“Unprecedented” Medicaid Cuts Could Cripple Health Program, BU Experts Warn
As Republicans weigh cuts to program that most benefits the poor, BU Medicaid Policy Lab leaders say there are other options to reduce Medicaid spending
Medicaid, the country’s largest health insurance plan, serving poor Americans, faces potential cuts from congressional Republicans. Photo by LPETTET/iStock
“Unprecedented” Medicaid Cuts Could Cripple Health Program, BU Experts Warn
As Republicans weigh cuts to program that most benefits the poor, BU Medicaid Policy Lab leaders say there are other options to reduce Medicaid spending
Medicaid—the country’s largest health insurance program, covering 70 million-plus people—may face cuts from congressional Republicans. Seeking economies to offset border security costs and continuation of President Trump’s 2017 tax cuts, Medicaid, the state-federal program for the poor, faces potential cuts of up to $2.3 trillion over a decade.
The possible cuts would be catastrophic for patients, says Megan Cole Brahim, codirector of the Medicaid Policy Lab at Boston University’s School of Public Health. SPH created the Medicaid Policy Lab four years ago to research improvements in access and quality care for the program’s disadvantaged patients.
Lawmakers are weighing other targets as well to reduce the federal deficit while supporting GOP spending priorities. Medicaid has become even more important, and expensive, under the Affordable Care Act (ACA), which picked up most of the cost of expanding coverage for states that chose that route.
President Lyndon Johnson signed Medicaid into law in 1965 as a lifeline to poor Americans who faced collapsing charity care from doctors. Insurance companies increasingly were disallowing that care or else cutting physicians’ reimbursements, limiting their financial wiggle room to serve patients who couldn’t pay. Unlike Medicare, the federally financed program for elderly Americans, Medicaid covers custodial nursing home care.
BU Today asked Cole Brahim, an SPH associate professor of health law, policy, and management, and Paul Shafer, an SPH assistant professor of health law, policy, and management and Medicaid Policy Lab codirector, about what the proposed GOP cuts would mean for those goals.
The interview has been edited for clarity and brevity.
Q&A
with Megan Cole Brahim and Paul Shafer
BU Today: What would administrators have to cut to meet a $2.3 trillion reduction?
Cole Brahim: Unprecedented, far-reaching cuts have been proposed to safety net programs, particularly Medicaid. First, they propose [to] cap the amount of spending per enrollee. This likely means that some important, non-required benefits would be eliminated, such as vision and dental benefits. Or states may lower their already low Medicaid provider reimbursements rates, thus further reducing provider participation and restricting access to care for patients who already experience substantial barriers.
Second, they propose eliminating the [federal] 90 percent match rate for all persons enrolled through the Medicaid expansion. This enhanced rate made it financially feasible for states to expand Medicaid to low-income childless adults, most of whom would have no access to health insurance if it weren’t for Medicaid expansion. If the federal match rate is eliminated, it’s likely that most states would reverse their Medicaid expansion, resulting in millions of Americans losing their insurance coverage. We know from the vast evidence that reversing it would not only result in significant insurance loss but less access to all types of care. From primary care to mental health care to cancer care, many patients would no longer have access to necessary medications.
Third, Republicans will look for ways to implement Medicaid work requirements, either through state-specific waiver approvals or proposed federal mandates. Nearly all Medicaid enrollees who are able to work do, in fact, work. However, this policy would put in place onerous administrative reporting requirements that would make it difficult to stay enrolled in Medicaid, even if enrollees are working. The result would be millions of Americans getting dropped from Medicaid.
These are just three examples of the leading ways Republicans are looking to dismantle the Medicaid program. Any one of these policy changes would be catastrophic to people who are currently eligible for Medicaid, which includes children, persons with disabilities, pregnant people, low-income elderly, and low-income parents and adults—nearly all of whom work or have caregiving responsibilities. These people would lose important benefits and millions would lose healthcare coverage altogether. This in turn will raise costs for states, hospitals, and health systems; uncompensated care costs will rise as patients are unable to pay their medical bills. Or patients will wait until a health issue lands them in the emergency room, because they cannot afford a doctor or their medications.
Shafer: A key feature would be limiting the scope of Medicaid in some way, either through per capita caps or block granting, which would place a per person or statewide limit on how much the federal government would contribute to states’ costs for Medicaid each year. This would represent a massive transformation of how Medicaid operates. Currently, states receive a set percentage of their spending as a match from the federal government, regardless of how much they spend, which allows the program to flex to meet the needs of the American people as needs and economic conditions change.
BU Today: What would the effect be on health providers serving disadvantaged patients, from rural hospitals to Boston Medical Center, BU’s teaching hospital and a safety net hospital?
Cole Brahim: Patients with chronic conditions or ongoing mental health needs may stop coming to their appointments. Prescriptions may go unfilled as patients cannot afford the out-of-pocket cost, making it difficult for providers to manage patients’ conditions. Patients may only go to the doctor after a medical problem has become so severe that they are left with no choice, making treatment more challenging.
There will also be devastating financial implications for healthcare providers. Uncompensated care costs will likely rise and total patient revenue will decline, especially for providers who currently serve large numbers of Medicaid patients—this includes community health centers and safety-net hospitals like BMC. The financial consequence for these providers may force them to reduce important services, eliminate staff, or close some sites altogether. For the many rural hospitals that are already on the brink of closure, this could put them over the edge—further exacerbating the healthcare access crisis that rural areas face.
Shafer: It all depends on states having latitude to try to buffer against or lean into [any cuts]. We would likely see significant cuts to the number of people eligible for Medicaid, by potentially millions to tens of millions of Americans, while also making it harder for people to get and stay on Medicaid by adding work requirements and more frequent income verification.
Lower reimbursements could make it harder for patients to find providers that take Medicaid, increasing wait times and delays in care. Safety net providers, in particular, could see a rising number of uninsured patients, increasing uncompensated care costs, putting more pressure on their bottom line. Medicaid expansion has been key to supporting rural hospitals; reversing course could result in a wave of closures. We have lost nearly 200 rural hospitals to service cuts or closure in the last two decades even with the Affordable Care Act, so we could expect to see even more in the future with any major cuts to Medicaid.
BU Today: Obamacare gave states the option to expand Medicaid with federal support. Didn’t that have positive health effects in states that said yes, while admittedly adding to federal costs?
Cole Brahim: Yes. This benefits both red and blue states. However, residents of all states contribute to the federal tax base, especially residents in blue, pro-expansion states, who disproportionately contribute to federal tax dollars on a per capita basis.
We should not look at the budgetary savings of cutting Medicaid in a vacuum; this would have a big impact on the health and well-being of our communities.
Shafer: Covering more people and helping them stay healthy has a cost. However, there is substantial evidence, through hundreds of studies, that Medicaid expansion has improved health insurance coverage, access to care, and health, while reducing mortality and bolstering state economies. We should not look at the budgetary savings of cutting Medicaid in a vacuum; this would have a big impact on the health and well-being of our communities. The consequences of that absolutely should factor in.
BU Today: Are there reasonable economies that could be made in the Medicaid program?
Cole Brahim: There are some reasonable ways that we could reduce spending in Medicaid without reducing coverage or benefits.
First, we could shift more patients away from fee-for-service and into value-based care arrangements. [Fee-for-service compensates doctors for any test or procedure, potentially inducing some unnecessary care.] This would change the way care is paid for and delivered, while also incentivizing improvements in care quality. Incorporating seniors and persons with disabilities, who often are excluded, into these models may be especially important, as these populations account for the majority of Medicaid costs.
Second, we could rebalance long-term care by expanding the availability of home- and community-based services. This may help keep patients out of costly nursing homes if they don’t want to be there. Finally, expanding access to primary care providers and to after-hours ambulatory care may help keep patients out of the emergency department for non-emergent needs, thus reducing the high costs associated with ED visits.
Shafer: Medicaid already pays the least among itself, Medicare, and private health insurance generally. We can cover fewer people in Medicaid, reduce benefits, pay less for care, or a combination of these to find cuts. However, over 70 percent of Medicaid is delivered through private health insurance companies who compete and receive set payments to allow states to offload the financial risks and gain budget predictability. So the proposals to block-grant Medicaid dollars to states or cap the per-person cost of Medicaid benefits must deal with that reality.
BU Today: As Medicaid is the largest item in state budgets, isn’t it unlikely they’ll make up any lost federal spending?
Cole Brahim: As states must balance their budgets each year, any growth in Medicaid spending likely means cuts to education, social services, public health, and other vital programs. So unfortunately, states can’t simply spend more on Medicaid without either substantially raising taxes or cutting other important parts of their budget.
Shafer: President Trump and Elon Musk originally pledged to cut $2 trillion annually from the federal budget, before saying that even $1 trillion would be “an epic outcome.” If there are large cuts in Medicaid, it seems unlikely that money will return to state budgets another way, if the larger goal is to shrink the size and budget of the federal government. Medicaid and K-12 education are generally the two largest sources of federal support to states, so large cuts in one or both of these could put substantial pressure on state budgets, requiring cuts to services or tax increases to offset the lost revenue.
For decades, we have focused on expanding coverage and improving affordability without addressing the underlying costs of care. Engaging with prices is complicated and pushes against powerful interests, like hospitals, the AMA, and the pharmaceutical industry, which makes it a hard needle to thread, politically and practically. Price transparency and surprise billing rules haven’t made a big dent. At a time where even many with private insurance are struggling to afford their care, leaving those with limited means to fend for themselves or with hollowed-out Medicaid benefits isn’t a real solution. Medicaid has also been a pivotal tool for health equity and improving the social determinants of health. Turning back means losing ground in a struggle that was tough enough already.
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