Per Capita Cap in House GOP Bill: A Cut, By Any Other Name
Caps Penalize Low-Cost States, Don't Grow Fast Enough

Blog post

It’s been four days since House Republicans released their American Health Care Act (AHCA) to repeal and replace the Affordable Care Act. Another name that might have been considered: The “Axe Medicaid” Act.

It’s clear in analyses by CWDA and countless other experts that House Republicans are taking advantage of their campaign promise to dismantle Obamacare as an opportunity to also tear apart the Medicaid program and severely cut base services and funding well beyond the changes that were made under the Affordable Care Act.

In a blog piece Wednesday, we focused on the eligibility changes proposed. Today, we are looking at the proposed “per capita cap” and what it would mean for California.

First, it bears repeating: In California, 3.7 million individuals have obtained Medicaid coverage since 2014 thanks to the Affordable Care Act expansion provisions. Approximately 14 million Californians – or nearly 1 in 3 residents – now rely on Medi-Cal, as Medicaid is known in California. That means a lot of lives are relying on how Medicaid is supported and funded at the federal level, and the changes proposed this week matter to everyone – from Medi-Cal clients, to hospitals and other providers, to taxpayers in general.

Since its inception, Medicaid has been a federal-state-county partnership where each partner pays its share of the costs for any and all eligible individuals who enroll. In contrast, the House Republicans propose to shift Medicaid from an open-ended entitlement to a “per capita cap” that would cap federal contributions to the program. The “per capita cap” is aimed at curtailing Medicaid spending over the next decade, which will put states in the position of increasing their contributions or, more likely, making changes to their Medicaid programs in order to accommodate the drop in federal dollars.

How would a per capita cap impact California?

  • A Medicaid per capita cap will financially disadvantage California due to the state’s historic low per-beneficiary spending. Basically, California will be penalized for running an efficient program. Part of the reason that California’s Medicaid costs are low are due to the state’s extensive use of managed care – with 10.3 million Californians enrolled in such plans – and relatively low provider reimbursement rates.
  • A per capita cap is out of line with federal requirements for states to have actuarially sound rates for Medicaid managed care plans. These requirements would remain in place, however, ensuring the costs of managed care plans will at some point exceed the federal Medicaid funds available to the state.
  • Costs will grow at a higher rate, especially costs for seniors and persons with disabilities, than the urban medical inflation rate (which is the inflator used in the House bill). As our Medi-Cal costs grow faster than the federal cap, the state will be forced to make difficult choices – about benefits, eligibility, and provider rates. The current program cannot be sustained if several billion dollars in federal funds are cut. 
  • This is a massive Medicaid cut. In the past the Congressional Budget Office estimated similar Medicaid cap proposals would cut $1 trillion in federal Medicaid spending over 10 years. This is a whopping 25 percent cut in the federal contribution to states’ costs of running their programs.

What about the 2014 Medicaid expansion?

Additionally, the measure would eliminate the enhanced match for the 2014 Medicaid expansion effective January 1, 2020 for certain individuals. If a recipient maintains continuous coverage after that date, the state will keep getting the enhanced matching rate for that recipient. However, if a recipient’s coverage is interrupted for even one month – which frequently happens, such as when someone finds temporary employment, no longer qualifies, but then is laid off and qualifies for Medi-Cal again – the federal matching rate will drop to 50-50 instead of 90-10. The intent of this proposal clearly is the same as with the “per capita cap”: to shift costs to states and counties and leave them with the hard choices to make about who to cover and what services they can receive.

So what’s at stake?

Ultimately, the health of low-income children, families, seniors and persons with disabilities will be negatively impacted by an underfunded Medicaid program. In addition, the fiscal health of the state and its 58 counties will be impacted by these massive federal cuts to the Medi-Cal program –putting at risk all public services that all Californians rely on.

What can you do?

  • Learn more about proposed changes to Medicaid by reading the CWDA letter opposing the American Health Care Act and share it with your community partners and networks.
  • Voice concerns with the proposed changes by calling the federal Capitol switchboard at 202.224.3121 to be connected to your representative and share your concerns: No one should lose health coverage or experience an increase in costs or reduction in coverage due to changes Congress or the Trump Administration enacts to ACA and Medicaid.
  • Make your voice heard on social media using #Fight4OurHealth and #ProtectOurCare, and encourage family and friends to do the same.

– Cathy Senderling-McDonald

Cathy is the Deputy Executive Director of CWDA.

Follow her at @csend. Follow CWDA at @CWDA_CA.