As for the deal itself and what it means for the country from a big picture perspective, I highly recommend that people read Bob Greenstein’s statement and sobering blog on it. It is a tour-de-force of political and economic analysis that concludes: “The new debt ceiling agreement will achieve the essential goal of avoiding a potentially catastrophic default in the days ahead. But to say that the deal is likely to lead to highly unbalanced results would be an understatement. The deal places the nation on a disturbing policy course and sets what may become important precedents that are cause for serious concern.”
On what it means for child and family health coverage, a few key issues that we are tracking:
IMPLICATIONS FOR MEDICAID
Medicaid is and will remain in the bull’s-eye of deficit cutting efforts. It is not implicated in the first round of $840 billion in cuts to discretionary spending, but it likely will be a major target of the new “super committee.” The committee has to come up with $1.2 trillion in cuts (well, really $1.5 trillion, but they get credit for $300 billion in interest savings if they can reach $1.2 trillion). If the committee fails to take any action or makes some cuts but falls short of $1.2 billion, there will be an across-the-board reduction (or “sequester”) on major categories of federal spending. Thanks to the efforts of the nation’s health care advocates (and, also, according to Politico, an irate and tenacious Jack Lew, President Obama’s OMB Director) Medicaid, CHIP, and a number of other important low-income programs are exempt from this sequester.
That’s good news, but it does nothing to stop the super committee from hitting up Medicaid for substantial savings. Indeed, the committee will have powerful incentives to look to Medicaid, as each and every dollar that the committee takes out of Medicaid reduces the size of the across-the-board sequester. The sequester is slated to hit defense spending and Medicare provider payments hard, which in turn will lead to a group of politicians (and lobbyists) who are very motivated to minimize the sequester. In this context, Republicans are likely to again raise the idea of turning Medicaid into a block grant. Even if this kind of radical restructuring is rejected, we surely will see members revisit some of the earlier ideas for Medicaid savings, including a “blended matching rate,” reductions in provider taxes, and a repeal of the stability protections (aka the maintenance-of-effort provisions). Given all of this, it is critical that at least one member of the committee is someone who, like the overwhelming majority of the country, believes that Medicaid must be defended. This person should also have a detailed understanding of Medicaid policy and how changes at the federal level impact those in the states.
IMPLICATIONS FOR CHIP
As Medicaid’s smaller, companion program, CHIP is in much the same boat as Medicaid – not subject to cuts in round 1, a possible target for the super committee, and exempt from the across-the-board sequester that will hit if the super committee falls short of $1.2 billion in deficit reduction. CHIP is a potential target because it already has been implicated in discussions of imposing cuts by creating a “blended matching rate.” More fundamentally, CHIP only works by standing on the shoulders of Medicaid, which could be a far shakier platform after the deficit dealing is done.
IMPLICATIONS FOR HEALTH REFORM IMPLEMENTATION
This one is especially complicated (although aren’t they all?) and there are really a number of different issues to sort through.
Advance premium tax credits. The refundable tax credits help people up to 400% of the FPL buy Exchange coverage, and, along with the Medicaid expansion, are critical to seeing the ACA succeed in driving coverage gains. Under the deal, the advance premium tax credit could be cut by the super committee but would be exempt from the sequester.
Cost-sharing reductions. The cost-sharing reductions reduce the size of deductibles and other-cost-sharing requirements – which are going to be quite hefty – for people up to 250% of the FPL. These could be cut by the super committee and also would be subject to the sequester.
Exchange Grants. The ACA created a funding stream to help states set up their Exchanges prior to actual implementation. This funding is mandatory and so won’t be affected by the initial $840 billion in discretionary cuts. But, it could be slashed by the super committee and is also subject to the sequester; yet another reason why states might want to move along in setting up their Exchanges.
Federal ACA implementation money. The ACA gave federal agencies $1 billion to implement health reform over the next several years. From what we’ve heard, that money has been spent a number of times over given all of the work that HHS, Treasury, Department of Labor, and other agencies are doing on the ACA. The deal doesn’t take any of it back, but the tight new caps on discretionary spending will make it very tough for the Administration to get more resources to support its implementation efforts, including setting up the federal data HUB and funding oversight and enforcement activities.
We’ll continue to track how all of this unfolds, exploring the implications for children and families. Enjoy those August vacations, though, because it is going to be a long fall and, indeed, a long next few years.