The Two Big Decisions That Will Drive Health Policy
Decisions about two things—paying for tax cuts, and whether President Trump wants another big fight about health care—more than any other factors, will drive the biggest health policy decisions in the early days of the Trump administration.
The first big decision is the one Republicans will make about paying for their $5 trillion tax cut (coincidentally about the same amount as we spend on health care each year). After plans were floated in the House for Medicaid cuts totaling an astronomical $2.3 trillion, Republicans appear to be circling around plans for Medicaid cuts in the neighborhood of almost $900 billion over 10 years. No number or program cut is cast in stone yet and the health policy environment is fluid and unpredictable as a result. But tax policy, coupled with a general desire to cut back the role of the federal government, is the major factor driving health policy.
That leads to the second big decision. Does President Trump want another big health care debate? Any of the big Medicaid proposals floated so far—a per capita cap, drastic cuts in federal Medicaid expansion matching rates effectively killing the expansion in 40 states and DC, or significant cuts in the regular Medicaid matching rate, and Medicaid work requirements—will bring a divisive debate. With margins tight in the House, the President may not want to run the risk of another defeat on a big health care package, having suffered a dramatic defeat on the Affordable Care Act (ACA) repeal in his first term. Instead, he may decide to keep health care, with its incendiary politics, out of the picture and avoid handing Democrats a hammer to use to drive down his popularity and wield in the midterms. Conservative Republicans in the House have a clear policy agenda to reduce federal health spending and the federal role in health. President Trump is more transactional and focused on his popularity, which is up, from 47 to 53 percent, momentum he will be careful not to squander.
It’s possible, if not likely, that Republicans in the House and President Trump will try to find a goldilocks solution to the tension between their goals: cut enough in federal Medicaid spending to help pay for tax cuts and satisfy conservatives who want to reduce federal spending, but not so much as to generate a controversial debate that endangers Trump’s ratings. That will not be easy. So far, the Trump administration’s actions in health have focused mainly on populations and programs without much political power, leaving hospitals, doctors, the nursing home industry, the managed care industry and state budgets generally untouched. Significant cuts to Medicaid will change that equation. Medicaid itself touches a broad swath of the population, with around 50% of the American people reporting that they or a family member have been covered by the program at some time. More than half of Medicaid spending goes for people who qualify for the program based on disability or age, many of whom use long-term care, including in nursing homes, which generally have powerful lobbies at the state level. Half of all Medicaid spending flows to the managed care industry, which is dominated by big insurance companies. Republican governors often turn on policy ideas that sound good until they morph into cuts in their federal funding that threaten state budgets and a governor’s popularity. There is no significant cut in Medicaid spending that is easy or simple to pull off, and certainly not one totaling almost $900 billion dollars over 10 years.
Another layer to the politics: Medicaid cuts do not equally affect red and blue states. and the architects of the cuts are well aware of that as they design them. Reducing the base Medicaid matching rate will have a bigger impact on blue states like California and New York with 50% matching rates. Cutting the matching rate for the Medicaid expansion will have no impact on big red states like Texas and Florida, states that never expanded Medicaid. By contrast, while it’s about the ACA and not Medicaid, both Texas and Florida saw rapid increases in enrollment in ACA marketplace plans after the enhanced premium subsidies were put in place, and enrollees in those states would be hit especially hard if the subsidies are not extended.
Among the policies under consideration Medicaid work requirements are the most certain to survive. They will not be an easy sell, however. The idea of work is popular. But Medicaid work programs don’t actually achieve gains in employment, are a heavy lift for states to administer, and are bitterly opposed by Democrats and advocates. They save real money—about $10 billion a year in federal spending over 10 years according to one Congressional Budget Office estimate—but not a lot in the context of $5 trillion in tax cuts and the challenges of implementing work programs. Ninety-two percent of the adult Medicaid population is likely exempt from the requirements for various reasons (they are working already, may be disabled, or caring for a family member), but every beneficiary has to prove that by jumping through hoops or by that being determined electronically. When they fail to comply with the red tape, they are dropped from Medicaid (the real purpose of the programs, many believe). The jobs some of the remaining 8% can get often come with lousy or no health coverage, a disincentive to take them.
Promoting “the dignity of work” has always had political appeal. In welfare reform we always said “the best welfare program is a good job.” However, if I were back in office as a state human services commissioner who championed welfare reform with work requirements and took real political heat for it, I would likely tell my Republican governor that the savings from Medicaid work requirements are not worth the lift or the damage they can do to coverage of low-income people in our state.
Finally, the center of action on the biggest health policy decisions is also noteworthy given the debate about RFK JR’s nomination and his confirmation. Dating back even to the days when Health and Human Services was the Department of Health, Education, and Welfare, there have been strong executive branch and weak cabinet administrations, as well as the reverse. With Republicans on Capitol Hill and the Office of Management and Budget driving policy and spending decisions on the big benefits programs and on tax cuts, the Department of Government Efficiency running around departments, and President Trump certain to make the call on almost everything, including the scope of Medicaid cuts he wants to have a fight about, this certainly looks like the archetype of the strong executive branch model, at least when it comes to the big-money health policy decisions.