June 30, 2017

A 35% Medicaid cut? That's what the Senate health bill could mean for federal spending long-term, CBO says

Daily Briefing

The Congressional Budget Office (CBO) on Thursday projected in a new report that federal Medicaid spending would be 35 percent lower in 2036 under Senate Republicans' health care bill compared with current law.

The new report comes after CBO on Monday released its so-called "score" of the Better Care Reconciliation Act (BCRA) for the years 2017 to 2026. That score projected that under the BCRA, by 2026 Medicaid would cover 15 million fewer Americans and federal funding for the program would be 26 percent lower than under current law.

Those projections reflect the BCRA's rollback in Medicaid expansion funds, which would start in 2021, and its ending in 2020 of the current Medicaid financing system, in which the federal government pays states for a set share of all costs incurred by Medicaid beneficiaries.

Under the BCRA the federal government instead would set a cap on per-beneficiary payments to states, which would grow more slowly over time than the average state's currently projected Medicaid cost increases. States under the BCRA also would have the option to cover certain enrollees through a block grant.

Details of new report

According to the new report, under current law federal Medicaid spending over the next two decades would increase by 5.1 percent per year. Under the BCRA, CBO projected that federal Medicaid spending would increase by 1.9 percent per year through 2026 and by about 3.5 percent per year in the following decade.

As a result, CBO projected that federal Medicaid spending in 2036 would be 35 percent lower than it would be under current law.

Past and projected federal Medicaid spending

CBO said that under the BCRA, "after the next decade, states would continue to need to arrive at more efficient methods for delivering services (to the extent feasible) and to decide whether to commit more of their own resources, cut payments to health care providers and health plans, eliminate optional services, restrict eligibility for enrollment, or adopt some combination of those approaches."

It added that "over the long term, there would be increasing pressure on more states to use all of those tools to a greater extent."

Understand the no-regrets priorities at the top of every finance leader's agenda

CBO cautioned that projecting federal Medicaid spending beyond 2026 "becomes increasingly difficult because of the considerable uncertainties involved." It also said it could not estimate the number of individuals who would lose Medicaid coverage beyond 2026, since it does not have a projected coverage baseline beyond that time. However, it said that it expects that "after 2026, enrollment in Medicaid would continue to fall relative to what would happen" under current law.

Report creates 'a fresh challenge' for passing the BCRA

The analysis "created a fresh challenge for Republican leaders as they tried to muster support for their bill," Robert Pear and Thomas Kaplan write for the New York Times.

Sen. Susan Collins (R-Maine) told CNN after the release of the new CBO report that the reductions in federal Medicaid funding reductions would "cause a lot of harm, and that's one of my biggest concerns about the bill."

Senate Republican leaders originally had planned to vote on the BCRA this week, but due to a lack of support they decided to make changes to the bill and postpone a vote until at least next week, following the 10-day July 4 recess (Pear/Kaplan, New York Times, 6/29;  Sarlin, NBC News, 6/29; Edney/Tracer, Bloomberg, 6/30; CBO report, accessed 6/30).

No matter what happens in the Senate: Get the clinical leader's resource guide

No matter the outcome of the debate over the future of the Affordable Care Act and Medicaid, the likely renewed focus on delivery system costs will make further clinical efficiency an imperative.

To help you and your clinical teams operate in this uncertain time, we've created The Clinical Leader's Resource Guide. Inside you'll find the information and no-regrets strategies needed to support clinical outcomes and financial success in any regulatory environment.

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