Shifting Costs to States?: Republican Medicaid Proposals Could Pop New York's Global Cap

President-Elect Donald Trump and the incoming Republican-led Congress may be considering ways to cut federal Medicaid spending which increased under the Affordable Care Act (ACA). These potential cuts could foist a new burden on states like New York that chose to expand Medicaid eligibility under the ACA.

This expansion was the subject of the United States Supreme Court's landmark National Federation of Independent Business, et al. v. Sebelius, et al., the decision that saved the ACA while limiting the federal government's power to withhold Medicaid spending to states that refused to expand Medicaid within their borders.¹ In the aftermath of this decision, some states, including New York, chose to expand Medicaid coverage to those adults who earn 138% of the FPL, while others did not. One of the benefits of expansion is that the federal government covers 100% of each state's expenditures for this newly-eligible population², which will decrease to 90% of total expenditures by 2020³.

This significant subsidy to the states may disappear under a Republican administration. While President-Elect Trump has not clearly signaled his administration's intentions on this topic, in June of 2016 Congressman Paul Ryan issued a document called A Better Way: Our Vision for a Confident America, which characterized Medicaid as "a broken insurance program that has historically failed lower-income families."⁴ Congressman Ryan's proposal would cap Medicaid spending per beneficiary each year, regardless of how much the state actually spent on that enrollee.⁵ This plan would also cut the Federal Medical Assistance Percentage, or FMAP, that the federal government pays states for adults who enroll in Medicaid under the Affordable Care Act's expansion effort. Under the ACA, the federal government currently covers 100% of the Medicaid expenditures for these newly-eligible adults.⁶ Under the Ryan plan, the FMAP would decrease from 100% for these adult enrollees in 2018, to each state's normal FMAP"”which is, in New York, 50%.⁷

Some back-of-the-envelope calculations illustrate that this reduction could leave New Yorkers with a higher Medicaid bill in 2019. As of December 2015, the most recent time period for which data are available, New York's Medicaid program covered about 5.7 million people, 2.27 million of whom were adults. Approximately 285,000 or 12.5% of those adult Medicaid enrollees were newly-eligible under Medicaid expansion.⁸ The Kaiser Family Foundation reports that the average payments for adult Medicaid beneficiaries each year is $4,596, which puts yearly Medicaid expenditures only for those newly-eligible adults at just over $1.3 billion.

Assume for a moment that this number remains stable through 2019, when the Ryan plan would take effect: Under the status quo, New York absorbs only 10% of that spending, or about $130 million. Under the Ryan plan, that number would increase to about $655 million"”a new expense of about $525 million. By way of comparison, New York's 2017 budget calls for Medicaid expenditures of $17.7 billion.

Obviously, as a percentage of all New York Medicaid expenditures, this new expense would be relatively small"”just 3.09%. However, Medicaid observers might ask how this new expenditure would influence other Medicaid spending under New York's Global Cap. Governor Andrew Cuomo's stated goal is to ensure that New York's total Medicaid spending growth is limited to the ten-year average rate for the long-term medical component of the consumer price index"”a figure that is approximately 3.6% today. The loss of the federal subsidy for adults at 138% of the FPL could plausibly consume most of that figure on its own at 3.09% of the 2017 Medicaid budget.

The potential loss of a big chunk of the FMAP just for newly-Medicaid-eligible adults illustrates how dramatic other changes to federal Medicaid policy could be for New York"”facing an increase in expense, where will State policymakers choose to make cuts? Consequently, providers should keep an eye on proposals on the federal level to alter the ACA. While there is no guarantee that Congressman Ryan's plan will find its way into law, if it does, New York may have to grapple with some significant questions for one of its biggest budgetary line items.

¹567 U. S. ____ (2012), available at https://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf
²Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 2001(a)(3), 124 Stat. 119, 272 (amending Social Security Act sec. 195 [42 U.S.C. § 1396d] to add a new subsection (y)).
³Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 2002(a)(1), 124 Stat. 119, 271 (amending Social Security Act 1902(a)(10)(A)(i) [42 U.S.C. § 1396a] to add a new subclause VIII extending this coverage); 42 U.S.C. 1396d(y)(1)(E).
⁴A BETTER WAY: OUR VISION FOR A CONFIDENT AMERICA, p. 5, June 22, 2016, available at http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf.
⁵Id. at p. 26.
⁶Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, FY 2017 FEDERAL MEDICAL ASSISTANCE PERCENTAGES, available at https://aspe.hhs.gov/basic-report/fy2017-federal-medical-assistance-percentages
⁷Id.
⁸TOTAL MEDICAID ENROLLEES – VIII GROUP BREAK OUT REPORT, December-2015, (Updated June 2016), available at https://www.medicaid.gov/medicaid/program-information/downloads/cms-64-enrollment-report-oct-dec-2015.pdf