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May 03
Republicans Propose Medicaid Per Capita Caps, State Flexibility
Sen. Orrin Hatch (R-Utah), the ranking Republican on the Senate Finance Committee, and Rep. Fred Upton (R-Mich.), the chairman of the House Energy and Commerce Committee, released a report on May 1 calling for greater flexibility for states in managing their Medicaid programs and imposing per capita caps on the federal contribution.  NACo policy opposes caps on federal Medicaid spending because of the risk of cost-shifting to counties.

In the report Hatch and Upton, who are the top Republicans on the committees with jurisdiction over Medicaid in their respective chambers, ​propose permitting states additional benefit design options including:  benchmark benefit design options, like those available for the Children’s Health Insurance Program (CHIP); value-based insurance design (V-BID); premium assistance for private coverage; specialty plans for high cost, complex-needs beneficiaries; basic primary care benefits; enhanced coordination for behavioral health services; consumer-driven options and requiring more cost-sharing.  The report also calls for measures to improve transparency by requiring states to release Medicaid claims data to enable the evaluation of provider quality and outcomes; allow states to implement provider payment reforms to align incentives and permit states exclusive authority to set provider rates.  Hatch and Upton endorse measures to move more Medicaid beneficiaries into managed care, to speed up the Medicaid waiver process and to offer states a defined funding allotment to implement reforms to providing long term services and supports.  The authors hope that demonstration projects currently underway to better coordinate benefits and services for those dually eligible for Medicaid and Medicare will bear fruit and can be taken to scale.  They also propose a guarantee of current law benefits for Medicaid beneficiaries with disabilities.

Arguing that the existing Medicaid program is too bureaucratic and too costly – and provides poor outcomes – Hatch and Upton propose changing federal contribution to Medicaid to a per capita cap.  The caps would be placed on the four beneficiary groups:  aged, blind and disabled, and children and adults.  Each state’s base year per capital calculation would be state-specific and recalculated every five years.  Because each state’s Medicaid program is different, the growth factor for higher spending states would be slower and for lower spending states it would be faster, with the goal of eventually normalizing spending nationwide.

Hatch and Upton propose excluding some Medicaid payments from the per capita cap including disproportionate share hospital (DSH) payments; Graduate Medical Education payments; CHIP payments and some payments for dual-eligibles.  The report indicates openness to consider “other appropriate exclusions.”  The report also calls for requiring states to report DSH payments more transparently.  Non-DSH supplemental payments would be subject to new payment and reporting rules and annual audits.

In order to promote accountability they propose requiring states to report on access to care, patient outcomes, patient experience and health care costs.  Additionally they call for lowering the amount of the non-federal share of Medicaid that states can raise through provider taxes from 6 percent to 5.5 percent.

Contact: Paul Beddoe 202.942.4234


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