Republicans’ ongoing push in Congress to kill parts of the Affordable Care Act is an attempt to act on an oft-repeated party pledge to get rid of former President Barack Obama’s signature health care bill. But the legislation proposed in the Senate would also move Republicans closer to a goal they’ve had for decades: changing how the federal government pays for Medicaid, the state-federal health insurance program for some people who have low incomes or high health care costs.
Republicans say the bill is necessary to stabilize the country’s private insurance marketplaces for people who don’t get insurance from an employer or a public program. But the biggest changes that the bill would make — both in terms of money spent and the number of people affected — would come from reductions in federal funding for Medicaid. Medicaid was created in 1965 mostly to cover low-income pregnant women, children and some parents. Republicans have argued that states should have more control over the program, and they’ve long been concerned with Medicaid’s costs as well. Democrats, meanwhile, have frequently pushed to expand the program to cover more people and more services. Politicians in both parties have at times shared the concerns of lawmakers across the aisle. But the parties have diverged in recent decades on what the federal government’s role should be in providing health care to people who can’t afford it — and the current GOP bill is one of many political battles that have been waged as a result.
In 2010, Democrats used their control of both chambers of Congress and the White House to expand eligibility for Medicaid to more low-income people. The ACA, aka Obamacare, allowed anyone earning under 138 percent of the federal poverty line to be eligible for the program, which had previously mostly covered people who were also considered high needs. Although the changes to the private insurance market have been the most talked-about aspect of the ACA, the new Medicaid rules ultimately led to a larger change in the number of people with insurance, about 11 million, even though only 62 percent of states chose to expand the program.1 Suddenly, people could qualify based on income alone; those with low-wage hourly jobs, people leaving prison or people with substance abuse problems that make it hard to hold down work were eligible for the public health insurance program. Today, Medicaid covers 1 in 5 people in the U.S.
Now, the Republicans control Congress and the presidency, and their legislation would move the program in the opposite direction. The party’s Senate bill not only would phase out the ACA’s Medicaid expansion but also would reduce funding, compared with current law, to the part of the program that predates Obamacare and covers people with disabilities,2 older people in nursing homes, pregnant women and children. That proposed change is the latest attempt in a long series of efforts to curb federal spending on Medicaid. The most prominent of the attempts began in 1981, under former President Ronald Reagan.
Medicaid was established under President Lyndon B. Johnson with bipartisan support and was tied to the civil rights movement. States and the federal government would each pay part of the cost of insuring certain groups of people who were considered too poor to get coverage on their own. Legislators frequently argue that states should have more control over the program. By setting requirements on how the money could be spent, however, the Johnson administration used Medicaid and Medicare — which covers people 65 and over — to force the integration of segregated Southern hospitals. Under the Nixon administration, the program grew to cover some people with disabilities, again with bipartisan support.
Reagan wanted to change how the program’s funding system worked, by implementing what’s called a block grant. These grants give states a set amount of money each year, with a lot of flexibility on how to spend it. That’s very different from the setup for Medicaid, which is an entitlement program — meaning that the number of enrollees is not capped and people who meet certain criteria can participate with no limit on how much is spent on them.3 States are reimbursed for a percentage of what they spend on Medicaid enrollees for most services. Though Reagan succeeded in turning 77 federal programs into nine block grants, including some public health and social services programs, Congress ultimately said “no” to restructuring Medicaid. By the end of Reagan’s administration, with support from both political parties, Congress had raised income eligibility for women and children and allowed more people into the program.
The next major Republican push came in 1995, after Republicans took both chambers of Congress in the wake of a failed attempt by President Bill Clinton to overhaul the health system. (That effort was attached to then-first lady Hillary Clinton and is sometimes referred to as “Hillarycare.”) Under the leadership of House Speaker Newt Gingrich, Republicans again tried to shift Medicaid funding to a block grant system. Bill Clinton countered with a proposal to change Medicaid to a per capita cap, which — unlike a block grant — would still guarantee that certain groups of people could be covered by the program (though restricting the program’s funding would likely change what kind of care they could receive or how many people could be covered).
The two approaches — per capita caps and block grants — have been discussed somewhat interchangeably in the current debate — today’s Senate bill proposes a per capita cap and would allow states to opt for a block grant instead. But in 1995, they were seen as antithetical because the cap would maintain the entitlement to some degree and keep much of the power with the federal government. As reports emerged calculating how much money states would lose if the program changed to a block grant, editorials decrying the loss to state budgets ran in local papers across the country (much as they are today). The block grant effort lost public support, and Clinton vetoed the bill.
As the federal budget fight continued, Bill Clinton again proposed changing Medicaid to a per capita cap, much to the dismay of fellow Democrats. Republicans eventually passed a budget bill in 1997 that left Medicaid intact (Clinton did agree to shift the government’s cash-assistance program to a block grant, the only time that an open-ended entitlement program in the U.S. has become a state-run block grant). The per capita cap in the current Senate bill puts the program on a much tighter budget than the Clinton proposal did.
After the fallout of that back and forth on Medicaid, Democrats and Republicans worked together in 1997 to create the Children’s Health Insurance Program, a block grant that covered uninsured children whose family incomes were too high to qualify for Medicaid. Today, 40 percent of U.S. children are insured through either Medicaid or CHIP.
The Medicaid block grant conversation didn’t rest there, bubbling up again six years later under President George W. Bush. Republicans were once again in full control of the government, and Bush began to craft yet another plan to change Medicaid funding to a block grant. The effort was short-lived, however: Bush turned the wheeling and dealing over to a bipartisan group of governors, which disbanded after they couldn’t agree on the goals of the plan. The effort failed before a specific plan materialized.
Although none of these efforts succeeded in overhauling Medicaid funding, they offer insight into what financial limits on the program could mean. Medicaid spending would have fallen off dramatically under the 1981 and 1995 plans, according to a 2005 study by Jeanne Lambrew, then a professor at George Washington University (she was later an Obama administration official and is now a senior fellow at The Century Foundation). She found that in both cases, states would have been given far less money within several years than what they ultimately received under the intact entitlement system.
What that discrepancy between actual spending and proposed spending means depends on one’s perspective.
Some believe that reducing federal Medicaid funding to states would damage a safety net that protects millions of vulnerable people. Limiting funding would make it more difficult for the program to adapt to emergency situations, said Diane Rowland, executive vice president of the Kaiser Family Foundation, a nonpartisan health care think tank. “When HIV came around and people couldn’t get private coverage, they could get Medicaid,” she said. “When you have Zika, when you have Katrina, when you have [expensive prescription drugs], the structure of the program is such that when it needs to grow, it grows.” Republicans often argue that a block grant or per capita cap program will give states more flexibility to spend money how they like, but Rowland believes the opposite would occur; with reduced federal funding, states would have to choose who and what to cover. The liberal Center on Budget and Policy Priorities has shown that changing an entitlement program to a block grant reduces its funding over time.
To others, the federal government’s hundreds of billions of dollars in Medicaid payments to states show a program that is drowning the country in debt in order to provide insurance to people who should be encouraged to find work and get private insurance. They point out that the program’s costs are growing faster than inflation. Vice President Mike Pence recently wrote on Twitter that the GOP would repeal and replace the ACA with a system “based on personal responsibility, free-market competition & state-based reform.” They say state control would make the program more efficient and allow more flexibility, say for older adults who might prefer to stay in their homes rather than move to nursing homes, as required by federal law.
The Congressional Budget Office, which analyzes the impact of legislation for Congress, has estimated that the per capita cap plan would reduce the amount of funding to the program, compared with what it would be under current law, by 26 percent over 10 years and 35 percent over 20 years. The CBO also found that 15 million fewer people would be enrolled in the program by 2026.
Many Republicans have publicly downplayed the impact of the proposed changes to Medicaid. “These are not cuts to Medicaid,” Kellyanne Conway, a counselor to President Trump, told ABC News. Health and Human Services Secretary Tom Price has also said the bill doesn’t cut Medicaid. Both he and Conway have pointed out that the program’s federal funding would still increase year over year, albeit at a slower rate than it would if Obamacare stayed in place. However, the difference in those spending levels — what it would be under the Senate health care bill and what it would be under Obamacare — amounts to billions of dollars per year. And the bill does freeze and cut the Medicaid expansion that occurred under Obamacare.
There’s little doubt that reducing the program’s federal funding by $772 billion over the next 10 years would alter who Medicaid covers and what services enrollees can receive. Medicaid covers more people than any other entitlement program in the country, so any changes would affect a lot of people. The program is responsible for 62 percent of nursing home residents in the U.S. and covers nearly half of all births. It also insures people who are in particularly dire need of health care: children with complicated, chronic conditions and people with HIV, for example. And that costs a lot of money. Medicaid is one of the federal government’s largest expenses, after Social Security, defense and Medicare. It’s the second-largest expense to states, after education.
Those facts have put it in the middle of the ideological fight between Republicans and Democrats for decades. Although millions of people’s insurance and billions of taxpayer dollars are at stake in what happens next, the outcome is unlikely to resolve that political divide.