Snyder fights for Medicaid plan in Obamacare repeal

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – Gov. Rick Snyder wants Republican President-elect Donald Trump and the GOP-led Congress to spare Michigan’s unique form of Medicaid expansion as they consider dismantling the Affordable Care Act, calling it a “successful” program that could serve as a national model.

Trump has repeatedly vowed to repeal and replace “Obamacare” but has not made clear whether he wants to pull back state funding for expanded Medicaid eligibility. It is a key but costly provision of the 2010 law that has allowed millions of low-income residents to qualify for government-paid health care coverage.

Congress is expected to act quickly on a joint budget resolution with reconciliation instructions to repeal certain aspects of the Affordable Care Act in the first 100 days of the Trump administration, said Joe Antos, a health care scholar with the American Enterprise Institute. A reduction in Medicaid expansion match rates might be part of that mix, Antos said.

“Going beyond that, there’s no clear schedule,” he said. “Some Republicans are saying: Give us three years and we’ll work on it – which I think is tantamount to saying give us three years and we’ll forget about it. Others are saying: No, we’ve got to get it done in 2017 or we’ll lose some political momentum, and I think there’s some truth in that.”

Republican governors like Snyder who expanded Medicaid eligibility to up to 133 percent of the poverty level under Democratic President Barack Obama are expected to play an important role in the debate. Trump takes office Jan. 20 with repeal-minded GOP majorities in both the U.S. House and Senate.

“I think it’s important that as they look at the Affordable Care Act ... I hope they carefully look at the success we’ve had in Michigan, because we didn’t just do Medicaid expansion,” Snyder told The Detroit News in a year-end interview.

“We put requirements for health and wellness on the front ends, and personal responsibility. We’re seeing a huge increase in coverage,” but also a huge drop in the number of people showing up at hospitals without insurance — a positive trend, Snyder said.

Snyder and Michigan’s GOP-led Legislature signed off on Medicaid expansion in 2013 but added unique requirements for recipients who earn between 100 and 133 percent of the poverty level, including Health Savings Account contributions and co-pays that can be reduced through healthy behaviors.

More than 642,300 people have signed up for the Healthy Michigan plan since it launched in April 2014, surpassing initial projections of 320,000 in the first year and 470,000 at its peak.

Robust enrollment figures mean Michigan will have to spend more on Medicaid expansion than originally anticipated. The federal government has fully funded the program so far, minus some administrative costs, spending around $4 billion a year in Michigan.

Increasing state costs

The federal government fully paid for Medicaid expansion for the past few years. But the funding rates for expanded Medicaid eligibility will drop to 95 percent this year and 90 percent by 2020 and beyond. That will leave states on the hook to make up the difference, a cost that will eventually approach an estimated $400 million in Michigan.

Enrollment “explosions” and other unexpected costs will “spell disaster” in many Medicaid expansion states, according to the Foundation for Government Accountability. The free-market group, which opposed the expansion, says enrollment numbers have more than doubled early predictions in 24 states with comparable data.

“Michigan lawmakers should begin looking for an escape hatch from the state’s Obamacare expansion as soon as possible,” Jonathan Ingram, vice president of research, told The News, suggesting the state could close the program to new enrollees while awaiting congressional action.

“As the state share begins to kick in, higher costs will start to put fiscal pressure on other core priorities, including education, public safety and even services for seniors and individuals with disabilities.”

Michigan’s law requires it to end Medicaid expansion if state costs outweigh savings. That’s unlikely to happen until at least fiscal year 2022, according to the Michigan House Fiscal Agency, because federal funding has allowed Michigan to save money in other budget areas, including prisoner health care.

State Sen. Patrick Colbeck, a Canton Republican critic of the Affordable Care Act, accused budget officials of “back filling” the Healthy Michigan plan to hide the fact “it’s costing us a heck of a lot more than we thought it would.” He called Medicaid expansion a “horrible failure.”

“Medicaid provides coverage, it doesn’t provide care,” he said. “And from an expense perspective, we’re going to be on the hook for well over $300 million from our general fund to go off and pay for this.”

But Snyder and other Healthy Michigan supporters argue the program could reduce long-term health costs.

Early data suggests Michigan hospitals are treating fewer uninsured patients, which “may reduce the burden of uncompensated care,” according to University of Michigan researchers, who found uninsured hospital stays dropped significantly during the first eight months of the expanded Medicaid eligibility.

The governor has also predicted Medicaid coverage will lead more residents to seek preventive care rather than make costly visits to the emergency room. But those kind of potential cost-saving behaviors are “harder to measure,” he acknowledged.

Emergency room use stayed high during the first two years of a state-funded Medicaid expansion program in Oregon, according to a recent study published in the New England Journal of Medicine, a result that counters a key promise of the Affordable Care Act.

Replace — with what?

Trump and Republican House Speaker Paul Ryan have called Obamacare repeal and replacement a top priority, but experts predict that finalizing a new plan may prove more politically complicated than expected.

Under Ryan’s “Better Way” proposal, states that expanded Medicaid eligibility would qualify for current funding levels but eventually be required to pay the higher traditional matching rates for the newly qualified population.

“I wouldn’t see that kicking in for at least three years, just because states would need some transition,” Antos said. “I think that’s going to be the argument.”

Changing match rates would require Michigan to shoulder about 35 percent of the cost if it wants to continue Healthy Michigan, rather than 10 percent by 2020, which would “be a very large burden on Michigan’s general fund and very difficult to manage,” said Laura Appel of the Michigan Health and Hospital Association.

“I don’t know where we would find the money, and that would put a lot of stress on our programs,” she said.

Trump wants to turn Medicaid into a block grant program, which could mean more flexibility for states but also cap funding. Ryan has proposed allowing states to choose a per-capita Medicaid allotment or block grant to “reduce federal funding over the long term, while preserving a safety net for needy, low-income Americans.”

Colbeck supports the block grant idea, which he said would force Michigan’s GOP-led Legislature to “go back to some fundamental discussions” about Medicaid expansion.

“The issue and objective of what we’re trying to do is take care of people without health care,” Colbeck said. “One way is to take money from one group of people and provide it to another group of people to subsidize their care. The other is to lower the cost for everybody so that the cost of getting that care comes within reach of the expansion population.”

If the Affordable Care Act is scrapped without an immediate replacement for Medicaid expansion funding, the state likely couldn’t afford to continue the Healthy Michigan program.

“That would be a very large number,” Snyder said. “We’re contributing part of the cost, but the bulk of it is coming from the federal government. You’re talking billions of dollars.”

Snyder has not yet personally discussed Medicaid expansion with Trump or Michigan’s congressional delegation, but he and other state leaders had a “robust” discussion about Medicaid expansion at a National Governors Association meeting in late November, according to his office.

“We’re happy to share our experiences, ...the positive and negatives of what we’ve learned and what other issues we’ve had,” Snyder said. “Because I think we’ve been a good role model in Michigan.”

Michigan’s Medicaid costs

The cost of Michigan’s Medicaid expansion, which includes the state match and administrative expenses, is projected to increase during the next several years.

2015-16: $20 million

2016-17: $152 million

2017-18: $225 million

2018-19: $266 million

2019-20: $364 million

2020-21: $399 million

Source: Michigan House Fiscal Agency