The American Health Care Act (AHCA) is not just an alarming, slapdash effort to repeal the Affordable Care Act—it’s also a plan to radically weaken Medicaid, our nation’s health care safety net. Indeed, the US House-passed bill’s most dramatic savings—$834 billion according to Congressional Budget Office estimates—are achieved by slashing federal funding to Medicaid, which provides health coverage to nearly 75 million low-income Americans, and undoing the program’s basic guarantee.
Nevertheless, these draconian reforms have been among the lesser told stories of the AHCA’s anticipated impact. The breakneck speed and secrecy surrounding the bill’s construction left little time to unpack how Medicaid per capita caps would affect the many populations, including older adults, people with disabilities, families, and children, who rely on Medicaid to afford quality health care. This includes the 11 million Americans—older adults and people with disabilities—who are enrolled in both Medicare and Medicaid. Of these millions of dually eligible beneficiaries, roughly 80 percent qualify for help paying for their Medicare coverage through the Medicare Savings Programs (MSPs). The US Senate is now repeating this exact process, meeting in secret and rushing to vote on a bill that will dismantle the Medicaid program.
Medicare Savings Programs: Medicaid Assistance With Medicare Premiums And Cost Sharing
There are four different MSPs—the Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), Qualifying Individual (QI), and Qualified Disabled and Working Individual (QDWI) programs—each with its own eligibility criteria. Depending on an individual’s income and assets, Medicaid will pay for the individual’s Medicare Part A premiums (QMB, SLMB, and QDWI), Medicare Part B premiums (QMB, SLMB, QI), and Medicare cost sharing (QMB). Enrollment in an MSP also automatically qualifies a person for help paying Part D prescription drug costs through the federal Low-Income Subsidy or the Extra Help program. The QMB program is the largest of the MSPs; in 2013, the program enrolled about 7 million people with Medicare.
Federal law sets baseline income and asset limits for each MSP but grants states flexibility to expand access to these vital programs. The federal limits are exceedingly low. In most states, full Medicare premium and cost-sharing assistance is only afforded to individuals with annual incomes at or below 100 percent of the federal poverty level, amounting to about $12,000, and with personal savings totaling a little more than $7,000.
To date, 12 states and the District of Columbia have opted to exercise the available flexibilities to increase eligibility for MSPs. Alaska, Connecticut, the District of Columbia, Hawaii, and Maine have higher income limits. Alabama, Arizona, Connecticut, Delaware, the District of Columbia, Mississippi, New York, and Vermont have no asset limits. In addition to expanding access, adopting such flexibilities can relieve administrative burdens on both beneficiaries and states, even creating savings for state agencies.
In 2015, Medicaid spent about $15 billion on premiums and cost-sharing help for Medicare beneficiaries. In December 2015 alone, Medicaid helped 8.5 million Americans afford their Medicare premiums and cost sharing. In Exhibit 1, we provide state-specific data for that month.
Exhibit 1: December 2015 Medicare Savings Program Enrollment
|States and District of Columbia||Qualified Medicare Beneficiary program only||Qualified Medicare Beneficiary program plus full Medicaid benefits||Specified Low-Income Medicare Beneficiary program only||Specified Low-Income Medicare Beneficiary program plus full Medicaid benefits||Qualifying Individual program||Total|
|District of Columbia||9,083||13,424||48||---||24||22,579|
Source: Centers for Medicare and Medicaid Services, Medicare-Medicaid Coordination Office, “March 2017/Release of Medicare-Medicaid Enrollee State and County Monthly Enrollment Snapshots.” Data on Qualified Disabled and Working Individual program unavailable.
Per Capita Caps And Block Grants In The AHCA Could Undermine Medicare Cost-Sharing Supports
Under current law, the federal government pays a set percentage of all costs incurred by a state’s Medicaid program—including the MSPs—to all eligible individuals. Unlike other Medicaid expenses, the AHCA excludes federal payments for MSPs from the per capita caps and the alternative block grant payment states may select. As such, if the AHCA became law, the federal share paid toward MSPs would be expected to continue as is under current law—but that doesn’t mean these programs are safe.
As the federal government starts to pay a smaller share of Medicaid funding under Republican plans to cap or otherwise limit federal support for the program, states will face heightened budgetary pressures. States that have opted to build a more effective and efficient safety net by offering more generous MSPs may eliminate those expansions altogether. Indeed, when faced with unexpected and sizable Part B premium spikes in 2016, the state of Arizona signaled it would no longer accept applications for the QI program, one of the MSPs that covers only the Part B premium. While this crisis was ultimately averted by the Bipartisan Budget Act of 2015, which mitigated steep premium increases for those not held harmless under existing law, it sends an ominous message about how states will respond under Medicaid per capita caps—in this case, undercutting the affordability of health care for low-income older adults and people with disabilities.
As the AHCA is taken up in the Senate, MSPs may be targeted more directly, and possibly, more severely. For example, in a leaked draft of the Republican governors’ working paper on Medicaid reform, federal funding for per capita caps would be set by establishing base cap amounts for most Medicaid eligibility groups, including children, pregnant women, and disabled individuals. But states could choose to eliminate their contribution to MSPs. The governors call on Medicare to take full responsibility for the MSPs, but it’s highly unlikely that this Congress would secure the federal funding necessary to replace that shortfall.
The Value Of The Medicare Savings Programs
An example helps to show just how essential the MSPs are to low-income Medicare beneficiaries. Today, an 80-year-old widow with an annual income of $7,000 meets the QMB eligibility requirements. Her assistance currently includes $109 a month for her Part B premium, as well as any deductibles and coinsurance. Without the QMB program, she would spend 18 percent of her annual income on her Medicare premiums alone.
One calculation researchers use to determine if a person is underinsured is whether a household with an annual income of less than 200 percent of the federal poverty level spends more than 5 percent of its income on medical care—excluding premiums. The widow would reach this point with out-of-pocket costs of $350, and without the QMB program, her out-of-pocket expenses could add up very quickly. For example, if she has three primary care doctors’ visits a year, she would pay the Part B deductible of $183 and then 20 percent of the Medicare-approved amount after the deductible was met. Assuming those visits were each $100, the total for all three appointments would be about $206 ($183 for the deductible and $23.40 for the coinsurance).
But if she needed an additional appointment with a specialist, she may face far greater out-of-pocket costs, including coinsurance for certain tests. One conservative estimate for an initial cardiology appointment with a stress test could add another $50. It is also likely that she would need several prescription medications. Without the QMB program, even one hospitalization at an additional cost of $1,316 would be financially devastating. Even if she incurred no additional health care costs, her total spending on health care would be $2,880—more than 40 percent of her income.
This example may seem extreme, but it’s not. A counselor on the Medicare Rights Center national helpline helped Ms. A—a cancer patient in her late 60s—sign up for QMB. Enrollment in QMB meant Ms. A also gained access to Extra Help, allowing her to pay only $8.25 per month for a $16,000 cancer medication. Ms. A also saved on her monthly Part B premiums and on the 20 percent coinsurance for her frequent visits to the oncologist. Without QMB, Ms. A’s ongoing cancer treatments would be entirely unaffordable.
Like Ms. A, most people with Medicare live on low or fixed incomes—making access to the MSPs critically important. In 2016, one in four people with Medicare lived on an annual income below $15,250. Similarly, most Medicare beneficiaries have limited assets; one-quarter have personal savings of less than $14,550, and 8 percent have no savings at all or are in debt. Enrollment in MSPs can free up limited funds to allow people to afford groceries, utilities, and other basic needs. Exempted or not, the AHCA’s per capita caps threaten to undermine this critical program for our nation’s most vulnerable people with Medicare.