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Bipartisan fear of Medicaid block grant threat to Virginia

Posted: Monday, January 16, 2017 10:30 pm

The potential replacement of the Affordable Care Act with a federal Medicaid block grant alarms both the General Assembly Republicans who oppose the federal health law and the administration of Gov. Terry McAuliffe, a Democrat who supports it.

Administration officials and Republican budget leaders agreed Monday that the adoption of a block grant to replace the Medicaid entitlement program could put Virginia at a severe disadvantage in funding services ranging from children’s health to treatment of mental illness.

“Virginia will forever be punished for having been frugal,” Secretary of Health and Human Resources Bill Hazel said between briefing the House Appropriations Committee and a Senate Finance subcommittee on the potential consequences of repealing the Affordable Care Act without a workable plan to replace it.

House Appropriations Chairman S. Chris Jones, R-Suffolk, and other House leaders said they, too, are concerned about the possibility that Virginia could be required to live on a block grant based on spending that ranks 47th per capita in the United States.

“This is not a 30-second political sound bite,” Jones said after the briefing by Hazel, who has served seven years as secretary under McAuliffe and his Republican predecessor, Gov. Bob McDonnell. “We’re thinking of the lives of hundreds of thousands of Virginians.”

House and Senate budget leaders are working on language to create an ongoing subcommittee to monitor and respond to the actions of President-elect Donald Trump and a Republican-controlled Congress, who have vowed to move ahead with repealing the law championed by President Barack Obama even without a clear plan to fill the hole left in the nation’s health care system.

“Congress is in a box, but it’s a box that they chose,” said Senate Finance Co-Chairman Emmett W. Hanger Jr., R-Augusta, after Hazel briefed the Subcommittee on Health and Human Resources.

The possibility of a Medicaid block grant, capping funding for what has been an entitlement shared equally by the state and federal governments, also worries advocates for children who rely on the program for basic health care, as well as treatment of mental illness and other behavioral disorders.

“We stand at the point of potentially rolling back 50 years of progress in health care for children,” said Margaret Nimmo Holland, executive director of Voices for Virginia’s Children.

Hazel said the costs to Virginia from a repeal of the ACA include the net loss of $123.2 million in state funds in the next fiscal year and $191.2 million in the following budget year that begins on July 1, 2018.

Most of the losses would come from the elimination of drug rebates that Virginia could not receive for its managed care insurance program before the ACA was adopted. The loss of those rebates alone would cost the state more than $237 million over two years, he said.

The state also stands to lose an additional $114 million from a reduced federal share of the children’s health insurance program, which operates in Virginia as FAMIS, or Family Access to Medical Insurance Security.

Repeal also would cost the state nearly $50 million in current savings to hospitals that have shouldered a smaller burden in caring for people without health insurance since the law’s passage in 2010.

The costs to the state would be offset partly by reduced federal spending on a program created two years ago to provide critical community services to people with mental illness, as well as services for former foster care youth and substance abuse treatment financed under a Medicaid waiver adopted last year.

“Congress needs to be very careful in considering repeal not to throw the baby out with the bath-water,” Hazel told the House committee.

Appropriations Vice Chairman R. Steven Landes, R-Augusta, has been a leader of legislative opposition to expansion of Medicaid under the ACA, but he, too, expressed concern Monday about the potential harm to Virginia of a block grant that would lock in historically low spending on benefits.

“At this point, it’s anybody’s guess what they’re going to do,” Landes said of Congress and Trump, who will take office Friday. “Do they understand the unique situation Virginia has?”

“One of the reasons we did not expand Medicaid is we did not trust the federal government to make good on its promise” to pay for no less than 90 percent of the cost, he said after the briefing. “Block grants are the same thing.”

Hospitals already have raised concerns about the potential for a block grant program that would reward states with high Medicaid spending per capita while putting Virginia at “a significant disadvantage.”

“Simply basing Medicaid funding amounts on historical precedent would not only disadvantage Virginia, but it would continue the trend of spending more funds on states with higher costs and poorer outcomes,” Sean T. Connaughton, president and CEO of the Virginia Hospital & Healthcare Association, wrote to the state’s congressional delegation early this month.

“Alternatively, Congress should consider targeted incentives that reward states with low costs and better outcomes and not punish those states that are attempting to control and have controlled Medicaid costs,” Connaughton wrote.

State officials and legislators do not expect clear answers during the legislative session that began last week and is scheduled to conclude on Feb. 25.

“It may become an emergency,” suggested Sen. Stephen D. Newman, R-Lynchburg, who raised the possibility of a special legislative session. “It may become a need to deal with a potential block grant.”

The creation of a joint legislative subcommittee, first proposed by Jones in November, would allow the legislature and administration to assess changes to the health care system by Congress and the Trump administration.

“It will be a working subcommittee,” vowed Jones, who said he wants to make the new panel “a permanent fixture” of the legislative process.

Right now, state officials and legislators do not know what to expect from the new administration. Repealing the ACA presumably would eliminate the federal health exchange that is currently enrolling about 400,000 Virginians for health insurance, the great majority of them relying on federal subsidies to pay their monthly premiums.

But Trump told The Washington Post in a weekend interview that his replacement plan would have a goal of “insurance for everybody.”

“The president-elect has said a number of things,” Hazel observed. “It’s hard to know what they’re going to do.”