"Trumpcare" Could Cut $200M From Medicaid, Destabilize HealthSource RI

Mar 22, 2017

Interim head of the Executive Office of Health and Human Services Anya Rader Wallack, left, with HealthSource RI chief Zach Sherman, discuss the impacts of the GOP's plan to replace Obamacare.
Credit Kristin Gourlay / RIPR

Rhode Island health officials are busy analyzing the potential impacts of the Republican plan to replace Obamacare. Proposed funding cuts to Medicaid  - the health insurance program for the poor - could mean covering fewer people or reducing payments to health care providers.

Medicaid cuts
Anya Rader Wallack, interim head of the Executive Office of Health and Human Services, says the Republican proposal could mean a loss of nearly $200 million over four years for Rhode Island’s Medicaid program. That comes from scaling back the expanded coverage Medicaid offered to single adults under Obamacare and capping state Medicaid spending per person. Wallack says that could ultimately drive up the number of uninsured Rhode Islanders.

“Obviously what we want to do is try to maintain as much coverage as we can, given the advances we’ve made and the fact that we’ve reduced the uninsured rate from something like 12 percent to four percent," said Wallack. "So we’re looking at all our policy options for maintaining that coverage. But the idea that we could make up for this kind of a funding hit is sort of hard to imagine.”

The GOP plan calls for capping state Medicaid spending per person and eliminating the expansion of coverage of single adults.

​Cutting costs
Wallack says there are basically only three levers the state could pull to make up for that loss in funding.

“You’ve got the benefits you cover, you’ve got eligibility, so the number of people you cover and at what income levels, and you’ve got provider payments," Wallack said. "We would, as we do every year in the budget process when we have to try to achieve savings, we look at all three of those. Benefits doesn’t really yield as much in general. It’s not the tool that has the most impact.”

So Wallack says that leaves the options of limiting the number of people eligible for Medicaid and cutting payments to health care providers. Providers already unhappy with payment levels, and hospitals could have to bear the brunt of caring for more uninsured people.

Expansion population
The Affordable Care Act expanded Medicaid eligibility to low income single adults. And unlike the traditional 50 percent matching funds the federal government sends to states to help pay for Medicaid, this so-called "expansion population" was covered with 90 percent federal funding. The current GOP plan freezes Medicaid expansion by 2020. Rhode Island's cost for covering this expansion population would continue to be 10 percent state money, 90 percent federal money, for people already enrolled. But that 90 percent match would be eliminated by 2020, reverting to the traditional 50 percent match. Medicaid officials estimate that many of the approximately 70,000 people covered by this expansion would eventually drop out of the program, because people drop out of Medicaid as their income or employment changes.

HealthSource RI
Rhode Island’s Obamacare health insurance exchange – HealthSource RI – could struggle to keep customers if the Republicans’ health plan passes. The issue is the proposed elimination of age and income-related subsidies to help people pay for coverage on the exchanges.

Under the Affordable Care Act, people who need help to buy health insurance plans on the exchange get some help. Nearly 90 percent of Rhode Islanders who buy coverage on HealthSource RI get some kind of federal subsidy to help pay their monthly premiums and some help paying for the percent of coverage their insurance doesn’t cover. That assistance covers, on average, nearly 70 percent of the cost of their premiums. Under the Republican plan to replace Obamacare, people who want to buy on the exchanges would get a flat tax credit tied to their age. HealthSource RI head Zach Sherman says the credits will be significantly lower than what customers get now.

“We would expect to lose people who currently receive subsidized health coverage through HealthSource RI to not be able to afford it, said Sherman."

The GOP plan would also allow insurers to charge older people more. And people whose coverage lapses would be charged an extra 30 percent when they re-enroll. That could discourage younger, healthier people from enrolling in coverage - and potentially destabilize the exchanges.

“Marketplaces – healthcare.gov and state-based exchanges across the country are very much evaluating the role they would play in a world where ‘Trumpcare’ is the law of the land. I can’t tell you right now how we would fund our operating budget down the road but we are definitely looking at the role we would play," said Sherman.   

The combination of the reduction in subsidies and higher monthly premiums could price low income Rhode Islanders out of the market.