Blog Series: Who Has the Most to Lose With a Capped System

Mar 07, 2017

By MBPC Staff

Who has the most to lose from capping Medicaid spending? In yesterday’s blog, we talked about some of the recent proposals by Congress to impose a block grant or per capita cap on federal Medicaid spending. We also wrote about the disastrous impact it would have on state budgets and ability to provide affordable health coverage for families. Today, we are going to take a deeper look at who has the most to lose under a capped system. As a quick refresher, if Congress votes to cap the federal government’s contribution to states’ Medicaid programs through either a block grant or per capita cap, states will then have to take up a greater share of their Medicaid costs as health care costs increase, to the tune of over $560 billion over the next decade. In turn, states would likely face significant budgetary pressure to begin cutting Medicaid services, critical to millions of families across the country. Impact on the State Budget As Montana sees diminishing contributions from the federal government, our state will have to pick up an increasingly larger share of costs. This could put a significant strain on the state’s budget, making it likely that at some point the state will have to reduce benefits. As the state’s share of Medicaid costs grows, Montana would be faced with difficult decisions to limit Medicaid costs moving forward, including: (i) cuts to the level of benefits under Medicaid; (ii) cuts to the number of Montanans enrolled in Medicaid; and/or (iii) cuts to Medicaid payments made to doctors, hospitals and other providers. All of these options will hurt Montana families trying to access Medicaid coverage. Cuts to benefits Medicaid currently provides more benefits than private insurance, and does so at a significantly lower cost for beneficiaries. While proponents of block grants tout the “flexibility” that states will have, the flexibility essentially means that states will be able to cut important services. For example, to save costs, states may cut a pediatric benefit known as Early Periodic Screening, Diagnostic, and Treatment (EPSDT) that assesses the health and development of children and covers the services they need. Covering fewer services is a shortsighted move that would reduce the overall health and well being of thousands of Montanans and potentially lead to much larger statewide health care costs down the road. Cuts to enrollees Montana would most likely have to cut the number of people it enrolls through Medicaid, including some of the most vulnerable recipients. Those most at risk of losing coverage would be the over 70,000 Montanans who have gained affordable coverage through the Montana HELP Act, the state’s Medicaid expansion program. Congressional House legislation could effectively end Medicaid expansion, by eliminating the current 90% federal match after 2019. The Health and Economic Livelihood Partnership (HELP) Act, designed with bipartisan support, has expanded health care to over 70,000 Montanans, who now risk losing that coverage. Montana currently provides Medicaid to pregnant women with incomes up to 150 percent of the federal poverty level (FPL), even though federal law only requires coverage up to 138 percent. As costs rise, Montana may be forced to drop coverage for pregnant women with incomes above the federal minimum. Cuts to payments for doctors, nurses, health care clinics, and hospitals Spending caps could also mean that Montana would have to reduce the payments it sends to providers. The Urban Institute has estimated that block grants could cause states to reduce reimbursements, which are already lower than what private insurance pays, to providers by more than 30 percent. In turn, this could cause a decrease in the number of providers willing to accept Medicaid payment for services. For rural Montanans, fewer providers could drastically reduce their ability to access affordable health care. Block granting Medicaid or implementing per capita spending caps would wreak havoc in Montana and reduce our ability to provide comprehensive, affordable health care coverage to people in need. Capping Medicaid spending does nothing to improve health care, but rather only limits Montana’s options and flexibility.