House Republicans Seek Post-Election Medicaid and Medicare Reforms

April 25, 2016

The results of the elections in November could increase push to reform Medicare and Medicaid.

It’s no secret that many Republicans have long sought to reform Medi­caid and Medicare. Right now, the key House committees are developing this legislation primarily in preparation for the post-election Congress. Whether those reforms will become law will be largely dependent on the outcome of the next election.

Medicaid: Major Restructuring or Target Changes?

In the recent past, reform proposals to Medicaid meant major restructuring of the program, such as block grants or per-capita caps as a means to control costs.

Presently, the federal government provides a fixed percent to the states that varies based on the state’s per-capita income. Poorer states receive a higher percentage of federal funding per dollar they spend, but no state can fall below 50 percent in funding assistance.

Under a block grant, states would receive a lump-sum amount, leaving them liable for the rest. Under per-capita caps, states receive a fixed amount per beneficiary, which according to that National Committee to Preserve Social Security and Medicare, would hit seniors and people with disabilities the hardest given that the majority of Medicaid spending covers their health care costs.

Beyond using these as a means to cut costs at the Federal level, what attracts entitlement reformers to these concepts is that the current funding by percentage makes it difficult for states to cut their own Medicaid budgets, because of the additional fiscal burden of losing free federal dollars.

While it’s unclear whether they will attempt to pass a major restructuring in 2017, a new version of reform could take shape.

This Congress, the House Energy and Commerce Committee has actively engaged in learning more about the program and potential areas for change. It has already held several hearings on the subject, covering everything from special needs trusts to supplemental payments to disproportionate share hospitals. In November 2015, the Chairman of the committee announced a special Republican task force on Medicaid reform.

Some of the legislation under consideration by the Energy and Commerce Committee is welcome, such as the Special Needs Trust Fairness Act. But other bills are more concerning. So far, several pieces of legislation have been introduced to limit Medicaid eligibility for long-term care. Both reforms were offered by the Chair of the Energy and Commerce Committee to “payfor” extending health care to 9­-11 first responders, but were removed in the final version that was included in the large appropriation package that passed at the end of 2015.

Here’s an example of what’s been considered so far that could affect your clients.

Limits to Community Spouse Annuities

H.R. 1771 sponsored by Rep. Markwayne Mullin (OK) would make one-half the income of a community spouse annuity available to the institutionalized spouse. NAELA lobbied Congress on the potential negative consequences, including that it would incentivize divorce, undermine the spouse’s economic security, and hurt the formerly middle and working class.

Limits to Home Equity Exclusions

H.R. 1361 sponsored by the Chair of the House Medicaid Reform Task Force Brett Guthrie (KY) would limit home equity for Medicaid eligibility to $552K (inflation adjusted), the minimum limit imposed under the DRA.

Counting Lump-Sums Under MAGI as Income Over Time

The Chair of the Energy and Commerce Subcommittee on Health, Joseph Pitts (PA), has sought to target a key change from the Affordable Care Act: removing the asset test requirements and moving to Medicaid qualification based on Modified Adjusted Gross Income (MAGI) only. H.R. 2339 primarily targets lottery winnings, but as currently drafted it could include other lump-sums as well, such as SSDI lump-sums for back benefits. The legislation would impute lump-sums payments as a stream of income over time thereby disqualifying under MAGI someone who received a lump-sum from Medicaid benefits over a period of months or years.

Medicare: Premium Support, Means Testing, and New Payment Models

On the Medicare side, there are two ideas, combining Medicare Parts A and B and “premium support.”

The first aspect would be to combine Medicare Parts A and B and create a single deductible and out-of-pocket spending cap. The Leadership Council of Aging Organizations has previously warned that “as long as redesigning the Medicare program is approached with the aim of securing federal savings, such efforts are likely to unfairly redistribute costs to beneficiaries, including those with fixed incomes, and limit access to needed health care.”

The second aspect would be “premium support,” in effect moving Medicare from a defined benefit to a defined contribution by the Federal government. Under this approach, beneficiaries would get a predetermined contribution from the government to shop for a private health insurance plan.

Meanwhile, there is much work being done to reform hospital and post-acute care provider payments. More recently, Chairman Brady introduced H.R.3298 — Medicare Post-Acute Care Value-Based Purchasing Act of 2015 to reform provider payments by making post-acute providers compete on a site-neutral cost-per-beneficiary basis. Importantly, the legislation also starts with a cut in payments from the current model, making those who provide “value,” in this case lower costs per beneficiaries, to receive amounts comparable to current payments.

Home health providers are particularly worried that it could force many, particularly non-profit providers and those in rural areas, to exit the business. The legislation is expected to move forward in the House, but its final form remains unclear.

Efforts to Counter Cuts

Organizational support around expanding, not cutting the Medicare program, is beginning to coalesce to counter the proposed roll-back of the program by entitlement reformers. Presently, Medicare does not cover items like hearing aids, dental, and vision (not to mention long-term care). Many seniors may sadly forgo these services, due to high costs or their limited income.

Going on the offense is also important to set the parameters of the debate. If the “beltway insiders” deem the debate to be around how to best cut these programs vs. how to best structure the program to provide adequate health security, two very different outcomes will result. The success of the Social Security expansion movement, which arose to counter “chained-CPI,” a means to limit the Social Security COLA, is an ongoing example of these efforts.

For Medicaid long-term care, there is important work being done, but as of yet Congress has not made any movements toward considering major financing changes. Most recently, AARP, the SCAN Foundation, and LeadingAge funded a study by the Urban Institute and Milliman on the costs and trade-offs of long-term care financing proposals. Importantly, the study has created a database and modeling system for future proposals to use to determine what their effects may be. In addition, the Bipartisan Policy Center, an influential think-tank founded in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole, and George Mitchell, plans to release their recommendations soon.

What Can We Expect?

For reforms to Medicaid and Medicare, it’s still too early to tell what, if anything, will pass and become law. But at this moment in time, it looks almost certain that Republicans will maintain their House lead, given that Democrats are at their weakest since 1929. So the discussion of fundamental reforms to the programs and potential legislation isn’t going away any time soon. Here at NAELA, we’ll be working to defend these programs against cuts that could hurt seniors and persons with disabilities and educating those who have a proclivity toward these cuts on the real impact these changes would have on American families.

About the Author

David Goldfarb, Esq., is NAELA’s Public Policy Manager.