Republican ideas for healthcare reforms could spell trouble for U.S. states

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By Robin Respaut and Hilary Russ | SAN FRANCISCO/NEW YORK

SAN FRANCISCO/NEW YORK President Donald Trump’s
push to fulfill a campaign promise to replace Obamacare, his
predecessor’s signature healthcare plan, with the help of a
Republican-controlled Congress, could add to U.S. states’
financial strain.

That is because a key component of the 2010 law allowed
states to expand Medicaid, the government health insurance
program for low-income Americans, and collect extra dollars that
came with expansion.

Thirty-one states and the District of Columbia chose to
expand Medicaid enrollment through Obamacare, formally known as
the Affordable Care Act.

While Republicans have not agreed to specific plans, one
idea gaining traction has been to convert the current system, in
which states share the cost of Medicaid enrollees with the
federal government, into fixed payments, or block grants, sent
to the states.

Trump’s nominee to run the U.S. Department of Health and
Human Services, U.S. Representative Tom Price, has long
advocated such a plan.

The Kaiser Family Foundation estimates a repeal of Obamacare
and a cap on federal Medicaid spending, such as through a block
grant or a per capita cap, could cut Medicaid funding by 41
percent over the next decade. That would likely handicap states’
ability to respond to larger enrollments during recessions.

“It will have clear implications for state budgets,” said
Robin Rudowitz, the Washington-based associate director at
Kaiser’s Program on Medicaid and the Uninsured. “States could
raise revenue and spend less in other areas, but these are not
easy choices to make.”

The foundation is a nonprofit focused on health issues.

Faced with inflexible federal funding, states might also
decide to limit Medicaid eligibility or freeze new enrollment,
reducing the number of people covered.

In a letter to congressional leaders on Tuesday, the
National Governors Association pleaded with lawmakers not to “shift costs to states.”

New Jersey, one of many states struggling with ballooning
public pension costs and modest revenue growth, expanded
Medicaid under Republican Governor Chris Christie.

That state could lose up to $3 billion in federal aid if the
Affordable Care Act is repealed and have to spend $1 billion
more from its budget, Democratic state lawmakers there said this


Medicaid sits at the heart of the federal-state fiscal
relationship. Over $330 billion in federal Medicaid dollars
flowed to states in fiscal year 2016, accounting for more than
half of all federal grants sent to state and local governments
and the largest individual program, according to Standard &

In 2015, the federal government paid about 60 percent of
total Medicaid costs while states paid 40 percent.

Medicaid enrollment also tends to spike during an economic
downturn, just as state revenues are most strained, spurring the
federal government to send more money to states.

Despite calls from Trump to Republican lawmakers on Thursday
for swift action on replacing Obamacare and on other priorities,
changes will likely still take time to work out.

House of Representatives Speaker Paul Ryan said the agenda
would take more than 100 days and said the goal “is to get these
laws done in 2017,” without guaranteeing an Obamacare
replacement would be enacted by the end of December.

With so many details still up in the air, public officials
are hard-pressed to craft budgets that directly respond to their

New York City Mayor Bill de Blasio on Tuesday said his next
budget would hold a record amount of money in reserve and seek
at least $1 billion of savings citywide to compensate for “a
huge amount of uncertainty” emanating from Washington.

In California, Medicaid enrollment jumped from nearly 8
million in 2012 to more than 14 million today, thanks in part to
federal healthcare reforms.

In a letter earlier this month to U.S. House Majority Leader
Kevin McCarthy, Democratic California Governor Jerry Brown
pleaded that Congress consider reforms that do not burden state

“That would be a very cynical way to prop up the federal
budget – and devastating to millions of Americans,” Brown wrote
to the Republican congressman from California.

However, Brown’s proposed budget this month did not include
a contingency for a potential repeal of Obamacare or the threat
of changes to the federal tax code.

“Until there is a change in policy at the federal level, we
will continue to budget under the current rules of the road,”
said California Finance Department spokesman H.D. Palmer.

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