What Happens if Medicaid is Cut

Medicaid spending is almost certain to get cut significantly under the emerging Congressional reconciliation bill. But what is Medicaid anyway and what will happen if spending drops?

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Transcript

David: 0:00

Medicaid spending is almost certain to get cut significantly under the emerging congressional reconciliation bill. But what is Medicaid anyway and what will happen if spending drops? Welcome to Care Talk America's home for incisive debate about healthcare, business and policy. I'm David Williams, president of Health Business Group.

John: 0:26

And I'm John Driscoll, the chairman of the Yukon Health System.

David: 0:29

It's a funny question to ask John. You know, what is Medicaid? But it's been around for a while and I, I'm not sure actually, that all of our, uh, folks that are, that are actually running, um, Medicaid actually know what it is. So what, what is it?

John: 0:42

Well, Medicaid is the program that the federal government and the state government. Both financially support to provide healthcare for, uh, the poorest and the most vulnerable populations that would otherwise not be covered by insurance. It's typically tied to some element of disability, some element of, of a, an absence of income. It also, uh, you know, was originally started really for the disabled and, um, for as aid for families with dependent children to make sure that young poor mothers could get healthcare. Uh, but as a, but as a, as a practical matter, now through. Multiple iterations. It now covers through the Obamacare expansions in Medicaid, a substantial amount of folks who are able-bodied working families. And so right now you've got everything from complex dual eligibles who qualify for Medicare and Medicaid on Medicaid and also. Now individuals who are working full-time jobs but probably can't get insurance or probably certainly can't get insurance at an affordable price through their employer. So it's actually a pretty broad category. I think it's close to, it's between 70 or 80 million Americans are now on Medicaid. It's pretty, it's pretty broad. It's a broad based care for a lot of everything from ranging from complex conditions to healthy, hardworking, um, poor employee, relatively poor employees.

David: 2:16

Yeah, I mean it's, uh, you know, it sounds like something where it's, uh, just a fringe program to begin with. You know, those that can't otherwise get insurance or whatever. And now it's, we're talking 80 million people or so, which is, uh, makes it very, very big. Uh, and of course, um, that the total dollars add up and it's something like 600 billion from the federal government a little bit more and close to 300 billion from the states. That was last year. So that's heading toward. A trillion dollars. A lot of it's in managed care. You know, John, part of it, what was beyond behind my question of what is Medicaid, is that when you talk to people who have Medicaid, and it's as you said, you know, 70 or 80 million. Not everybody knows that they actually have it, and part of that is due to branding. So here in Massachusetts they call it Mass Health and Oklahoma SoonerCare, California Medi-Cal. So it's probably the name. People don't associate Medicaid with themselves. And there's also just a lack of clarity of how health insurance works in in the first place. And I think that's that's all boiling in there somehow.

John: 3:12

I, I think the, the, the challenge for Congress, Congress put together, um, sort of a mock or model budget without details that would allow the Republican led leadership in the Congress in the house to effectively pull the classic reverse Robin Hood to steal from the poor and give to the rich. To fund a very large tax break or, uh, for corporations and wealthy people. And I think that, uh, that the majority of the savings in that or the of that transfer of, uh, taxes. That their, for the businesses and wealthy people are currently paying, um, would be made up for an $880 billion over, over a decade reduction in Medicaid. But they didn't give any detail. So everybody's kind of, you talked about a trillion, well, you've got nearly a trillion of cuts to a program that cares for the poorest. The near poor are going to tax breaks for businesses and, uh, wealthy people, uh, that's where the majority of the money would go. Seems kind of crazy, but it does beg the question of what should Medicaid cover and how should it cover? And maybe, maybe Dave, you could go into the different things that Medicaid, what's the structure of Medicaid today? Because it, it's not just the people who are. Covered in Medicaid that are vulnerable here. It's also anybody who's a doc, a a, a nurse's aide, or a hospital, all of whom depend. Pretty substantially on the dollars that flow through that Medicaid program.

David: 5:05

Well, John, that's a simple sounding question. It's a hard question. Let, let me, let me start by, uh, going off into one second on why you could

John: 5:11

slow down if it, if it's, if you're struggling,

David: 5:14

I am struggling. But let me, let me say one other thing. First was we, we went right to, Hey, you need to, uh. There's this desire to expand or extend tax breaks and therefore Medicaid gets to be cut. Well, it's not the only large program, but it's kind of the only one that doesn't have, uh, a protection associated with it. So, you know, Medicare announced, okay, we're not gonna cut Medicare. Social Security not gonna cut that. The military not gonna cut that. Maybe gonna grow it. Interest on the debt, you know, so that if you add up all the things that are untouchable, you're kinda left with Medicaid is the big thing that's, uh, that's there. So that's why we're talking about it in the first place. Although,

John: 5:50

to be fair, the the president also said he's not gonna cut, cut, cut your Medicaid, so, right. Of course. He never quite sure what he, yeah. Whether he understood Medicare or Medicaid. But he did say, you know, basically he's gonna keep his hands off of Medicaid and then Okay. But the Republican leadership said they have their hands all over Medicaid. Yeah, yeah, yeah. No, and

David: 6:08

they, I think just the math would say that you, uh, that you need to go after Medicaid. So I think that's what's expected. Now, going back to my comment before about how people don't know that they have Medicaid, they're also not directly receiving the funds. So when Medicaid money is spent, they don't send it to, you know. John Driscoll or John Q Public, it does go to pay for services that are in hospitals or physician offices. Uh, medications, nursing homes in particular is a big one, so that's where actually the funds go. So if the, if there's a cut. Then that's who's affected. Now, where are some of these, uh, folks? They're actually, uh, in places that are economically disadvantaged as a whole, as regions in particular rural areas. And if you go into, you know, if you ever drive into, uh, like let's say an old, an old town that's kind of, you know, down the dumps and you see, oh, there's a new, big, big new building there, it's almost invariably a hospital. Or a, uh, a medical clinic. And a lot of that money is from Medicaid and Medicare, uh, as well that's, that's coming in. So it's a major source of funds flow into places that, you know, otherwise, uh, would not be receiving those funds. And that, that's why I think it's a tricky thing, uh, to deal with. Well,

John: 7:25

because what you have in committees of jurisdiction in the house and the Senate are a lot of committee chairman, um, from Ruby Red states that were big. Trump supporters whose hospitals and doctors in rural areas are exclu almost exclusively dependent on these Medicaid dollars continuing to flow. If those are cut off. Healthcare could stop. A lot of these rural hospitals would close, or we've already got a bit of a crisis in rural healthcare where you can't, we don't have enough doctors and hospitals, so a major cut would need major pain for these rural areas. Now, I don't, honestly, Dave, I don't see how they're gonna, I. Square that this circle, because what they're talking is sort of a quick layer cake cut, uh, for something that is a, uh, a fra already a pretty fragile system when you're looking at, uh, low income areas.

David: 8:24

A lot of these, uh, reforms or cuts to Medicaid are framed in moral terms. And so a big one is about work requirements. You know, the people shouldn't be sitting around, you know, collecting their free healthcare, uh, or whatever. That's a big one. And that's where a lot of the, uh, that's where a lot of the emphasis has been. And I've even seen things go, uh, further saying that, you know, these are things that just the states are just using to enrich themselves by paying for all sorts of things that are got nothing to do with. Healthcare and let, let's get back to, you know, doing Medicaid essentially for charity cases. How does that all come together?

John: 8:56

Well, I, I think that there. Isolated examples of where some states may have paid for some stuff, particularly in an, in, in an experimental mode that was addressing the social, uh, determinants of healthcare. Frankly, we know that if you don't, you know that some of these program, some of the things that have been pointed out are, are things like food subsidies, and we know, frankly, that if you're hungry, you're likely to be. Get sicker and, and be a more expensive burden on the system. So I think there's some, there, there are some reasonable questions that you ask, but I think it's often aimed at sort of targeting the, the odd anecdote, uh, you know, I actually, I. I think this is going to be really hard because Medicaid is an elemental part of how people get healthcare and work at at for low income jobs that don't provide insurance. It's an elemental, perhaps the last standing part of healthcare in a lot of these rural areas. And I think if you start pulling the pin on that, you could, you could have some real catastrophic consequences where you have health, you know, you've, you've heard of food. Deserts, not, not deserts, but deserts where there's not, that you don't have access to, uh, uh, healthy food or food at all. I think you could run into the same thing in terms of healthcare and I think that that is where the Republicans are, are, are, are struggling. I.

David: 10:22

Let's talk a little bit more about how Medicaid came to cover so many people. I'll throw out a couple of ideas and there may be more. You know, one is just that it was an approach that was used to, uh, under the Affordable Care Act in order to expand coverage. So, as you said before, it was part of the, you know, sort of aid to family dependent children's, essentially for, you know, single mothers before. So it was expanded as a way to get more people into coverage. Um, at the same time, there were some other things that had been discussed. A public option or co-ops, and those had ultimately not been. Uh, you know, either not allowed at all or not been, uh, successful. And then during the, um, public health emergency related to Covid, uh, then, you know, people could be added to the rules, but they couldn't automatically be taken off. So I think that's a reason. And then of course, also healthcare has become so expensive that, uh, employers can't necessarily afford to cover it and people can't pay for it on their own. So all those things add up for taking a program that was little. To one that's big, and if you cut it as you say, uh. You know, the, the need is still gonna be there.

John: 11:30

Well, and, and let's go back to, I mean, they, the, the, the one item you raised, which is work requirements. Most states already have, uh, requirements that able bodied people who are working, I. Are either they, they may get access to these Medicaid programs through the Affordable Care Act subsidies. I mean, the whole way in which we finance, support and extend healthcare is pretty darn complicated. But Medicaid's touching a lot of that. And historically, you know, work requirements. Are, are really a cover for frankly, another level of bureaucracy to, uh, disqualify people who would otherwise be on Medicaid. And it hasn't been terribly effective at actually getting the care to the people who need it. But look, there, there's a. This is the, the reason why they're looking at Medicaid is a, to your point, they don't, they didn't think there was much of a constituency to protect it. Now what they're finding is doctors, nurses, as well as a lot of folks who work, who are getting, getting Medicaid in these red districts, rural districts, poor areas, uh, really depend on it

David: 12:42

and they like it. So, you know, in another era we, we'd be talking about hospitals, talking about Medicaid and they don't like Medicaid, they have too much Medicaid and it pays too little and they lose money on it. How do we square that, uh, with concern that if it goes away, they're gonna go bankrupt? I.

John: 12:59

Let's, let's start with the notion of, of course, they make money on Medicaid. I mean, if they, if, unless all of the hospitals are completely filled, um, they are, they're, they're, they're, they're definitely making money on this program. Their cashflow po. I don't think I've ever seen a hospital unless it was trading a higher pay, a higher compensated commercial member or um, um, Medicare member that it would in some ways lose money on Medicaid. They aren't making as much money as they'd like, uh, but hospitals always wanna make more money. Having said that. If you actually were to pull the, the, those lives out in a material way. Hospitals are typically running at, you know, nonprofit hospitals at a sub 5% margin, mostly between one and 3%. And I don't know that a lot of hospitals wouldn't. I mean, I, I, well I certain that a lot of hospitals would actually have to reduce their footprint or frankly close in certain parts of the country.

David: 14:04

So there's new leadership, not just, uh, at the presidential level, but also at the level of health and human services, and then centers for Medicare and Medicaid services, uh, under that. And what do we take, if anything, from, uh, what the head of HHS and the head of CMS, uh, are doing with Medicaid or with their attitude toward it might be?

John: 14:26

Well, we don't really know yet. I think that the. I, you know, I've been pretty public at, at being a skeptic of RFK Jr. Who's a skeptic on science. Um, so I, I think that he, he, he's having, he's having, he's having, he, he's chasing the, the, the, the demons of autism and vaccines and getting. He's getting caught a little pretty darn quickly with measles, and he's doing a fair, appears to have approved a fair amount of damage being done to the NIH and the FDA, but just skipping over all of that. Put that aside for a moment. He's, yeah, he's, uh, what we've heard from, um, Maraz, who just was recently signed in, is that he actually is a fan of Medicaid. He wants to root out waste, fraud, and abuse the, the, um. Uh, the, the, the three headed monster that appears to, to always be in government programs but never to be found by Republicans. Um, but I think there's legitimate concerns about fraud in medic in in any healthcare program, frankly.'cause there's just so much money sloshing around. But it's unclear to me that you can protect Medicaid reimbursement for doctors and hospitals and make any material cuts, uh, because actually. Of the lower reimbursement, which you've raised in other, uh, um, podcasts where commercial payers full, um, employer employee paid by employee insurance, Medicare, which is paid by the feds for the elderly and managed care versions of, of all, that all pay more on a per episode per day, um, per service basis. Medicaid. So in many ways, David, Medicaid is the most efficient part of the healthcare system because it's the least. It's the, it's the lowest price. And so I, I, again, I, I think, I think the, the Republicans are kind of stuck here and it's gonna be really interesting how they, um, I. Uh, navigate outta the escape room they've designed for

David: 16:33

themselves without a key. There had been some discussion way back when about something called, uh, Medicare for All as an approach to universal coverage, and I always thought actually that Medicaid for all made more sense if you're gonna go in that direction, largely for the reasons that you've described in terms of, uh, just the lower cost, it's also more comprehensive. So if you talk about prevention, social determinants of health and the continuum of care. It's actually Medicaid. I mean, a lot of what Medicaid pay for is actually nursing homes for people that have Medicare, those, uh, dual eligibles that you're, um, you know, that you're, that you're describing. So, uh, that would be an interesting contrast. Instead of cutting it actually, maybe everything else should be folded into it.

John: 17:15

Well, that is, is a fascinating topic that we should probably explore on a different podcast because it would say very different direction than, um, this kind of, again, medicate Medicaid. Well, it's, it's really a budget trap that led them to, I think the, uh, cuts to Medicaid trap that are gonna end up. Rather than solving a problem of the reverse Robinhood move of, of, of, of, of, of giving people tax breaks who probably don't need them, although they may feel like they need them as the president's tr uh, crashing, uh, the, uh, the stock market. Um, uh. I, I don't, I don't, I don't see this as being anything other than a lose lose proposition for Republican leadership. Um, as they go into the next round of congressional elections, uh, you either gotta not deliver on the tax cuts for the people who don't need it, that you promised or deliver on that at the expense of the people who voted you into office. It's gonna be really interesting to watch and we can, I promise, David, we can bring up, uh, your perpetual proposal of Medicaid for all on a different, on a different version of

David: 18:22

care talk. Well, that's it for another episode of Kara Cho. We've been speaking about Medicaid cuts or maybe radical expansion of Medicaid. I'm David Williams, president of Health Business Group,

John: 18:33

and I'm John Driscoll, the chairman of the Yukon Health System. If you liked what you heard or you didn't, we'd love you to subscribe on your favorite service.