As GOP targets Medicaid, what constitutes a cut?

July 17--WASHINGTON -- Plans to scale back Medicaid spending have become a critical sticking point in Republicans' push to repeal major parts of the Affordable Care Act.

Several moderate Republicans who represent crucial votes have criticized the proposal, and an analysis by the nonpartisan Congressional Budget Office predicts 15 million fewer people would have coverage through the health program by 2026. If any of those senators balk, the bill could be sunk.

But Sen. Pat Toomey, the Pennsylvania Republican who authored one of the hotly debated Medicaid provisions, argues the plan contains no cuts and would not force anyone to lose coverage. Eligibility will remain the same and Medicaid spending, he says, will keep rising -- just slower, "and that makes it sustainable."

His Keystone State colleague, Democratic Sen. Bob Casey, calls the argument "a false premise -- and I think that's being charitable."

"The cost of everything goes up, so over time if you're putting less money into a program like Medicaid, it's a cut," Casey says.

Here are the facts behind the competing arguments playing out in Washington as Republicans press for votes this week.

What's at stake?

Medicaid mainly provides health coverage to poor or disabled adults, pregnant women, and children, covering about 74 million people. States and the federal government share the cost, with the feds paying 57 percent on average, although slightly less in Pennsylvania and New Jersey.

It's the third-largest domestic program in the federal budget, expected to cost around $385 billion this year, and has been a longtime target of fiscal hawks hoping to rein in the deficit.

The ACA, or Obamacare, expanded Medicaid to the working poor, healthy people earning up to 138 percent of the federal poverty line, or $39,000 for a family of four. The federal government promised to pick up all of the new costs initially, later dropping to 90 percent.

Pennsylvania and New Jersey took up the offer, adding 700,000 and 500,000 participants, respectively, to Medicaid rolls, part of 11 million nationwide who have gained health coverage through the expansion in 31 states and the District of Columbia.

What would the Republican health bill do?

The Better Care Reconciliation Act (BCRA) would make several major changes to Medicaid funding.

The first directly targets the ACA expansion. Instead of the promised 90 percent of aid for the expansion enrollees, the federal share would phase down to the same rate for other aspects of Medicaid, starting in 2021 and reaching its typical 57 percent in 2024.

Other changes address Medicaid more broadly -- a sore point for some Republicans, who argue that they should stick to addressing Obamacare provisions.

But Toomey wants to seize this chance for bigger changes. He points out that Medicaid is growing faster than the economy, contributing heavily to the federal deficit and, he says, making it unsustainable over the long haul.

Reining in costs, Toomey argues, will ensure Medicaid survives.

So the bill also would change Medicaid from an open-ended program that grows to meet demand to one that has a per-capita limit. Instead of growing with medical costs, the program would send states a fixed amount per person. If actual costs rose above that amount (say, if there were an epidemic or spike in prescription-drug prices), states would pick up the added expenses -- although a new tweak provides some flexibility in the case of a health emergency, such as a disease outbreak.

The per capita limit would rise with inflation. But in a provision inserted by Toomey, the Senate plan would use a less generous measure of inflation than the House did. He would use CPI-U, which tracks overall inflation, instead of CPI-M, which accounts for how fast medical costs are rising. CPI-M increases more quickly.

The shift could mean a difference of billions of dollars over time.

"The fact is each and every year the federal government is going to spend more money on Medicaid than the year before," Toomey said in a recent question-and-answer session broadcast on several Pennsylvania TV stations.

Still, compared with current law, the changes would mean $772 billion less in Medicaid spending over the next decade, a 26 percent drop, the Congressional Budget Office estimates.

The latest Senate version, released Thursday, has some additional Medicaid changes, but they are relatively small in the scope of the bill and are unlikely to have a major impact on a new CBO analysis expected this week.

What are the effects?

Democrats and some Republicans from states that participated in the expansion worry that these changes would cost millions of people their health coverage.

The annual cost in Pennsylvania, once all the cuts are in place, would be $4.5 billion in 2025 under an average scenario, and close to $6 billion if costs rise more quickly, according to a new analysis Gov. Wolf's office plans to release Monday. By 2030 those numbers would roughly double. New Jersey could lose up to $4 billion a year, estimates the liberal group New Jersey Policy Perspective.

Faced with losing billions of dollars of federal aid, the states would find it difficult to come up with the money on their own to close the gap, the program's supporters argue. They'd have to cut services, coverage, or payments to doctors, devote more state money to the program -- or a combination of all of those steps.

"The cuts in federal Medicaid funds to protect health care benefits for Pennsylvania's most vulnerable are unacceptable and insurmountable," Wolf said in a statement.

Cutting back care, though, would be states' decisions, Toomey says, disputing the idea that the Senate bill effectively kicks people off of Medicaid. Since eligibility will be the same, he says, states could still provide coverage while covering less than half the cost.

"The only way anyone loses coverage is if a governor or state legislature decides this program isn't worth it at 48 cents on dollar," he said. "If the program is worth it, then it should be a priority."

He also sharply disputes the CBO projections, saying they are based on faulty assumptions, including that some unspecified states would expand Medicaid if the ACA remains in place and that millions would give up their enrollment because of the end of a mandate requiring people to have health insurance.

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