House Republicans seeking to thread the needle in Medicaid spending cuts are eyeing “per capita caps,” which would throttle federal funding without technically changing benefits.
The key Republicans who support the proposal argue it is not technically a “cut,” seeking to avoid the politically charged label.
But the controversial plan would change the nature of the Medicaid program by putting a cap on federal Medicaid payments to states that expanded the program under the Affordable Care Act.
However, GOP leaders say nothing is certain as they debate the best way to offset President Trump’s massive tax cuts.
Moderate and battleground-district Republicans are pushing back on threats to Medicaid, while conservatives and budget hawks are agitating for deeper cuts.
A planned Energy and Commerce Committee markup was pushed back by at least a week to give members more time to resolve their differences.
Here’s what to know about the fight:
Federal spending caps would mark a major change
Medicaid is a joint venture between the federal government and states. The federal government pays a fixed share of states’ Medicaid costs without any limit, so the amount reimbursed goes up or down depending on how much a state spends on the program.
For Medicaid expansion states, the government pays 90 percent.
A per-beneficiary cap would fundamentally change Medicaid from an open-ended entitlement to one with strict limits on federal spending. Congress would set a fixed amount per beneficiary for each state to receive, and states would be responsible for all remaining costs.
“Medicaid spending grows with inflation, but also with the costs of new technology, blockbuster prescription drugs such as [GLP-1 drugs], and changes in population health,” said Alice Burns, associate director with KFF’s Program on Medicaid and the Uninsured.
Per capita caps would prevent federal spending from growing to pay for those new costs, Burns said. It would make federal spending lower and more predictable, but states would assume 100 percent of the risks.
Over time, the cap would inevitably lead to an increasingly lower federal matching rate — without a floor, it could drop even lower than the current level for nonexpansion “traditional” Medicaid.
A cap would also lock in existing inequities. States with lower initial per enrollee costs would continue to receive less federal funding than states with higher initial costs, even though the cap would change year to year.
According to the Congressional Budget Office, a per enrollee cap would cut federal spending by between $588 billion and $893 billion over nine years, depending on how the cap was designed.
The budget resolution, which lays out parameters for crafting the final Trump agenda bill, directs the Energy and Commerce Committee to find at least $880 billion in cuts, a figure that scorekeepers say cannot be reached without changes to Medicaid.
Would force state leaders to make difficult decisions
Republican proponents argue a cap is not a benefit cut, as they can set a ceiling on federal spending but still allow for some flexibility in the states.
The proposal would force states to be more fiscally responsible; any changes to benefits would have to be made at the state level. The argument is that state leaders who can best manage their money won’t be forced to make difficult decisions.
If a state cuts benefits as a result of a cap, “they’re bad,” said Rep. Jeff Van Drew (R-N.J.).
If the cap is set to the rate of inflation, “that should say to the states, ‘Hey, we’re still going to grow. We’re going to control the rate of growth,'” and the states are going to have to organize themselves to make sure their spending reflects the change, Van Drew said.
But experts say state leaders are going to be forced into making difficult decisions.
If officials don’t want people to lose coverage, they would likely have to make offsetting cuts elsewhere — like provider payments — or raise taxes. Eventually, there would be enormous pressure for states to end Medicaid expansion because of the steep costs.
As the effects of the caps continue to grow over time, Burns said it’s likely that at some point states won’t be able to cut benefits or payment rates, so a lower federal match is an inevitability.
Perilous politics for many Republicans in Congress
Republicans previously tried to cut Medicaid spending in 2017 as part of the ObamaCare repeal effort.
The House’s repeal bill included a measure that would have set a cap on how much states received in funding based on their estimated number of beneficiaries, with adjustments for inflation.
But the repeal effort failed, and the GOP paid a high price during the next election.
Now, moderate and swing district Republicans are warning against some of the steepest cuts.
“We have very clearly articulated our position on protecting Medicaid for eligible recipients,” Rep. Mike Lawler (R-N.Y.) told reporters Thursday. “Leadership is well aware of that.”
Rep. Don Bacon (R-Neb.) said he told the White House he won’t support more than $500 billion in cuts to Medicaid — he is supportive of work requirements and stricter eligibility checks, but nothing that will cut benefits.
