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How Medicaid became the most important battleground in American health care

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The battle for Medicaid moved to Maine this week.

On Tuesday, the state’s voters approved expanding Medicaid to 70,000 of their poorest residents, circumventing the archconservative governor who has blocked the expansion five times in the past four years. “Maine people have supported this for years,” Ann Woloson, who worked in support of the ballot initiative, told me the day before the vote. They would finally get it.

But less than 24 hours later, that governor — Republican Paul LePage — signaled he would do whatever he could to block it.

Farther down the East Coast, Virginia voters may have shockingly swept a Democratic House into power — in an election where health care was the biggest issue and those voters went dramatically toward Democrats — a crucial step toward Medicaid expansion in that state. 

But on the same day that voters across the country signaled they want a more expansive Medicaid program, President Trump’s top Medicaid official, Seema Verma, sketched out her own vision for Medicaid, one that would take the program in a drastically new direction from what it had become under the Obama administration. She described a smaller program, with fewer enrollees and more restrictions. She said her own goal was moving people off the program’s rolls.

“For this population, for able-bodied adults, we should celebrate helping people move up, move on, and move out,” she said. “The thought that a program designed for our most vulnerable citizens should be used as a vehicle to serve working-age, able-bodied adults does not make sense.”

Medicaid, long the forgotten sibling of our social safety net, has now become the central battleground in the fight over America’s social compact.

This battle over Medicaid is, at its core, very simple. Republicans want to shrink it, to cut its spending and add restrictions so it serves fewer people. Democrats want to expand it, to increase its funding and reach so it serves millions more people.

The program endured its toughest test in decades this summer, when Republicans sought to fundamentally reshape Medicaid by adding a federal spending cap while also ending Obamacare’s dramatic expansion of the program.

“I would say this was the greatest threat to the Medicaid program that I have ever seen,” Joan Alker, who follows Medicaid for Georgetown University’s Center for Children and Families, told me. “What I’m struck by this time around is how Medicaid has come out of this strong.”

Indeed, throughout the summer, protesters pleaded with lawmakers to protect the program and defeat the GOP’s plans to repeal Obamacare and overhaul Medicaid. Its defense was a centerpiece of the resistance. Democrats are now turning to the program — which, even a few years ago, they weren’t eager to expand in the 2010 health care law — as a preferred vehicle for a public insurance option and, perhaps eventually, the avenue for a universal single-payer system.

Republicans are looking for ways to roll back Medicaid

Medicaid is a joint state-federal venture, unlike Medicare or Social Security. The federal government sets some standards for who and what must be covered and kicks in 50 percent or more of the funding, but states have significant latitude in how they administer the program and they must pay a substantial share of its costs.

That reliance on state discretion has always led to significant disparities in Medicaid benefits, eligibility, etc. across the states. Arizona did not even have a Medicaid program until 1982, even though the program was created during Lyndon B. Johnson’s Great Society in 1965. Medicaid now covers more than 70 million people.

“This was the giant sleeper program,” Sara Rosenbaum, a George Washington University professor who has followed Medicaid since the 1970s, told me. Some people knew when the program was created, she said, that “someday it would grow into a program that was how we insure low-income people.”

Obamacare sought to expand Medicaid in every state to every American in or nearly poverty, but the Supreme Court blocked it. Instead, 32 states chose to expand Medicaid as the health care law intended; 19 mostly Republican-led states refused. That set up the program to be a major part of this year’s debate about repealing and replacing the Affordable Care Act.

But the big Republican vision for overhauling Medicaid — placing a federal spending cap on the program, making it more akin to welfare post-reform — is dead. It failed in July when the Better Care Reconciliation Act went down in the Senate and again this fall when Graham-Cassidy couldn’t muster a majority. Medicaid spending would have been cut by 35 percent, versus current law, after two decades of those spending caps. Enrollment was projected to drop by up to 15 million people in the next 10 years.

Medicaid reformers in Congress may have fallen short for the time being, but they did get spending caps passed in the House and the plan received more than 40 votes in the Senate. Supporters of Graham-Cassidy, which borrowed the spending caps from the earlier BCRA, have promised to try to revive it next year.

So Republicans very nearly succeeded in changing the program forever, and they may try to do it again soon. But its size (75 million covered lives) and its importance to state budgets and economies ($350 billion in annual spending) have made Medicaid harder and harder to unravel.

“Even when the program was a fraction of the size it is now, people understood you didn’t want to cripple it. It’s what we have; it works well,” Rosenbaum said. “This recent episode was the granddaddy of them. It drove the point home in a way that wasn’t possible before because it’s become so gigantic.”

But these existential threats have been overcome before, only to reappear; in 1995, Republicans in Congress actually passed a Medicaid block-grant plan, though they knew that President Bill Clinton’s veto pen was waiting for it. It took 20 years, but this year congressional Republicans resurrected this very similar proposal.

So some people who have followed the program for a long time don’t think we should bury the idea just yet. 

Gail Wilensky, who oversaw Medicaid during the George H.W. Bush administration, told me the problem this time was that in the context of Obamacare repeal, the Medicaid spending caps were very clearly being used to pay for tax cuts for the health care industry and the wealthy.

“It just made it very messy, because they were all kinda mushed together, with basically the impression left that this was just about the gutting the money out of Medicaid and the program be damned,” she said. “It doesn’t mean to me per capita block grants … couldn’t have a rational structure about it.”

Republicans could come back to Washington in 2019 with an even stronger Senate majority, given that Democrats are defending many of the most closely contested seats. That could open up another opportunity for them to overhaul Medicaid.

But many of the same problems that sank Medicaid spending caps the first time — namely that every state including those led by Republicans has Medicaid as its biggest budget line item, and therefore reductions in federal funding are going to hurt — will still be a barrier.

“Medicaid is the No. 1 source of money for state budgets. Governors of both parties were not happy about this. It’s the biggest formula fight Congress will ever have,” Alker said. “I think it really would come down to a question of leadership. To move this on its own, they would really have to decide this was really the Holy Grail for them.”

But even setting aside a fundamental overhaul like spending caps, Republicans can do a lot to shape Medicaid more to their liking. States are allowed to apply for waivers from some federal requirements, and the Trump administration has wide discretion to allow those policies to be implemented.

Red-state governors have proposed requiring some Medicaid recipients to work or look for work, charging small premiums or asking enrollees to pay something out of pocket for medical care, and even requiring drug trusts for Medicaid recipients. The Obama administration had acquiesced to some of these ideas, like premiums and cost sharing, but refused to budge on things like work requirements. 


But for at least the next three years, and maybe longer, Republican-led states will find a much more hospitable administration.

“I think the administration will use waiver policy to try to make their mark on the Medicaid program, no question,” Alker said. “They’ll try to push the waiver strategy to the limit.”

Rosenbaum pointed to a letter that then-Health and Human Services Secretary Tom Price sent to states in March, which claimed that Obamacare’s Medicaid expansion was “a clear departure” from the program’s core mission and signaled that the new Trump administration would be open to policies like work requirements that had previously been off limits.

“At that moment, he showed his cards,” she said, “which is to absolutely use the power he has to try and deny or nullify an entire act of Congress by claiming that it’s contrary to the act of Congress.”

Verma sent a clearer signal still in her speech this week, portraying such requirements as a moral necessity for fulfilling her goal of moving people out of Medicaid.

“Believing that community engagement requirements do not support or promote the objectives of Medicaid is a tragic example of the soft bigotry of low expectations consistently espoused by the prior administration,” she said. “Those days are over.”

Democrats are starting to propose expanding Medicaid even more

Democrats have always been friendlier to Medicaid, but they haven’t exactly been yearning to expand it until very recently. In fact, when Obamacare was being drafted, the original idea was to use federal subsidies to send everyone to the health care law’s insurance marketplaces to buy private coverage. 

It was only once Democrats saw that it’d be cheaper to expand Medicaid to cover the poorest uninsured that they added the biggest single expansion of Medicaid since the program’s beginning.

Seven years later, that expansion of Medicaid has covered more than half of the 20 million-plus people who gained coverage under the law. It has been, even in the eyes of Republicans, a much smoother success than the health care law’s expansion of private health insurance, where technical glitches and premium hikes have left a far muddier picture of the law’s impact.

“Medicaid has managed to do this without the convulsion that the exchanges have gone through,” Wilensky said.

And now that Medicaid has proved more politically resilient than many believed possible, some Democrats are starting to imagine an even bigger future for it. 

Sen. Brian Schatz (D-HI) is now proposing to allow every American to buy into Medicaid, should their state agree to allow it. “One of the unintended consequences of the Republicans trying to cut Medicaid is they made Medicaid really popular,” he told Vox’s Sarah Kliff and Jeff Stein in an interview. “This conversation has shifted. There was a time where Medicare was really popular and Medicaid was slightly less popular. What this ACA battle did was make both of them almost equally popular.”

Even if such federal pursuits are stalled while Republicans control Washington, they could be undertaken at the state level. The Nevada legislature passed a Medicaid buy-in program earlier this year, though it was vetoed by the Republican governor. 

States have had narrower buy-in programs for some time, and they could find them to be an appealing way to introduce a strong public option to their state. It’s an idea that even Wilensky, who worked in a Republican administration, finds palatable.

“As a default option for people who don’t have employer-sponsored insurance or who can’t afford their portion, and who are willing to give up access to a broader network, I don’t see that as a major threat,” she told me. “At a practical level, it’s been able to get the job done.”

Depending on the structure of these buy-in programs, experts have told me, we could end up in a situation where Medicaid takes up more and more of the market. 

If states can set premiums lower than private insurance can, and if they cap what people who otherwise don’t qualify for Obamacare subsidies have to pay for a Medicaid buy-in, that could bring more and more people into the program. That’s one way to read Schatz’s bill, which also notably proposes increasing Medicaid’s reimbursement rates to match Medicare’s, removing another conservative attack on the program: that it pays too little.

A program increasing in size, accepted by more and more doctors — it’s a few steps down the road from single-payer, though Medicaid-for-all is certainly not the rallying cry that Medicare-for-all is among Democrats. 

Whatever the end point, Medicaid is the most obvious testing ground for any future efforts to expand health coverage and care.

“It’s the only place you can experiment. If you have population health needs, it’s the one canvas you can paint,” Rosenbaum said. “You can’t do it with commercial insurance. We can see that, with what it takes just to keep a small commercial insurance market going.”

“Medicaid’s always in the game,” she continued. “So as problems arise, Medicaid is the obvious place to take on problems.”

The program is staring at a fork in the road, with each side eager to use it for their own ends. Medicaid is forgotten no more.

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Categories: Medicaid Watch