By several measures, Kentucky has been the nation’s biggest winner from the Affordable Care Act (ACA). Nearly seven years later, those gains and more are at risk in the recently released American Health Care Act (AHCA) – which not only fails to replace the ACA, but goes beyond it to restructure the Medicaid program in a way that will further reduce access to coverage and benefits. Together, these changes will rip health insurance away from 24 million Americans according to the Congressional Budget Office.
Proposal Unravels Medicaid Expansion and Restructures Medicaid to Shift Costs to States
Per-capita-caps = an end to Medicaid as we know it
The AHCA proposes a highly consequential change to Medicaid in the form of capping payments to a certain dollar amount per enrollee starting in 2019, and then adjusting for inflation (medical-related inflation to begin with, though that formula is vulnerable to cuts in future). Because Kentucky would be on the hook for all the costs above and beyond what the federal government provides, the state would have to choose between increasing its share of payments, cutting benefits, scaling back the number of people enrolled or cutting already too-low payments to hospitals, clinics and other kinds of providers. This funding method also doesn’t take into account spikes in costs due to things like new, expensive medications, outbreaks that are more expensive to treat like the opioid addiction crisis or the larger share of older patients as baby boomers begin requiring more costly care.
This squeezing of federal funding for Medicaid could restrict coverage for all Medicaid recipients — including kids, seniors and people with disabilities.
Unwinds Medicaid expansion by freezing enrollment and ending the enhanced federal match
The plan would freeze enrollment for the Medicaid expansion in 2020, which means no new people would be able to join the program after that point in time and be subsidized with the so-called enhanced “Federal Medical Assistance Percentage” (FMAP). The FMAP is the percent of Medicaid costs that the federal government pays. For Kentucky, traditional Medicaid is 70 percent paid for by the federal government and 30 percent paid for by the state. In contrast, for Medicaid expansion, the federal government pays an enhanced FMAP of 90 percent.
The federal government would still pay 90 percent of the cost for existing Medicaid enrollees, but that group would disappear as they cycle out of the program because of income or other eligibility changes. According to a report from the National Academy for State Health Policy, Kentucky saw 13,000 people cycle between Medicaid and marketplace coverage in 2014 because changes in their incomes made them eligible or ineligible for Medicaid. In the Medicaid program as a whole, 19 percent of Kentucky recipients covered in 2012 were no longer covered in 2013. The result is a death by attrition for expanded Medicaid in Kentucky.
The cost of paying for expanded Medicaid with the lower state matching rate is hefty — an earlier estimate put it at $712.7 million in 2019 for Kentucky above what we would otherwise pay with the enhanced match. It is extremely unlikely that our legislature would be willing to pick up that tab in future years.
Between reducing the enhanced federal match and freezing enrollment for the expansion as well as instituting a per-capita-cap across the board, the Congressional Budget Office estimates that 14 of the 24 million fewer people with coverage would come from reduced Medicaid enrollment. By comparison, a little over 11 million people gained coverage from expanded Medicaid since 2014.
Plan Threatens Private Insurance Market and Reduces Premium Assistance for Low-income and Older Kentuckians
Help for buying insurance based on age, not income
The new plan would still offer tax credits for helping people purchase insurance plans, but not based on income. Rather people would receive a tax credit between $2,000 and $4,000 based on age, ranging from 30-60 years old. This puts older, low-income Kentuckians at a significant disadvantage. As an example, a 60 year old earning $20,000 per year in Pike County would see a $6,410 decrease in her tax credit and a $6,000 decrease in Muhlenberg County under the AHCA compared to the ACA. The plan cuts credits for some low-income people even while people with incomes higher than what is eligible for subsidies under the ACA (up to $115,000) could get tax credits for purchasing insurance. And the credits don’t come close to covering the cost of insurance, particularly for older Kentuckians, who under this law could be charged up to five times as much as a young adult (compared to only three times more now).
The “continuous coverage” requirement would likely damage private insurance market
Under the AHCA plan, there is still a requirement for insurance companies that they cannot turn people away or charge exorbitant premiums for those with preexisting conditions; this is called “guaranteed issue.” At the same time, the plan removes the individual mandate that requires everyone have insurance – but the mandate is necessary to make guaranteed issue work without destabilizing insurance markets. The way the plan proposes to fix this problem is by introducing a “continuous coverage” requirement. This provision says that once enrolled you have to stay enrolled without a lapse of more than 63 days. If you do experience a gap in coverage for longer than 63 days, insurance companies would be able to increase premiums by 30 percent.
In practice, this creates incentives for healthy people to avoid the 30 percent penalty by not enrolling in coverage until they are ill, leaving sick people in the insurance pool and making insurance more expensive, which we’ve written about here. Ultimately, that can mean skyrocketing premiums, large drops in coverage and weaker coverage for insurance markets. The Congressional Budget Office estimates that there would be a decline of nine million people by 2026 between the employer-based and individually purchased insurance markets based on changes in the AHCA.
The AHCA Would Set Back Our Health and Economy
Fundamentally restructuring Medicaid, unwinding the Medicaid expansion that has provided coverage for 440,000 Kentuckians, reducing help for low-income and older Kentuckians to purchase insurance, and destabilizing private insurance markets are all reversals of the healthcare successes we’ve experienced as a Commonwealth. These damaging policy changes are being made in the AHCA to pay for large tax cuts for the wealthy and corporations in the bill. Another concerning consequence is that it scales back the lifespan of the Medicare Trust Fund, putting pressure on future lawmakers to further cut healthcare for seniors.
Kentucky has seen enormous gains because of the ACA. Our rate of uninsured has been cut dramatically, our providers have seen an 80 percent decrease in uncompensated care and low-income Kentuckians are already reporting better health. There are 1.3 million Kentuckians covered by Medicaid, and 130,000 who get insurance through the individual insurance market, all of whom are put at risk in some way by this plan. Lawmakers in Washington should reject this plan, and any other healthcare proposal that jeopardizes our health and our economy.
Updated March 14, 2017