Kentucky)
  • The impact that denial of coverage would have on healthcare costs with elimination of preventive healthcare services, treatment for opioid addiction and job restrictions for those with chronic addictions
  • The requirement that states would bear the burden of job training, child care, transportation to work sites and other administrative costs with limited resources.

Democrats responded that this proposal violates the Medicaid statute as well as the original intent of the state waiver program. They also pointed out that the majority of Medicaid beneficiaries who can work do work, and often carry more than one low-paying service job that does not permit them to afford commercial health insurance coverage.

Many Republican governors support the proposal, as they would like to see a greater number of Medicaid beneficiaries receive health insurance through an employer rather than through the state. Earlier this month, Kentucky became the first state to receive approval to impose job requirements as a part of its Medicaid program, followed in short order by Indiana.

Cost-sharing considerations

Another approach to reducing Medicaid costs is cost-sharing, which is already permitted under federal law. Like the job-requirement proposal, children, pregnant women and others are partially waived from this requirement with lower premiums and cost-sharing limits.

In addition, states may impose higher premiums and cost-sharing limits for the option to purchase brand as opposed to generic prescription drugs and the nonemergency use of emergency departments as determined by a medical screening exam under the Emergency Medical Treatment and Labor Act.

All about the execution

There is no question that the United States cannot sustain the current unfunded liabilities that include Medicaid, Medicare and Social Security. In addition, cuts to the Medicaid program are supported by a significant number of Americans. However, doing this successfully will be complicated by the fact that those receiving this coverage deeply appreciate its benefits and that many studies support the positive economic value of Medicaid expansion.

Imposing work requirements and cost-sharing on Medicaid beneficiaries will only work if the jobs available to them are not minimum-wage service jobs and provide employer-based insurance. Thus, the main question is: Can states invest in the infrastructure necessary to help get their most vulnerable populations on their feet in an economically meaningful way? Or is the intent to merely withhold healthcare services to compensate for federal and state budgets that have spiraled out of control?

Jonathan H. Burroughs, M.D., MBA, FACHE, FAAPL is a certified physician executive and a fellow of the American College of Healthcare Executives and the American Association for Physician Leadership. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation's top healthcare consulting organizations to provide "best practice" solutions and training to healthcare organizations.