GOP Medicaid overhaul

How the GOP Medicaid overhaul could become the next fiscal cliff

Even some Senate Republicans acknowledge the changes in their repeal bill might never see the light of day.

By JENNIFER HABERKORN and RACHANA PRADHAN

The Senate health care bill, if it becomes law, would set in motion a massive rollback of Medicaid funding beginning in three years. But even some Republican supporters acknowledge the full cuts might never happen.

Instead, they say it could become another Washington fiscal cliff, where lawmakers go to the brink of radical spending changes only to pull back — or have their successors pull back — just before the point of inflicting real pain in the face of intense pressure.

“We all expect that no matter what we do, somebody is going to come back and say they want it plussed up,” said Sen. John Cornyn (R-Texas), who believes the cuts are essential. “We’re trying to take the only entitlement that we actually have a realistic chance of putting on a sustainable path … and taking that opportunity to get that done.”

One Congress can’t stop its successors from changing the laws it passes. And there’s plenty of precedent for postponing pain, especially since one Congress’ attempt at fiscal responsibility may become a political liability to the next. One of the most notorious examples was the decade-plus “doc fix” fiasco, in which Congress repeatedly found money to avoid automatic cuts to doctors’ Medicare reimbursements mandated by the 1997 Balanced Budget Act.

Facing other “cliffs,” Congress has repeatedly prevented rules that bar many tax breaks from hitting the middle class. Lawmakers also quickly undid military pension cuts that were part of the 2013 bipartisan budget deal.

The Senate bill, if passed into law, would certainly result in political pain — it would reduce federal Medicaid spending by $772 billion over 10 years, shifting to an even more frugal spending path over time. It would also for the first time cap, or limit, the federal contribution to Medicaid, starting in 2020. And it would unwind Obamacare’s Medicaid expansion.

It is expected that those cuts would create huge gaps in state budgets, and governors would have to make up the money somehow — or else drop people or trim benefits. Those pressures have Republicans openly speculating that a future Congress would face immense political pressure to block or delay the cuts.

But some Republicans think the funding changes are reasonable. Federal spending for many other programs is capped at the rate of inflation — the rate the GOP wants to set for Medicaid starting in 2025, said Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Health, Education, Labor and Pensions Committee.

But even Alexander admitted that could change for Medicaid.

Pegging spending to grow at the regular inflation rate “has been a very sensible, prudent way to do it,” he said. “In the case of defense, we’re going to have to increase defense spending. We could make the same sort of decision about Medicaid if that turned out to be necessary.”

Traditionally, health care spending has grown faster than the rate of inflation.

The Medicaid portion of the Senate’s plan has gotten less attention than the Obamacare repeal. But the Medicaid overhaul would constitute the biggest changes to a program that covers about 74 million people since it was established more than 50 years ago. For decades, Republicans have sought to rein in the program’s spending and give states more flexibility.

The bill would both chop Obamacare’s enhanced Medicaid payments beginning in 2021 and convert the entire program to a budgeted system based on a flat payment to the state for each patient beginning in 2020.

“It’s a program that has got to stop growing so fast so we can have it 10 years from now, 20 years from now, 30 years from now,” said Sen. Roger Wicker (R-Miss.). “So to the extent that we can give states an opportunity to experiment 50 different ways and make it work better for the people, that’s a good thing.”

Still, some Republicans admit they may not have the political stomach to go through with the most dramatic changes.

“I don’t think it will ever be instituted,” Sen. Dean Heller (R-Nev.) said of the Medicaid cuts before he came out against the Senate bill.

“It’s kind of like the Cadillac tax,” he said, referring to an unpopular Obamacare tax on high-cost health care plans that Congress has already delayed as a result of political pressure. Nevada is one of 31 states that expanded Medicaid under the 2010 health care law.

Democrats contend that conservatives are being sold a bill of goods — that the health care bill offers sweeteners such as scaling back Obamacare in the beginning while the bigger cuts to Medicaid happen in the future.

The bill is "a whole lot of short-term spending that is guaranteed to happen, and a whole lot of promised, deeply unpopular, long-term structural reform that Democrats and Republicans would work together to undo before they ever came to pass," said a senior Democratic aide. "We’ll see if conservatives end up willing to once again be the suckers at the end of this backroom deal.”

That said, lawmakers may not have many chances to stop the spending reductions before they begin to take effect in 2020, if a bill passes. President Donald Trump's term doesn't end for four years, so Republicans would still control at least one branch of government. There would be competing pressures: The party's fiscal conservatives have long sought the Medicaid spending rollback that may make moderates queasy before an election.

On top of that, at least eight states have automatic triggers to unwind their Medicaid expansion programs if federal funding declines below Obamacare levels, many of them immediately. Three million people in those states — Arkansas, Arizona, Illinois, Indiana, Michigan, New Hampshire, New Mexico and Washington state — gained coverage under the expansion.

And Republicans were unable to undo much of Obamacare even after Democrats lost control of the House.

“Once you get something into statute, it’s hard to change it,” Wicker said. President Barack “Obama lost the House two years after he got elected president and never got it back. And it was still almost impossible to make those substantive statutory changes to Obamacare. It’s on the books, and it takes a full action by the House, Senate and signature by the president to get it done.”