The Center's work on 'Health Reform' Issues

Health Reform’s Success Grows; House Budget Chair Promises Repeal

March 17, 2015 at 12:48 pm

A day after the Administration announced that 16.4 million uninsured people have gained coverage under health reform, lowering the uninsured rate from 20.3 percent all the way to 13.2 percent, the House Republican Budget Chairman unveiled a budget that would reverse this remarkable progress by repealing health reform, including its Medicaid expansion.

In the run-up to Supreme Court arguments in King v. Burwell, in which plaintiffs seek to invalidate subsidies for health coverage for people in 34 states using the federal marketplace, House and Senate Republicans said they had plans to maintain coverage for the 8 million people at risk of losing it should the plaintiffs prevail.  Yet House Budget Committee Chairman Tom Price’s budget plan would repeal health reform entirely.

Among other things, that means repealing the requirement that insurers allow young adults to stay on their parents’ health plans until they turn 26.  That provision alone is responsible for 2.3 million of the 16.4 million coverage gain.

The Price plan’s vague statements about “starting over” on health reform and “expanding choices and flexibility” are empty promises for people who can’t afford health coverage without expanded Medicaid and subsidies. The Chairman’s budget eliminates the funding for their coverage, which would drive them back into the ranks of the uninsured.

Proposed Medicaid Block Grant Would Add Millions to Uninsured and Underinsured

March 17, 2015 at 12:40 pm

Update, March 17:  We’ve updated this post to reflect that the House Budget Committee used the Congressional Budget Office’s January 2015 baseline in preparing its plan rather than CBO’s March 2015 baseline.

House Budget Committee Chairman Tom Price’s budget plan proposes to radically restructure Medicaid by converting it to a block grant and cutting federal funding for it steeply, by $913 billion over the next decade. It would also repeal health reform’s Medicaid expansion. The combined Medicaid cut would reach $1.8 trillion over ten years, relative to current law, adding tens of millions of Americans to the ranks of the uninsured and underinsured.

Repealing health reform’s Medicaid expansion means that at least 14 million people would lose their Medicaid coverage or no longer gain coverage in the future. (That’s the number of people who the Congressional Budget Office [CBO] estimates would eventually gain coverage under the Medicaid expansion, though it could reach 17 million if all states adopt the expansion.) In addition, the large and growing cut in federal Medicaid funding from the block grant would almost certainly force states to sharply scale back or eliminate Medicaid coverage for millions of low-income people who have it today. All told, after accounting for the plan’s proposed repeal of health reform’s marketplace subsidies, tens of millions of people would likely become uninsured under Chairman Price’s plan.

Under the Price plan, the federal government would no longer pay a fixed share of states’ Medicaid costs, starting in 2017. Instead, states would get a fixed dollar amount of federal funding known as “State Flexibility Funds.” (The budget plan doesn’t specify how it would set each state’s block grant amounts initially or adjust them each year.)

  • The block grant funding would fall further behind state needs each year. The annual increase in the overall block grant funding would average about 4.7 percentage points less than Medicaid’s current projected growth rate over the next ten years, which accounts for factors like rising health care costs and the aging of the population. Federal Medicaid and Children’s Health Insurance Program (CHIP) spending in 2025 would be $161 billion — or nearly 34 percent — less than what states would receive under current law, according to the budget plan (see chart).  And the cuts would likely keep growing after 2025.
  • Altogether, the block grant would cut federal Medicaid spending by $913 billion from 2016-2025; a small share of these cuts could come from CHIP, which the Price plan would merge into its new Medicaid block grant. That would cut federal Medicaid and CHIP funding by nearly 24 percent over the next ten years, compared to current law — and that doesn’t count the loss of the large amount of additional funding that states would receive to expand Medicaid under health reform.
  • The loss of federal funding would be greater in years when enrollment or per-beneficiary health care costs rose faster than expected, such as during a recession or after the introduction of a new breakthrough health care technology or treatment that improved patients’ health but raised costs. Currently, the federal government and the states share in those unanticipated costs; under the Price plan, states alone would bear them.

As CBO concluded when analyzing a similar Medicaid block grant proposal from former House Budget Committee Chairman Paul Ryan’s budget plan of three years ago, “the magnitude of the reduction in spending . . . means that states would need to increase their spending on these programs, make considerable cutbacks in them, or both. Cutbacks might involve reduced eligibility, . . . coverage of fewer services, lower payments to providers, or increased cost-sharing by beneficiaries — all of which would reduce access to care.”

In making these cuts, states would likely use the expansive additional flexibility that the Price plan would give them. For example, the plan would likely let states cap Medicaid enrollment and turn eligible people away from the program; under current law, states must accept all eligible individuals who apply. It also would likely let states drop certain benefits that people with disabilities or other special health problems need.

The Urban Institute estimated that former Chairman Ryan’s similar block grant proposal in 2012 would lead states to drop between 14.3 million and 20.5 million people from Medicaid by the tenth year (outside of the effects of repealing health reform’s Medicaid expansion). That would cause a drop in enrollment of between 25 percent and 35 percent. The Urban Institute also estimated that the block grant likely would have caused cuts in reimbursements to health care providers of more than 30 percent by the tenth year. Chairman Price’s Medicaid block grant proposal likely would mean similarly draconian cuts.

Medicaid Expansion States Are Saving Money

March 16, 2015 at 1:48 pm

Health reform’s Medicaid expansion has produced significant state budget savings, two new reports covering five states show. Savings are expected to continue — and grow — in coming years. These reports provide strong evidence that claims that the expansion will harm state budgets are misplaced.

Expanding Medicaid saved Arkansas and Kentucky nearly $31 million and $26 million, respectively, in just the first six months of 2014, according to a report prepared for the Robert Wood Johnson Foundation. They expect to save $89 million and $84 million this fiscal year, which ends June 30. What’s more, the report found that these states will continue to accumulate savings that will cover all costs related to the expansion through the end of the decade, even as the federal share of those costs phases down from 100 percent to 90 percent by 2020.

Arkansas and Kentucky have achieved these savings in areas available to all states. For example, as more people have gained health insurance, fewer have needed state-funded mental health and behavioral health programs that serve the uninsured. And both states have moved people who previously received care under specialized Medicaid categories for disabled adults and women with breast and cervical cancer into the expansion’s new eligibility group, for which the federal government is paying the entire cost.

Connecticut, New Mexico, and Washington State are also enjoying budget savings from their Medicaid expansions, a separate report from the Kaiser Family Foundation found.

In addition, Arkansas, Kentucky, New Mexico, and Washington State are collecting more revenue from taxes on the providers and managed care plans that serve the newly insured, the reports show.

Health Costs Continue to Slow, Improving Budget Outlook

March 9, 2015 at 5:16 pm

With health care cost growth continuing to slow, the Congressional Budget Office (CBO) now projects that federal health spending will be nearly $700 billion less over the 2011-2020 period than what CBO projected in January 2010 — even with the subsequent enactment of health reform (see figure).

Lower projected health care spending has markedly improved the budget outlook, with CBO projecting that federal budget deficits through 2025 will be about $400 billion less than it projected in January.

“The largest factor underlying that reduction,” CBO says of its lower deficit projections, “is a downward revision in projected growth in premiums for private health insurance, reflecting the fact that spending by private health insurers on health care and administration rose less in 2013 (the most recent year for which data are available) than in preceding years and by much less than [CBO and the Joint Committee on Taxation (JCT)] had expected for 2013.”

This slowdown in health costs affects the budget outlook in three major ways.

  • First, slower growth in health insurance premiums will reduce the cost of the subsidies available to low- and moderate-income people who purchase coverage in the health insurance marketplaces.
  • Second, lower premiums will result in higher taxable wages for workers, thereby increasing income and payroll tax revenues.
  • Third, because premiums will be lower, fewer workers will be enrolled in employer-sponsored health insurance plans that would potentially be subject to the excise tax on high-cost plans (the “Cadillac tax”) that takes effect in 2018. CBO and JCT now estimate that revenues from the excise tax will be 41 percent lower through 2025 than they estimated previously.

Even if cost growth remains moderate, federal health spending will keep rising as more baby boomers become eligible for Medicare and Medicaid.  Making the health care system more efficient thus remains a major budget challenge.  But CBO’s latest projections confirm that we’ve already made substantial progress.

Critics’ Portrayal of Health Reform Doesn’t Match Reality

March 5, 2015 at 5:16 pm

As we explained yesterday, many of the benefits that three key House Republican committee chairs claim their health plan will offer are things that health reform already provides — and, in most cases, much more so than their plan likely would. Here’s another problem with their Wall Street Journal op-ed: its portrayal of health reform simply isn’t true. It portrays people “stuck” in health insurance they can’t afford, and paying for benefits they don’t want, just to avoid the penalty for not having coverage. The reality is quite different.

Many people buying their own insurance have more freedom of choice than before health reform. Before health reform, people without job-based coverage had few good options. Many couldn’t buy insurance on their own or faced exorbitant premiums because of pre-existing health conditions or other factors. And enrollees who wanted to switch plans often faced a battery of questions from the insurance company and higher premiums.

Now, people have numerous plan options to choose from and can switch each year to suit their needs, just like people with job-based coverage. Moreover, people who’ve enrolled through the marketplaces give their coverage high marks: seven in ten people surveyed last fall rated their coverage and the quality of their health care as excellent or good.

Coverage is more affordable for most Americans, not less. More than 80 percent of the people enrolling through the marketplaces are eligible for premium subsidies, which reduce premiums in the federal marketplaces by an average of 72 percent. Before health reform, premiums were out of reach for people with modest incomes. Now that insurers have to grant coverage to everyone and charge the same premiums regardless of past medical problems, a market that was closed to many with modest incomes is finally a viable source of health insurance. Recent data show other pocketbook improvements: fewer people skipped needed medical care or had problems paying medical bills as health reform took effect.

Before health reform, many plans lacked benefits that people wanted. Before health reform, many plans in the individual market lacked coverage of maternity care, substance abuse and mental health treatment, and prescription drugs. Health reform requires insurers to include those benefits. It also requires coverage of certain preventive care at no cost, bars annual and lifetime limits on benefits, and caps the amount people pay on deductibles and other cost-sharing charges each year.

It isn’t all about the individual mandate. To be sure, the penalty for not having insurance is a critical part of health reform since it encourages more healthy people to buy coverage. But the mandate isn’t the only reason people would purchase marketplace coverage, as the op-ed claims. The penalty hasn’t even fully phased in, yet numerous surveys show significant — even historic — gains in coverage (see here and here) through the marketplaces, as well as through health reform’s Medicaid expansion.

Those gains reflect the fact that people who are uninsured generally want coverage but either can’t afford it or don’t have coverage through a job. Now, however, health reform offers people a choice of marketplace plans with meaningful benefits and substantial help purchasing them.