Medicaid Reform Could Shift Risk onto States and the Most Vulnerable Americans and Harm Population Health, According to New Analysis

WASHINGTON, DC – Medicaid insures roughly 69 million people in the United States and finances nearly half of all births. It is the leading funder of long-term services and supports for seniors and people with disabilities and is at the front lines of efforts to combat the opioid epidemic. However, legislation currently under consideration by Congress would fundamentally alter the structure of Medicaid and create a permanent and growing chasm between actual health care costs and federal contributions to Medicaid. This could have implications for access to health care and long-term services and supports among many of the most vulnerable Americans, according to a set of briefs released today by the National Academy of Social Insurance.

According to the brief Medicaid and Federal Funding Caps, legislation under consideration would change the federal contribution to Medicaid from open-ended funding related to state spending to capped funding largely divorced from actual costs. In the future, the risk for health care cost growth beyond the growth rate embodied in the capped federal contribution would be borne solely by the states, rather than collaboratively between the federal government and the states. As health care costs rise, most states—constrained by balanced budget requirements and limited ability to generate revenue—would be forced to cut benefits or coverage.

“The risk shift being proposed now is broadly analogous to the shift from traditional employer pensions to defined contribution [401(k)] plans in the retirement sector over the past four decades,” said Benjamin Veghte, co-author and Vice President for Policy at the National Academy of Social Insurance. “It shifts risk—in this case, the risk of health care cost growth—from the nation as a whole to the states and ultimately to individuals in need of care. In the context of the decades-long trend of growing inequality in income, wealth, and longevity, such a risk shift raises the stakes.”

A companion brief, Medicaid’s Role in Improving the Social Determinants of Health, examines how addressing the social determinants of health can improve the health status of Medicaid beneficiaries, and therefore be a key strategy for providing cost-effective, efficient care. By partnering with state and local agencies to address the social determinants of health, state Medicaid leaders may enhance their ability to control costs and strengthen the program’s financial sustainability over the long term.

The briefs were supported by AARP and the Robert Wood Johnson Foundation.