GOP Healthcare Bill May Bankrupt States

U.S.Bank Bankruptcy

The New Bill Would Cut Medicaid Funding Without Reducing Its Core Mandates

Projections show that a potential budget vacuum may occur if the Republican healthcare plan is passed, as the bill would continue to cut funding to Medicaid going forward but without cutting its core mandates.

Medicaid is currently funded in an open-ended scheme, where the federal government reimburses states according to how much was spent on healthcare for enrollees, with no upper limit. After 2020, however, enhanced reimbursements for able-bodied adults would be cut and a per-person spending limit would be imposed upon the states, according to the bill.

In order to account for inflation, the bill’s per-person spending limit would follow the medical care component of the consumer price index for most non-elderly people, and the index plus one additional percentage point for elderly disabled people.

The math works out to about 3.7% growth over the next decade and 4.7% for the elderly, according to the Congressional Budget Office (CBO). Medicaid, however, is currently growing at a rate of 4.9% for the non-elderly and 3.3% for the elderly, meaning it would dramatically shift where care is meted out.


But these provisions alone would decrease Medicaid spending by almost $800.0 billion over the next 10 years and would decrease enrollment by about 15 million. But things only get worse from there for Medicaid.

After 2025, the bill would change the per-capita growth rate for enrollees to the consumer price index for all urban consumers. Regular consumer goods often inflate less quickly than medical care, with a rate of increase of about 2.4%. This means that in the years following 2025, Medicaid will be even more limited.

“After the following after the next decade,” the CBO wrote, “states would continue to need to arrive at more efficient methods for delivering services (to the extent feasible) and to decide whether to commit more of their own resources, cut payments to health care providers and health plans, eliminate optional services, restrict eligibility for enrollment, or adopt some combination of those approaches. Over the long term, there would be increasing pressure on more states to use all of those tools to a greater extent.”

As written above, both healthcare outcomes, services, and overall availability of Medicaid would suffer, but so too would the states as they have to continue to meet the mandates of Medicaid but with increasingly reduced funding, leading to potentially impossible budget decisions.


The Senate’s Plan Makes Medicaid a Time Bomb,” The Atlantic, July 3, 2017.