Medicaid Redux: Graham Cassidy Again

Where Medicaid is concerned, the latest version of Graham Cassidy, made public on September 24, 2017, retains the contours of the earlier version.  There are a couple of narrow changes, one of which adds to the list of potentially significant legal complications with the draft bill.

What Stays The Same

Like its predecessor, the draft would fundamentally alter the federal/state financial relationship Medicaid. The two most obvious changes from current law involve capping federal contributions to the traditional program and ending the Affordable Care Act's federal Medicaid funding for the expansion population. But the scope of the one-sided federal transformation in Medicaid's historic financial ground rules goes well beyond the draft's two most striking features.  In numerous other ways, the draft upends over a half-century of policy regarding the availability of federal funding to states to meet the health care needs of their most indigent populations—from giving vast new discretion to the HHS Secretary to bar federal funding for totally permissible state spending decisions under federal law (such as public health emergencies) to further denying states' ability to generate their share of total Medicaid expenditures through lawful taxes.

Whether such a one-sided, dramatic, changing of the rules regarding the federal government's historic financial commitment to financing health care for medically indigent populations passes constitutional muster in the wake of the United States Supreme Court's historic Medicaid coercion decision (with its memorable "gun to the head" quote from the Chief Justice) has been a matter of not inconsiderable reflection within the academic law bar for some time now.   Whatever its legality, the bill is undeniably profound in its reach and impact.

The key provisions that remain the same are:

• Treatment of the ACA expansion population: The draft would end all federal funding, as of January 1, 2020, for the Affordable Care Act's low income adult Medicaid expansion population, with a new, narrowly crafted exception for certain Native Americans, discussed below;
• Planned Parenthood exclusion: The draft would exclude federal funding for Planned Parenthood for one year;
• Withdrawal of federal Medicaid funding for catastrophic health care costs: The draft would shift to the states all costs for beneficiaries experiencing high health care costs up to 3 months prior to the date of enrollment;
• Work requirement option: The draft would allow states to impose work requirements on working-age adults who do not fall into one of the bill's recognized exemptions (pregnant/postpartum women, sole caretaker parents of children under 6 or children with disabilities; married teenagers in school, full-time students, and certain patients in drug treatment programs);
• Shortening of the eligibility period for poor adults: The draft would allow states to shorten periods of eligibility for the expansion population by imposing more frequent eligibility redetermination requirements for the expansion population (as long as this population remains in place);
• Block granting for the poorest adults, overwhelmingly working-age women: The draft would continue to give states an option to convert Medicaid into essentially a standardless  block grant, frozen in time to a base year in terms of both federal funding and population size, for "non-elderly, non-disabled, non-expansion" adults—a group consisting  overwhelmingly of a state's most impoverished women  including, apparently, women during and immediately following pregnancy;
• Capping of Medicaid spending with broad discretion in the HHS Secretary to interpret their scope and stringency: The draft would cap the federal Medicaid contribution by imposing per-capita caps designed to: (a) limit the federal contribution to a fixed amount that grows over time at an annual rate well below actual Medicaid costs, especially for poor children and working-age adults; (b) constrain federal funding in states deemed by the HHS Secretary to have "excess" Medicaid expenditures, meaning that their actual costs exceed the agency's targets; (c) give the HHS Secretary broad discretion over calculating the actual amount of any state's base year funding (for purposes of figuring out the starting point for the cap);  and (d) give the Secretary broad discretion to determine, during periods of public health emergencies, whether states will be able to spend additional money outside of the caps.
• Further reduction of federal funding by constraining states' ability to generate their share of total program costs: As before, the draft threatens to further, and significantly, reduce federal Medicaid spending; it limits by one-third the amount of revenue states could raise for their share of overall program costs by reducing the amount that can be generated through lawful provider taxes.
• Constraining states' ability to use funds from the "Market-based health care grant program" to support Medicaid for traditional populations: States are barred from counting, toward their required share of total Medicaid spending, their own expenditures and those of cities and counties under state and local indigent care programs.

What Changes

Treatment Of American Indians And Alaska Natives: Extending The ACA Expansion Medicaid For A Handful

In 2010, according to the U.S. Census Bureau, 5.2 million people identified as AI/AN either alone or in combination with other races.  Of these, 2.9 million identified as American Indian or Alaska Native alone.  The Census Bureau reports that during that year, the majority of the AI/AN population lived in California, Oklahoma, Arizona, Texas, New York, New Mexico, Washington State, North Carolina, Florida, and Michigan. As a percentage of the total local population, the state of Alaska, not surprisingly, shows the highest concentration of state residents who identify as AI/AN.  While  Anchorage ranks behind New York City, Los Angeles, Phoenix, and Tulsa in terms of the total number of residents who identify as AI/AN either alone or in combination, the city ranks number one in terms of the percentage of the population that is AI/AN.

The AI/AN population is exceptionally poor.  Overall, one in four lives in poverty; among those identifying as solely AI/AN in terms of race, the poverty level surpassed 29 percent in 2012. Alaska, in particular—although the same can be said for all states with large AI/AN reservation or rural populations— faces critical problems because of the isolation in which these individuals and families live.

Owing to its poverty, in Medicaid expansion states, the AI/AN population has experienced enormous gains in Medicaid coverage. Between 2013 and 2015, the proportion of the AI/AN reporting no insurance coverage fell from 23 percent to 15 percent.  (By comparison, the uninsured rate for the population fell from 25 percent to 21 percent in non-expansion states).  As has been the case with poor and medically underserved rural and urban communities throughout the country, the Medicaid expansion had a multiplier effect for the AI/AN population, bringing not only insurance coverage but needed revenue for health care services into communities, enabling access expansion, and stimulating employment. The AI/AN population, like other deeply-impoverished and at-risk populations, has much to lose from changes to Medicaid that would eliminate the ACA Medicaid expansion and its funding, while also slashing overall federal funding for the traditional Medicaid program.

Among all populations facing the range of health and health care risks stemming from hundreds of billions of dollars (ultimately mounting into the trillions) in lost Medicaid funding, the new draft singles out this population for special treatment, although the specialness of the treatment is mostly chimerical.  Under the bill, certain Native Americans would get to keep Medicaid by being reclassified, beginning January 1, 2020. The specifications for who among the expansion population, and who among the expansion Native American population, gets to keep its coverage are those who meet all of the following criteria:

• The individual is an "Indian";
• The individual is part of the expansion population;
• The individual lives in a state that as of December 31, 2019 provided for coverage of the ACA expansion population;
• The individual was actually enrolled as of December 31 2019 and was receiving benefits as of that date; and
• Following that date, the individual does not experience a break in eligibility longer than a state-specified level, which cannot be less than 6 months.

This provision essentially amounts to grandfathering an identifiable racial group: people who are considered "Indian" for purposes of Medicaid (presumably the same definition that applies to Medicaid for eligibility purposes – those who are members of a federally-recognized tribe). No other racial or ethnic group receives comparable grandfathering protection, a fact that may carry constitutional implications insofar as it appears to disfavor certain Medicaid beneficiaries not falling within a particular racial classification.

But even for this favored classification, the provision appears to be incredibly limited in who can invoke its protections.  Within the entire population of AI/AN beneficiaries today, the rule would apply only to those who, as of December 31 2019, were actually enrolled in their state Medicaid programs (paradoxically, state programs would need to start shutting down well before that given the total loss of funding as of January 1, 2020). Furthermore, the protection would be applicable only for beneficiaries experiencing long term breaks, i.e., breaks not less than 6 months. Medicaid churning is a well-documented problem, and much of it is short-term. But this provision appears to do nothing to help even those falling within the racially identifiable group but whose disenrollment is shorter than 6 months.

Favorable Federal Financial Contribution Rates For Certain States Under The Medicaid Cap

The draft also would set a higher federal financial contribution (that is, the amount of total Medicaid expenditures borne by the federal government) for certain "high poverty" states.  The meaning of "high-poverty" does not focus on the percentage of the state's population living below the federal poverty level. Instead it references certain states (Alaska and Hawaii) whose federal poverty levels are set differently— that is, higher—from the 48 contiguous states.  For Alaska, the FMAP increase would be an additional 25 percent of the weighted average federal Medicaid spending, while for Hawaii the bump would amount to an additional 15 percent.

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