With the Senate health-care bill delayed for now, the conservative and more centrist GOP wings need to bridge a philosophical gap to succeed. The outcome of this debate will define what the Republican Party stands for—and whether the problems of America’s entitlement state can ever be solved.
The biggest policy divide concerns the future of Medicaid, and here the problem is the moderates who are acting like liberals. Despite their campaign rhetoric, some Senators now want to ratify ObamaCare’s Medicaid expansion as an unrepealable and unreformable welfare program.
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Most of the Affordable Care Act’s insurance coverage gains have come from opening Medicaid eligibility beyond its original goal of helping the poor and disabled to include prime-age, able-bodied adults. The federal-state program has become the world’s single largest insurer by enrollment, covering more people than Medicare or the British National Health Service. Total spending grew 18% in 2015 and 17% in 2016 in the 29 states that expanded, and the nearby chart shows the growth of overall federal Medicaid spending under current law and without reform.
The Senate bill attempts to arrest this unsustainable surge by moving to per capita spending caps from an open-ended entitlement. When states spend more now, they generate an automatic payment from the feds. The goal is to contain costs and give Governors the incentive and flexibility to manage their programs.
Meanwhile, four long years from now, the bill would start to phase-down the state payment formula for old and new Medicaid beneficiaries to equal rates. Governors ought to prioritize the most urgent needs.
This would be the largest entitlement reform ever while still protecting the most vulnerable. The bill is carefully designed to avoid overreach and would save taxpayers $772 billion compared with what Medicaid would otherwise spend under current law, according to the Congressional Budget Office. This does not “cut” spending; it merely slows the rate of increase.
This has nonetheless made some Senators nervous, like West Virginia’s Shelley Moore Capito and Ohio’s Rob Portman. The growth rate for the block grants would be set at the rate of medical inflation for most beneficiaries at the start and then fall to the consumer price index in 2026, which is more ambitious than the House bill. Some Senators would like to see more generous growth rates, while others favor waiting six or seven years, rather than four, to start the phase-down of the expansion.