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Friday, February 03, 2017

Five Things We Do Know About the Future of the Medicaid Program

Five Things We Do Know About the Future of the Medicaid Program

It’s no secret that healthcare is at a cross roads. Ask any health policy expert what healthcare will look like under the Trump administration and the likely response will be, “the only thing we know for sure is that there will be a lot of uncertainty.” And that’s pretty much true. The Affordable Care Act, which President Trump has vowed to repeal, is an intricate law with hundreds of interwoven threads that will be nearly impossible to untangle and put back into neat, orderly balls of yarn.

There are major questions, too, about what will become of the Medicaid program, the largest single source of coverage in the U.S.  The GOP’s criticism of the program, which most often targets its costliness, is nothing new but with both houses of Congress solidly conservative and the threat of veto removed, changes are definitely on the horizon. Yet, there are things we do know. Even in the midst of overwhelming uncertainty, there are five things we can bank on in 2017.

1. The goal will change from coverage to cost containment.

In the Obama administration and with the passage of the Affordable Care Act, it was clear that the goal of the Medicaid program was expanding access to health coverage. People who would have not traditionally qualified, such as adults without children and those with incomes slightly above the federal poverty line, were eligible for Medicaid in states that chose to expand their programs. The Medicaid provisions, together with the Health Insurance Marketplace, made significant progress toward that goal.

Though he has made some statements indicating no one who has insurance now will lose it, for Trump and his administration, the more important Medicaid conversation will be about cost containment. To realize this goal, there are really only three strategies and they are likely to all be on the table: Reducing the number of people eligible, reducing the number of things that are covered (benefits) or reducing the amount the government will pay for healthcare services.

2. Medicaid expansion is in jeopardy.

Of the three levers politicians have to achieve cost containment, the easiest may be reducing the number of people eligible, which means the Medicaid expansion population, who has not traditionally qualified, is an easy target. A straight repeal of the ACA would eliminate the eligibility category altogether. It is important to note, however, that reducing eligibility among this population may not be as straightforward as a simple change in who qualifies.

There are other ways to reduce eligibility more in line with the “personal responsibility” ideals of the right, that aren’t quite so politically contentious as simply removing eligibility. Several existing conservative policy proposals, for instance, require cost sharing such as premiums or deductibles from recipients. When recipients are unable to meet their cost sharing obligations, they lose eligibility and cannot qualify again during a certain lock out period, even if they pay back what they owe. For the right, these types of policies have the advantage of reducing the number enrolled while placing any blame for subsequent hardship on the beneficiary, not the policy itself. 

3. Hospital bad debt and charity care will increase.

Each of the cost containment levers – reducing benefits, reducing enrollment and reducing payments – stand to impact hospitals financially. Obviously, reducing payments is the most direct way in which hospitals will feel cost containment, but reducing benefits and enrollment will also affect hospitals. Fewer benefits mean that people may not have access to the care they need. Rather than getting care in the most appropriate setting, these under-insured individuals may have to wait until they need care in an emergency room. Similarly, those who are locked out of coverage or who aren’t eligible at all will likely do that same thing. Without access to care at all, however, these individuals may rely on the hospital for all of their healthcare needs. Most likely, neither of these groups will be able to afford to pay for their care, which means hospitals will see increases in bad debt and charity care.

4. States will bear greater financial risk for their Medicaid programs.

Medicaid is a joint federal-state program, with a significant portion of its funding coming from the federal government. A popular conservative strategy for cost containment is to push greater risk onto states to fund their own Medicaid programs. Again, this can be advantageous politically for federal-level conservatives who can point the finger at governors when reductions become necessary under tighter Medicaid budgets.

So how would the federal government do this? Policy proposals generally take two forms when this topic comes up: a block grant or a per-capita model. In both cases, rather than receiving an open-ended amount of money that reflects the number of enrollees and the services they receive, states receive a set amount of money to administer their Medicaid program. A block grant is just a set amount of money that does not change, other than updates for inflation. A per capita model is also a set amount of money but one based on the number of enrollees. It is likely that one of these two models will be a part of any changes to the Medicaid program.

5. Governors will have strong opinions about changes to Medicaid.

Besides having to take on the bad guy role when capped funding forces them to reduce eligibility, governors stand to lose a whole lot more with potential changes to Medicaid. Under the current program, for every dollar states spend on Medicaid, the federal government gives them a “federal match.” This funding is a very big part of a state’s budget and reductions in Medicaid funding also mean reductions in dollars flowing into the state. The threat of losing a significant source of state funding and the potential gaping budgetary holes it is likely to induce will not sit well with most governors.

In addition, since capped funding models typically use some sort of baseline payment amount derived from what the federal government is currently spending in each state, and since federal matching funds vary significantly by state already, establishing new capped funding baseline amounts across states promises to create strong opinions among governors about the fairness of their state’s capped Medicaid allotment. The fact that some states (31 and the District of Columbia to be exact) chose to expand their Medicaid programs and received an enhanced federal match for the new population, while others didn’t also creates a challenge for establishing a baseline amount. If the capped amount is determined based on the current federal match, how will the federal government account for the enhanced match that accompanied the expansion population? Or maybe the enhanced match will be disregarded all together. No matter what the decision is here, states will be fighting for the biggest piece of a shrinking pie that they can get.

It’s hard to imagine what the future holds for healthcare. Given our political makeup, it seems we’re poised to make major changes to how we provide care to those who live in poverty and the near poor. As policymakers begin debating the specifics of these changes, it will be important to remember that much more is at stake than a budget. Of course, it’s responsible to be budget conscious, and it’s wise to pursue ways to rein in spending, but in making those changes we should not forget to take into account how we plan to care for our most vulnerable citizens. 

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