Jack Needleman is chair of the Department of Health Policy and Management at the UCLA Fielding School of Public Health and a faculty associate at the Center. He was a panelist at the Feb. 15 Grand Rounds seminar on how repeal of the ACA would affect safety net providers and moderated the Jan. 25 Paul Torrens Health Forum on planning for changes to the ACA.
In this brief interview, Needleman discusses the likelihood of Medicaid converting to block grants, how reduced funding may put pressure on California's already rock-bottom provider payments, and what it will take to get politicians to take notice.
Q: Beyond repeal of ACA subsidies and the Medicaid expansion program, you and the other panelists brought up another scenario: The federal government converting Medicaid, known as Medi-Cal in California, to a block grant system. Why should we care?
We should definitely care whether Medicaid is made a block grant. Currently, the costs of Medicaid are split between the federal and state government. The state bears only a portion of the costs of expanding the population covered, expanding services, increasing payment rates, or cost increases due to medical inflation. And decisions reflect this. The program is also sensitive to economic downturns, when the population eligible for Medicaid can increase, and the costs associated with the growth of the Medicaid population are only partly borne by the state with the federal government also sharing in those costs.
While there are several ways in which a block grant might be implemented, there are two key features of virtually all proposals. One is limiting the growth of the block grant to a fixed percentage each year, which most observers expect will be less than the actual inflation of medical expenses, so the state would bear an increasing share of the total costs of the program over time. The second is making the block grant insensitive to changes in economic conditions or to the growth of the number of eligible, requiring states to absorb these additional costs, reduce eligibility or lower payment rates for services.
Q: One of your fellow panelists said California's Medi-Cal reimbursement fees to doctors were fourth-lowest in the country. What will happen to those fees under a block grant program?
The federal requirements for state Medicaid programs allow substantial variation in payment rates and some variation in eligibility standards and services offered. California, like many states, chose to structure its Medicaid program to maximize eligibility and covered services, and limit state expenditures by establishing low fees for physicians and other services.
Under a block grant, to the extent that California had to absorb increases in the costs of the program below the rate of medical inflation, it would confront hard choices about increasing the amount of state funds going to the program, cutting eligibility or benefits, or cutting payment rates. Historically, payment rates would come under the most pressure, and eligible services would be next on the cutting block.
These changes would likely reduce the level of participation of providers in the program, reducing access to both primary and specialty services. This would increase the demand on safety net providers such as federally qualified health centers, and while care at safety net providers is often found to be good, higher demand coupled with level or reduced payment could threaten access or quality.
Q: A recent story reports some Republican-leaning counties in California have a high share of Medi-Cal recipients, and cutting off Medi-Cal to those areas would be too politically risky. Is putting representatives on notice the key to averting block grants?
The politics of Medicaid are complex. The Republican members of Congress and the Senate who have advocated for repeal and replacement are not in agreement about what a replacement program would look like. Many Republican members of Congress from California and elsewhere are from conservative but low-income areas, such as the Central Valley, which have benefited from Medicaid expansion.
Political science theories that try to explain the behavior of Congress members tend to emphasize the dual loyalty of Congress members to congressional leadership (which can provide rewards for members such as leadership positions and power within the legislature, campaign funds and consideration of member-sponsored legislation) and to constituents, motivated by the desire for re-election and fear of an electorate mobilized over specific issues. Electorate mobilization is often weak as low-information individuals may not become involved. But a highly salient issue, one whose profile has been elevated by demonstrations, news coverage and engagement of local organizations in lobbying and electioneering, which can heavily influence an election.
The activism, demonstrations and engagement in town halls play a double role of increasing public knowledge and challenging elected officials. The political risks of cutting Medi-Cal will only become substantial if elected officials become concerned that a significant proportion of their electorate will vote on this issue.