Defenders of Medicaid have been fighting hard against Republican proposals to cut the program, but they’re just waking up to the threat of one proposed by the Obama administration.
It’s an idea to change the way federal matching funds work and save money in the process — and it would probably do it by shifting costs to the states. If that happens, Medicaid advocates fear, the states will just pass on the cuts to providers and, ultimately, the patients.
In the budget blueprint unveiled in April, President Barack Obama proposed adjusting the way federal matching funds paid to the states are calculated for Medicaid and its companion, the Children’s Health Insurance Program. Sources close to the administration tell POLITICO that White House officials have been trying to develop the idea into a version that could become part of a deal in the ongoing deficit reduction talks.
Today, state dollars in these programs are matched at different rates for different populations. For the Medicaid population, under the matching formula known as the Federal Medical Assistance Percentages, the federal government pays an average of about 57 percent of the national costs. For CHIP, the rate is about 70 percent.
And when the Patient Protection and Affordable Care Act expands Medicaid coverage starting in 2014, the federal government will initially pick up all of the costs of the new population entering the program, then scale back to 90 percent in later years.
The administration wants to create what’s known as a “blended rate” for these programs, recalculating the levels so states receive federal dollars at the same rate for all populations in joint state-federal health programs. And in the process, they want to contribute to Medicaid savings totaling $100 billion.
This has Sen. Jay Rockefeller (D-W.Va.) nervous.
“What we know is that in order to generate ‘at least $100 billion’ in savings, any blended-rate proposal would have to severely reduce federal Medicaid and CHIP payments to every state over time, with some losing a lot more than others,” Rockefeller said. “And the underlying needs and costs don’t disappear — they just move from the federal side of the ledger to the state side.”
“Such a substantial cost shift to already financially strapped states would force states to reduce or eliminate Medicaid coverage, cut provider payments even more and completely undermine the Children’s Health Insurance Program. This is not a viable option and would spawn a formula fight among the states,” he said.
One reason little attention has been paid to the blended-rate proposal is that the administration has been noticeably silent on it. The only public information it has released on the plan came in the fact sheet accompanying the president’s April speech, which contained a single sentence on the issue that also references introducing a new mechanism for enhanced federal support during hard economic times.
“The president’s framework would replace the current complicated federal matching formulas with a single matching rate for all program spending that rewards states for efficiency and automatically increases if a recession forces enrollment and state costs to rise,” it reads.
But despite the public silence since then, White House officials have been actively developing a detailed proposal that could be part of a budget deal, sources close to the administration say.
This information void has led advocates to hold their fire, especially in the face of threats that were getting a lot of public attention: block-granting the program, capping federal expenditures or repealing Affordable Care Act prohibitions on cutting the program in the run-up to 2014.