Senate Obamacare Debate Is About Money, Not Compassion

A new government report explains why Republicans, after nine years of opposing Obamacare, are having such a hard time repealing it.

The answer: It’s pretty much about the money. It’s not about providing Medicaid coverage to low-income adults.  Some moderate Republicans who profess concern for the needy are actually trying to shift more of the cost of providing them Medicaid coverage from their states to the federal government.  They’re holding out for more federal cash for their states. And they just might get it – from Senate Democrats.

Obamacare made an offer to states that agreed to extend Medicaid eligibility to childless, nondisabled, low-income adults: The federal government would pay 100 percent of the medical bills for this new category of “expansion adults.” That percentage would slowly decline, but never fall below 90 percent. The District of Columbia and 31 states jumped at the offer.

The federal government pays a much lower federal matching percentage for every other category of recipients, including children, blind and disabled adults, pregnant women, and the frail elderly. That matching rate varies from 50 percent in states  with relatively high per capita incomes (California, for example) to nearly 75 percent in the poorest state (Mississippi).

The Senate bill to “repeal and replace” Obamacare would leave the Medicaid expansion in place, but would ultimately eliminate the higher federal reimbursement for their care.  The federal government would bear the same share of medical assistance for nondisabled, childless adults as it does for pregnant women and people with disabilities.  It slowly phases out the current Medicaid reimbursement policy that discriminates on the basis of age, gender, pregnancy, and disability.

Some Senate Republicans are clinging to this inequitable arrangement that provides a sweet deal for their states.

To estimate just how sweet a deal, I used forecasts by the Centers for Medicare and Medicaid Services of the per capita costs of covering expansion adults and the number of recipients in that category between 2018 and 2026. The government will spend more than $896 billion on that group alone over the nine-year period. Under Obamacare’s current arrangement, the federal government will supply more than $812 billion. The states will put up just $84 billion, or less than 10 percent of the costs. Every net dollar a state spends on an expansion adult will leverage an average of $9.66 in federal reimbursement. A terrific deal, as President Trump might say.

The Senate bill would require states to pick up a little more than one-quarter of this $896 billion in spending over that nine years – still a good deal. Washington would, on average over the period, pay wealthy states like New York and Connecticut the same matching percentage for nondisabled adults as it pays Mississippi for the medical care its disabled Medicaid recipients receive.

In dollar terms, the state’s share would increase from $84 billion to $227 billion over that period.  The Senate bill would not begin phasing down the federal matching rate until 2021, when it would fall to 85 percent from 90 percent. Beginning in 2024, the federal matching rate would be the same for expansion adults as for other categories of recipients. That gives expansion states six more years of preferential federal payment rates, ample time to make the budgetary adjustments necessary to continue enrolling expansion adults.

It comes down to this: Some GOP Senators who oppose this provision aren’t fighting for the poor; they’re fighting for a discriminatory reimbursement arrangement that keeps federal dollars flowing to their states.

Some argue that equitable federal Medicaid reimbursement might induce some states to stop covering expansion adults, leaving many who rely on Medicaid without coverage. Perhaps. But it would be politically difficult for a state that has expanded its program to reverse course. Consider that Republicans elected to Congress to repeal Obamacare have now embraced its Medicaid expansion.

A state that did downsize its Medicaid program would join the 19 states that have declined to expand it. Those states did not make that decision out of stinginess or callousness. Expanding health coverage is not the chief end of government, and Medicaid spending isn’t government’s only – or even its highest – priority. Every dollar a state spends on Medicaid is taken from families and businesses. That dollar, once spent on Medicaid, is not available for education, public safety, highways or to otherwise benefit its citizens.

Republican Senators who are withholding their votes from the GOP bill, egged on by their governors, have a hole card: If that measure fails, Senate Minority Leader Charles Schumer (D-NY) will likely push legislation to “fix Obamacare.” The Schumer bill no doubt will give expansion state Senators the federal Medicaid money they seek.

If Schumer manages to lure GOP moderates into his camp, it will be through the enticement of pork-barrel spending, not through an appeal to compassion.


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About the author

Doug Badger

Galen Institute Senior Fellow
Doug Badger’s career in public policy spans more than three decades and includes stints as a policy adviser to the White House, the U.S. Senate, the Department of Health and Human Services and the Social Security Administration…. Full Biography