NC Budget and Tax Center

Ineffective health policy + Loss of federal money = Millions of North Carolinians worse off over time

This week, House Republicans in Congress produced a bill that would repeal and replace the Affordable Care Act, which has been in place since 2010. The proposed bill is called the American Health Care Act.

An analysis of this proposed bill to drastically restructure health care in the United States can be summarized using the following formula: Ineffective health policy + Loss of federal money = Millions of NC citizens worse off over time

The variables of this formula and their negative result are explained below.

Ineffective Health Policy

The United States is already trying to catch up to other countries in terms of health outcomes.- When it comes to three core principles: 1) access to health care, 2) affordable health care, and 3) quality health care, the proposed bill is not clear as to how each of those three needs will be met and instead appears to be focused solely on restructuring health care in order to reduce the federal debt.

Reducing the federal debt is important; however, it should be noted that fundamentally restructuring health care alone will not solve the U.S federal debt issue. The Congressional Budget Office (CBO), which conducts nonpartisan analysis for the U.S Congress, recently published a volume describing over 100 policies that could reduce the budget deficit. According to CBO:

“Making policy changes that are large enough to shrink debt as a percentage of GDP—or even to keep it from growing—would be a formidable task. Many of the policies described in the recent volume of budget options are scalable; for instance, tax rates could be raised by smaller or larger amounts, so the size of their effects could be changed. Nevertheless, over the next 10 years, as debt increases by $10 trillion, only 3 of the 115 options might save at least $1 trillion, CBO estimates.”

From a basic public administration standpoint, when a public policy will not accomplish its intended outcome it is an ineffective policy.

Loss of federal money

The proposed bill calls for the U.S. health care to adopt a per-capita model that will cut federal contributions and shift costs to all states over the next decade. On Tuesday, the Center on Budget and Policy Priorities reported the new House Republican health plan would shift an estimated $370 billion in Medicaid costs to states over the next 10 years. The per-capita model means the federal government would provide fixed funding per beneficiary, without regard to the state’s actual need. States would then be responsible for 100 percent of costs above fixed federal funding level.

It is crucial that citizens and all state legislators know that the proposed bill means North Carolina would receive less federal money to pay for healthcare and, in turn, require additional costs to be paid for using state money. This week at a Joint Health and Human Services Appropriations Committee meeting, it was clear that there are still legislators who do not know that the federal government currently pays 66 percent of North Carolina’s Medicaid’s costs, and the state pays the remaining 34 percent, resulting in a 2 to 1 federal “match.” Specifically, for each of the past seven years, the state has received $8.2 billion in federal assistance on average. On the other hand, North Carolina has only had to contribute $3.1 billion a year in state appropriations on average during this same time period.

The proposed bill includes a section that calls for each state to have a per-capita amount that is based on inflating their 2016 fiscal year per-capita medical assistance expenditures using the Consumer Price Index (CPI). However, it is important to note this type of adjustment may not be adequate to address the cost of specialized care for vulnerable populations, which can increase by a rate that is higher than the CPI rate. Additionally, a CPI adjustment may not be sufficient when you consider that today federal funding rises to address special needs such as new disease, public health crisis (like opioid epidemic) or new costly treatment. Under a per-capita model, states would bear all additional costs to address special needs.

Millions of NC citizens worse off over time

From a formula standpoint, the results are not positive for states when an ineffective health policy is combined with less federal money. If the U.S restructures its health care as called for by the proposed bill, it will be an incentive for states to cut available health services or drop over time its most vulnerable populations, like North Carolinians with disabilities or older populations, which together account for most of the costs.

As congressional leaders continue to debate health policy it is important to remember that here in North Carolina we believe in a better state of health. According to our state’s Healthy North Carolina 2020 plan:

“The case for improving the health of individuals throughout the state is strong…the improvement of population health is an important economic development strategy, because health is a form of human capital and as such is a significant “input” into our economic system.”

One Comment

  1. Judy Hilburn

    March 13, 2017 at 9:34 am

    A very article. Understanding what we are up against makes it clear the current administration does not have our best interests at heart.

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