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Selection of HHS chief signals massive effort to change federal role in healthcare

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For Kaiser Health News

President-elect Donald Trump’s selection of  Georgia Congressman Tom Price, M.D., to head the Department of Health and Human Services signals that the new administration is all-in on both efforts to repeal the Affordable Care Act and restructure Medicare and Medicaid.

Price, a Georgia Republican who currently chairs the House Budget Committee and a retired orthopedic surgeon, was among the first to suggest that not just the ACA but also Medicare are on the near-term agenda for newly empowered Republicans.

Privatizing the Medicare program for seniors and disabled people and turning the Medicaid program for the poor back to the states are long-time goals for Republicans in Congress and the White House. They say that the moves could help put the brakes on health spending. Opponents argue, however, that both changes are aimed instead at shifting the financial burden of healthcare from the federal budget to states and individuals.

That question — should the federal government continue to provide open-ended health benefits? — could prove to be a key battle line.

Democrats and consumer advocates say the changes would break a promise to guarantee health services made when Medicare and Medicaid were enacted, in 1965.

“That is the explicit intent of these proposals, to cap liability and shift costs,” said Edwin Park of the left-leaning think tank the Center on Budget and Policy Priorities.

Len Nichols of George Mason University agreed: “It’s about fixing the growth rate so they can be certain of a lower federal commitment to healthcare.”

Republicans, however, say in the face of rising federal deficits, it would be irresponsible not to rein in the programs’ spending.

“We have a moral obligation to the country to do this,” House Speaker Paul Ryan told the New York Times in 2011, when he first proposed the plans as chairman of the House Budget Committee.

Medicare, which covers roughly 57 million elderly and disabled Americans, and Medicaid, which covers more than 77 million people with low incomes, are among the biggest items in the federal budget, together costing an estimated $1 trillion in 2016, according to the Congressional Budget Office.

And, more importantly, both programs are expected to keep growing, consuming ever more of the budget. According to the CBO, over the next 30 years, the percentage of federal spending claimed by the major federal health programs (primarily Medicare and Medicaid) is expected to rise from just over 6 percent to more than 10 percent.

“By reforming these programs in the future, we can preserve them for the present,” said Ryan in another 2011 interview.

Both GOP proposals for the major medical entitlement programs date back decades.

Proposals to replace the open-ended Medicaid program, in which the federal government matches whatever states spend, with a block grant that would limit the federal government’s financial responsibility first surfaced in the early 1980s, during the Reagan administration. When Republicans took over Congress in 1994, the idea reemerged, was passed and sent to President Bill Clinton, who vetoed it. President George W. Bush revived the idea again in 2003, but he could not get Congress to act on it.

The latest version of the proposal offered by House Republicans would give states the option of modifying the plan so that the federal payments to states would be based on a per capita funding formula.

A number of Republican governors have supported the idea, because the program would generally relieve states from rules governing who and what to cover in Medicaid in exchange for accepting limited funding.

But advocates for the poor say it would lead to fewer people getting fewer services. Because the federal contribution proposed by Ryan is specifically set to increase more slowly than predicted inflation in health care, “states could either contribute much more to their Medicaid programs, or, more likely, use that flexibility to make deep cuts to the program,” said Park.

A 2012 estimate from the Urban Institute said that year’s proposal could result in 17 million people losing coverage, and payments to healthcare providers could be cut by nearly a third.

Thomas Miller of the conservative American Enterprise Institute says more recent proposals have gotten less draconian. “It’s gotten a little better because as opposed to a big block grant, it’s gone to the per capita allotments” that would be based on the number of people enrolled in the program.

Park of the CBPP said that would be better than simply giving states a single pot of money. With a per-capita cap, the federal contribution would rise as more people are added to the program. But the cuts would still be deep, he said, because “you’re achieving similar savings by slashing spending per beneficiary.”

In Medicare, the concept of “premium support,” which would give enrollees a set amount of money to spend on the health plan of their choice, emerged in the mid-1990s. The original proposal was geared to using competition to slow the growth of Medicare spending.

But later iterations of the Medicare proposal would increase contributions intended to pay for insurance more slowly than the expected rate of health inflation. That means that instead of covering the government’s share of a set package of benefits, what is currently referred to as Medicare’s defined benefit, the program would instead pay a specific amount, often referred to as a defined contribution, that might not be able to pay for those benefits.

“Right now, the federal government says you pay [a set share] of those costs” through Medicare premiums, deductibles and co-pays and beneficiaries get government funding to cover guaranteed benefits in return, said Park. “Under premium support there would no longer be that guarantee and there would no longer be a defined set of benefits.”

Miller of AEI said any effort to push these GOP plans for Medicare and Medicaid will run into stiff headwinds — even in a Republican-controlled Congress — because it’s difficult to take something away from people.

Congress can’t simply cut the programs, he said. “You have to tell people why you’re doing this. You have to say this is actually going to improve the healthcare system.”

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