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Medicaid adjustment benefit? Bill could give break to Georgia
May provide more funding for state's elderly, disabled

Tucked inside the U.S. Senate health care bill is a little-discussed provision that could benefit Georgia, according to a conservative organization.

The overall Senate legislation continues to be in flux as Majority Leader Mitch McConnell (R-Ky.) searches for votes to pass it.

Still, the current Senate version — like the House bill that is also a proposed replacement for the Affordable Care Act — contains a fundamental reorganization of Medicaid, which covers roughly 2 million Georgians. It would turn the program from an open-ended entitlement into a structure that limits federal spending through a per capita cap for most Medicaid beneficiaries.

But the Medicaid overhaul also contains a provision that would allow the U.S. Health and Human Services secretary to adjust the federal Medicaid funding per state by up to 2 percent based on its spending levels.

If a state’s per capita Medicaid spending is above the national average by 25 percent or more, its per capita cap would be decreased the following year by 0.5 percent to 2 percent.

But if a state is below the average by 25 percent or more, its cap would be increased by 0.5 percent to 2 percent.

Kelly McCutchen, president of the Georgia Public Policy Foundation, says that for Georgia, a traditionally low-spending state per Medicaid enrollee, the adjustment formula could bring large funding increases for its elderly and disabled populations. In those areas, Georgia Medicaid spending is about half the national average.

“This would make a real difference for low-spending states,” he told Georgia Health News.

Under the bill, the HHS secretary — currently Tom Price of Georgia — must ensure that the redistribution does not cost the federal government extra money.

Five states — Alaska, Montana, North Dakota, South Dakota and Wyoming — would be exempted from the redistribution because each has a population density of fewer than 15 individuals per square mile.

Children in the Georgia Medicaid program already are funded above the national average but not more than the 25 percent cutoff point, McCutchen said.

While funding for adults in Georgia Medicaid would decrease, the loss would be more than offset by increases in other areas, he said.

A Manatt Health analysis also shows a Georgia gain under the redistribution formula.

The new redistribution provision, Manatt Health said, likely was added to the bill to mitigate the concern among traditionally low-spending states that their spending levels are “baked” into the formula for future Medicaid funding under a per capita cap, putting them at a permanent disadvantage against their higher-spending counterparts.

In its analysis, Manatt found that nearly twice as many states would be losers under the redistribution provision as would gain from it.

If states were to maintain their current per capita spending patterns through fiscal 2019 (the first year of data used in redistribution calculations), 20 states would be hit by a tighter cap. In comparison, 12 states, including Georgia, would experience some relief from the per capita cap cuts because they have expected spending that is low on average for their overall populations or for any of the individual eligibility groups, Manatt said.

Other southern states, such as South Carolina and Louisiana, would also benefit from the adjustment formula.

“A lot of southern states tend to be lower-spending states per enrollee,” said April Grady, a Manatt director. She speculated that low-spending states would have pushed for the redistribution plan.

“This is a complex policy to digest,” Grady said on Monday. And it’s difficult to project with certainty. “We don’t know what the numbers will be in 2019” for each state’s Medicaid spending, she added.

The Manatt brief also says that the new provision might not work as intended and, in fact, could harm some states it’s designed to help, hurt states with higher health care costs or that serve a higher proportion of people with significant health care needs (e.g., a state with an older population) and create even more uncertainty for states.

“The provision makes no allowance or adjustment for the many facts that might drive a state to spend considerably more than the national average,” Manatt Health said. “States may end up classified as high spending simply because they have a higher cost of living, provide a more robust benefit package to beneficiaries, have an older population, cover a higher need group of beneficiaries, or reimburse at higher rates to address access issues.”

Laura Harker, health policy analyst at the Georgia Budget and Policy Institute, which supports the Affordable Care Act, said Monday that even if Georgia were to receive more federal dollars under this adjustment in the first year, “the growth is still capped at an arbitrary limit that may not be able to keep up with real health care costs.”

“This adjustment provision creates the incentive for states to spend less on Medicaid to avoid having their cap adjusted downward,” Harker said. “With the incentive to spend less, many states will have to restrict eligibility and benefits. This is especially true for Georgia, because the Medicaid program is already efficient and would have fewer options to reduce costs.”

McCutchen of the Georgia Public Policy Foundation said the House health care bill would be unfair to Georgia and other lower-spending states because the block grant funding would be based on historical spending. The House bill, he said, would lock in the inequities between a high-spending state such as New York and a low-spending states. That funding gap has troubled Georgia Republican political figures as well.

The redistribution adjustment in the Senate bill, he said, “could enormously benefit Georgia.”

“This is something that’s good for Georgia,” McCutchen said. “It’s fiscally responsible; it’s fair.”

He said he wants one key change to the Senate provision: These adjustments should be mandatory. Currently, the proposed redistribution changes are discretionary and the cost savings from reductions in high-spending states must offset increases in low-spending states. The latter, McCutchen said, brings “politics into the mix.”



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