For people who depend on Medicaid, proposed federal caps in health care plans instill fear

Aaron Christensen was born with a condition so rare that fewer than 100 people have been diagnosed and reported with it worldwide.

The boy, now 6, has Nicolaides-Baraitser syndrome, which is characterized by intellectual disability, distinctive facial and other physical features, and often seizures.

When he was born, "everything kind of changed," said his mother, Sara Christensen. "We still don't know what the future looks like."

Aaron could depend on Medicaid to pay for all or most of his health care his entire life, through a special program. And that's why they're extremely anxious about congressional Republicans’ plans to cap what the federal government spends on Medicaid in future years.

“It is seriously putting our most vulnerable people at risk,” said Christensen, who lives in Fond du Lac. “And for whatever reason, in our society, we’ve decided that’s OK.”

The bill passed by the House to replace parts of the Affordable Care Act would change the way the cost of Medicaid programs is shared between the federal government and states, limiting future increases in federal funding and putting more of the onus on states.

The draft of the Senate’s version of the bill released Thursday would lower future spending on the program even more than the House bill.

The proposed changes have been described as the most far-reaching in Medicaid financing since the program was enacted in 1965 and are considered the most significant part of both bills.

'Massive program'

Many people give little thought to Medicaid, but the state-and-federal program provides health care, long-term care and other services to roughly 74 million people.

That includes 1 million people, or more than one in six, in Wisconsin.

Polls have shown that more than one in two people either receive or have received benefits from the program, or are related to or know someone who has.

“It’s a massive program that touches many, many Americans,” said Colleen Grogan, a professor who specializes in health policy at the University of Chicago.

It provides health care to poor families, though the eligibility for parents historically has varied considerably from state to state. It provides long-term care to people who are elderly, frail and impoverished. And it provides health care and long-term care to people who are disabled.

Since 2014, Medicaid also has provided health care to adults with incomes below 138% of the federal poverty level — $16,642 this year — in the 31 states that expanded their Medicaid programs under the Affordable Care Act.

An estimated 11 million people gained coverage from that part of the law.

The bill passed by the House and the draft of the Senate bill would phase out much of the federal dollars that enabled states to expand their Medicaid programs. 

Supporters of the proposed caps contend the program is unsustainable.

State and federal spending totaled $545 billion, compared with $646 billion for Medicare, in the 2015 fiscal year, according to the Kaiser Family Foundation, a health policy research organization.

The federal government paid about 63% of the total cost of Medicaid that year.

Limiting future spending in the program has been a goal of some conservatives for years.

Further, the two congressional bills also would give states more flexibility in running their Medicaid programs, freeing the states from many of the program’s complex and burdensome regulations and enabling states to experiment with new approaches to improving care and controlling costs.

Supporters contend that the program’s costs must be checked and that its current structure gives states little incentive to become more efficient because they keep only some of the savings.

For example, the federal government pays about 59% of the program’s cost in Wisconsin, so if the state saves a dollar, it only gets to keep 41 cents.

Conversely, there's a limited penalty on states that spend more on the program because the federal government pays the largest share of the cost.

The proposed caps on future spending would largely pay for repealing taxes imposed by the Affordable Care Act on affluent households as well as pharmaceutical companies, health insurers and medical device manufacturers.

The House bill repeals the additional 0.9% Medicare payroll tax and the 3.8% tax on investment income for individuals with incomes above $200,000 and for married couples with incomes above $250,000.

The liberal Center on Budget and Policy Priorities estimates that millionaires would see about $40 billion in tax cuts a year once the caps are in place.

“It strikes at what are our priorities. As a people, what do we value?” asked Nancy Gapinski of Glendale, who has a son with autism. “It seems like some people in Washington value tax cuts for the wealthy over care for the most vulnerable, and that disturbs me.”

Sick with concern

Opponents of the proposed caps on federal funding contend that potential savings will be on the margins.

What Medicaid pays hospitals, doctors and other health care providers already is far below what Medicare and private insurance pays. Medicaid spending also has grown at a slower rate than private insurance.

Parents of disabled children — like the Christensens — have been among the most vocal opponents of limiting federal funding of Medicaid. They worry that the limits eventually will result in cuts to services, and they fear what that could mean for their children.

“We are just sick with concern here,” said Barbara Beckert, director of the Milwaukee Office of Disability Rights Wisconsin.

Other groups are equally apprehensive.

“What the House version and the Senate version would do to Medicaid would be a disaster,” said Lynn Breedlove, co-chair of the Wisconsin Long-Term Care Coalition.

The House bill and the draft of the Senate bill would give states the option of getting federal funding in the form of a block grant or fixed payments for each person in their Medicaid programs.

States are expected to opt for the fixed payments — or per-capita caps — because the federal payments would increase as the population ages and because Medicaid enrollment swells during economic downturns. The House and Senate bills would peg the caps to what a state spent in 2016.

The formula for future increases in spending in the House bill has two components:

• For children and adults who are not disabled, the per-capita caps would be tied to the Consumer Price Index for Medical Care.
• For people who are disabled or elderly, the per-capita caps would be tied to the index plus one percentage point.

In the draft of the Senate bill:

• The per-capita caps would be pegged to the Consumer Price Index for Medical Care from 2020 through 2025.
• The per-capita caps then would be pegged to the Consumer Price Index.

The draft of the Senate bill would limit federal spending on Medicaid much more sharply than the House bill because health care costs historically have increased at a much faster rate than general inflation.

But under either bill, the federal payments would increase at a slower rate than the projected increase in costs.

The concern is that the formulas for future increases in federal spending — which would begin in 2020 — will shift a steadily increasing amount of Medicaid’s costs to states over time. And that the states either won't be able to keep up the current level of coverage, or won't want to keep it up.

“The whole point of the proposal, in some ways, is to put some restraint on the federal contribution to Medicaid,” said James Capretta, a resident fellow at the American Enterprise Institute.

Capretta predicted that people will be surprised by how creative and focused states will become if the federal government moves away from open-ended payments.

“I have some confidence that there will be some savings there,” he said.

An inviting target

The Wisconsin Department of Health Services did not make anyone available to talk about how the proposal could affect Wisconsin, stating it would be premature to speculate at this time.

It also would not comment on whether Secretary Linda Seemeyer supports the move to per-capita caps.

The real effects of limiting future increases in federal spending on Medicaid — compared with the program’s actual costs — won’t be known for more than a decade.

“The gap does grow over time, and that’s because the difference compounds,” said Rachel Garfield, a senior researcher for the Kaiser Family Foundation and associate director for its Program on Medicaid and the Uninsured.

That’s what scares advocates and people who rely on the program.

“The needs don’t go away when the funding does,” said Gapinski, whose autistic son's therapy is paid for through a Medicaid program. Gapinski sees optional services, such as speech and physical therapy, eventually being eliminated because of budget constraints.

“There is no way cuts of those magnitude won’t affect people,” she said.

But unlike other entitlement programs such as Social Security, Medicaid can be an inviting target.

“The fact that we have so many people uneducated about what Medicaid funds and who it helps really puts us at a disadvantage,” said Lisa Pugh, state director of Arc Wisconsin, an advocacy group for people with intellectual and developmental disabilities.

That’s the frustration for people such as Christensen.

“I love my child as much as you love your child, and he is just as important as the child standing next to him,” she said. “And he deserves every right in this world that your child does. And when they want to cut things that help improve his life, I don’t understand that.

“I don’t understand how people can be OK with that.”