NC Budget and Tax Center, Trump Administration

GOP’s health plan secrecy and Medicaid per-capita caps should raise alarms in NC

As Americans we should always expect a transparent and open government. An open government strengthens our democracy and promotes accountability, efficiency and effectiveness in government. Unfortunately, the U.S. Senate has continued to promote secrecy when it comes to its draft legislation to repeal the Affordable Care Act.

Yesterday, the New York Times covered this topic and was precise in pointing out that this secrecy has raised concerns among both Republicans and Democrats, stating:

“Senate Republican leaders are aiming to transform large sections of the American health care system without a single hearing on their bill and without a formal, open drafting session. That has created an air of distrust and concern — on and off Capitol Hill, with Democrats but also with Republicans.

I’ve said from Day 1, and I’ll say it again,” said Senator Bob Corker, Republican of Tennessee. “The process is better if you do it in public, and that people get buy-in along the way and understand what’s going on. Obviously, that’s not the route that is being taken.”

“In theory, the bill-writing process is open to any of the 52 Republican senators, but few seem to have a clear, coherent picture of what will be in it. Senator Ron Johnson, Republican of Wisconsin, offered a hint of the same frustration felt by Democrats seeking more information about the bill.

“I come from a manufacturing background,” Mr. Johnson said. “I’ve solved a lot of problems. It starts with information. Seems like around here, the last step is getting information, which doesn’t seem to be necessarily the most effective process.”

This secrecy, along with the fact that Senate Republicans plan to retain the Medicaid per-capita caps without major changes in their version of the House bill, is bad news for North Carolina. While per-capita caps would shift substantial Medicaid costs and risks to all states, North Carolina would face disproportionately larger cuts. [Note: Under a Medicaid per capita cap, the federal government would set a limit on how much to reimburse states per enrollee.]

The reason is simple, North Carolina is a state that meets most of the criteria laid out by the Center on Budget and Policy Priorities for states that would be most harmed by Medicaid per-capita caps. Below is a table with the criteria and a brief assessment of North Carolina against it.

North Carolina would be disproportionately harmed by Medicaid Per-Capita Caps
Criteria Is North Carolina one of these States? Assessment
States with relatively low historical spending per beneficiary. Yes North Carolina spends considerably less on Medicaid per enrollee, regardless of their category, compared to other states. North Carolina ranks 47th on spending per elderly enrollee ($11,178); the national average per elderly enrollee is $17,476. North Carolina also ranks 43rd for spending per enrollee with disabilities ($15,238), while the national average is $19,033. When it comes to spending per child enrollee the state ranks 36st ($2,349) compared to the national average of $2,602.
States with more restrictive Medicaid benefits or eligibility. Yes North Carolina has set very restrictive Medicaid eligibility and ranks 40th in the country in terms of its eligibility. Only ten states make it harder than NC for parents to get Medicaid.
States with relatively fast growth in per-beneficiary spending. No North Carolina’s average annual growth in per-enrollee spending varies among eligibility groups but overall is close to the U.S. average. NC growth in spending for seniors and people with disabilities is less when compared to the U.S. average.
States with demographic and other factors that will likely raise Medicaid spending per beneficiary in the future. Yes Population trends show that in less than 20 years, 20 percent of North Carolina’s population will be over age 65. As North Carolina’s population grays, the need for long term care services increases. Currently Medicaid helps three out of every five nursing home residents in North Carolina.
States at greater risk of natural disasters. Yes North Carolina is always one hurricane away from major devastation and need for rebuilding (see Hurricane Matthew).

Given all the secrecy involved to replace the Affordable Care Act, one thing is known: the Senate plans for each state to have a per-capita cap amount that is based on each States’ per-capita medical assistance expenditures and adjusting that amount in the future using the Consumer Price Index (CPI). However, it is important to know that a CPI adjustment, no matter its amount, will not address the actual needs of a state’s population.

We have previously reported a CPI adjustment would be insufficient in addressing special needs—as federal funding currently does—such as a new disease, public health crisis, or new costly treatment. Under a per-capita model, states would bear all additional costs to address special needs. The General Assembly’s own Fiscal Research Division has also concluded that under a per capita-based cap model the state would bear all the risks for shortfalls related to changes in Medicaid utilization, pricing, and consumption.
Under current proposals to replace the Affordable Care Act, North Carolina stands to lose at least $6 billion over the next ten years in federal funding for Medicaid. If the Senate produces a new health plan bill and keeps Medicaid per-capita caps in its framework, North Carolina’s state budget and its people will suffer in the long-term.
Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

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