Deep dive: 5 things to know about how the CBO scored the AHCA on Medicaid

Medicaid reform is priority within the Trump administration and at the center of the Republican-proposed American Health Care Act. According to an analysis conducted by the Congressional Budget Office and the Joint Committee on Taxation, changes to Medicaid under the legislation are responsible for most of the reduction in health insurance coverage and most of the cost savings.

Here are five things to know about how the CBO and JCT scored the AHCA on Medicaid.

1. Enrollment. The CBO and JCT attribute much of the overall drop in enrollment after 2018 to Medicaid. The agency expects Medicaid enrollment to decrease by 14 million by 2026, which is a 17 percent reduction from current levels, according to the report. The bulk of this reduction would begin in 2020 when the enhanced federal matching rate for the newly insured is ended and the per-capita cap model for federal funding begins. The 5 million or so enrollees who drop Medicaid coverage before 2020 will do so because of the elimination of the individual mandate, according to the CBO analysis. Some Medicaid enrollees are subject to the individual penalty and will therefore drop coverage when it is eliminated. The report uses single people with incomes above 90 percent of the federal poverty line as an example of a population where this may apply.

2. Savings. The largest savings realized in the bill stem from pulling back on the ACA's Medicaid expansion. The report estimates these savings would total $880 billion in direct federal spending over the next decade, so that by 2026, Medicaid spending would be 25 percent less than it is projected to be under current law. The CBO and JCT also expect states to reduce Medicaid costs through several provisions in the law, including those that would close the loophole allowing lottery winners to qualify for the program, decreasing retroactive benefits and eliminating payments for any enrollees who cannot provide sufficient proof of citizenship. The provisions aimed at reducing state Medicaid costs would drive down direct spending by roughly $7 billion by 2026, according to the report.

3. Capitation. The AHCA would transition Medicaid into a per-capita cap program. Under this model, reimbursement would be tied to the consumer price index for medical care services. The CBO expects Medicaid spending to grow faster than the CPI-M, therefore forcing states to either spend more to continue to provide the same level of Medicaid services or to reduce spending by cutting benefits, reducing eligibility or some combination of the two. 

4. Disproportionate Share Hospital payments. Under current law, DSH payments will be reduced by $2 billion in 2018 and will increase annually until $8 billion in DSH payments is cut in 2024 and 2025. The AHCA would restore DSH payments for non-Medicaid expansion states, which the CBO and JCT estimate would add an additional $31 billion in expenditures over the next decade. Because the uninsured rate would go up and Medicaid enrollment would go down, the portion of DSH payments made to hospitals through Medicare are also expected to increase, costing the government an additional $43 billion over the next decade.

5. Planned Parenthood. A provision of the proposed law would defund Planned Parenthood Federation of America and its affiliates and clinics for a one-year period, which would have both immediate and residual financial impacts. This reduction would save $178 million in direct spending in 2017 and save $234 million from 2017-2026, according to the report.

The report notes that 45 percent of births are paid for by Medicaid. The additional births associated with reduced access to abortion services would add an estimated $21 million in direct Medicaid spending in 2017 and an estimated $77 billion from 2017-2026, as a number of children born under such circumstances will also qualify for Medicaid. The net savings associated with the Planned Parenthood provision — savings from reducing funding and costs to Medicaid — are estimated to be a $156 million reduction in direct spending from 2017 to 2026, according to the report.


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