The Trump Effect on Medicaid

March 20, 2017 | Featured Articles

Download PDF

“Under a Trump Administration, the future of CMMI—as well as the Medicaid expansion—is in imminent jeopardy.”

Uncertainty is increasing among physicians impacted by the Medicaid expansion. If you are a physician in a group practice or hospital located in an impoverished zip code, this expansion may have already increased your patient pool. It may also have increased your ability to provide follow-up to your patients who are noncompliant with medical management or drug treatments for their chronic conditions (e.g., diabetes and hypertension).

Meanwhile, CMS’ embrace of a value-based payment model (VBPM) affecting both Medicare and Medicaid has promoted a trend by group practices and hospitals toward forming Accountable Care Organizations (ACOs). At the forefront of this shift toward Medicare and Medicaid managed care has been the Center for Medicare and Medicaid Innovation (CMMI)—established under the Affordable Care Act (ACA) to pilot-test healthcare delivery and payment innovations.

Under a Trump Administration, the future of CMMI—as well as the Medicaid expansion—is in imminent jeopardy.

CMMI Goal of Replacing Medicaid Fee-for-Service Model

The basis for CMS focus on replacing a fee-for-service (FFS) model has been that the duplication of health-related services (e.g., x-rays) and lack of coordination of care has led to the exploding national healthcare cost-burden. According to CMS, the US health expenditure grew to $3.2 T in 2015, of which $545 B (17%) was for Medicaid. (Meanwhile, CMS also reported $646 billion [20%] in 2015 for Medicare.)

A total of 3,141,300 people were enrolled in Medicaid/CHIP as of September, 2016, per the Kaiser Family Foundation—of which 9 million are dually enrolled in Medicaid and Medicare. These dual beneficiaries are mostly impoverished seniors or younger people with disabilities, and widely recognized as “high risk/high need” patients. Therefore, CMMI financial alignment demonstrations projects have been mainly aimed at this group.

“As of June, 2016, over 370,000 beneficiaries who are dually eligible for Medicare and Medicaid were enrolled and receiving services from health plans in nine states with capitated financial alignment demonstrations,” according to the Kaiser Commission on Medicaid and the Uninsured.

What is the ‘A Better Way’ Healthcare Plan?​

House Speaker Paul Ryan voiced his approval at this summer’s Republican National Convention of a specific national health plan developed by some members of Congress (including Tom Price—Trump’s choice for Secretary of the Dept. of Health and Human Services [DHSS]).  According to this policy document—A Better Way—“In the 114th Congress alone, House Republicans introduced more than 400 individual bills that would improve our nation’s healthcare system.”

The commonality of these Republican-sponsored bills is that they either limited ACA implementation or repealed it. Overall, the perspective embodied in A Better Way is that “the federal role should be minimal and set a few broadly shared goals, while state governments determine how best to implement those goals in their own markets.”

Furthermore, this document promulgates: “States have been in the business of regulating health insurance for decades. They should be empowered to make the right trade-offs between consumer protections and individual choice, not regulators in Washington.”

According to the Sargent Shriver National Center on Poverty Law, there are few actual details included in A Better Way. The exception is required spending limits for Medicaid, necessitating “a drastic cut, leaving tens of millions of low-income people at risk of losing coverage.”

Attitudes Toward CMMI by Trump’s Cabinet Appointees​​

Along with supporting ACA repeal, President-elect Trump’s proposed cabinet appointees to head CMS (Seema Verma) and DHSS (Tom Price) disapprove of CMMI and its demonstration projects.  “Price has been an outspoken critic of the innovation center,” according to an article on November 30, 2016 in The Atlantic.

Meanwhile, Verma was a consultant in the design of Indiana’s Medicaid policy, under the governorship of Mike Pence; this policy requires Medicaid enrollees to pay fees for their coverage, per an article in Fortune Magazine. For beneficiaries unable to pay the required co-pays and monthly fees, some services are not covered; also Medicaid coverage can be discontinued if fees are not paid.

Block Medicaid Grants and Increased State Authority

In regard to the Medicaid position advocated by Trump and his appointees—favoring block grants to states or per capita spending limits—a Commonwealth Fund report of November, 2016 states: “Current proposals for dramatically reducing federal spending on Medicaid would achieve this goal by creating fixed-funding formulas divorced from the actual costs of providing care.”

Furthermore, Rosenbaum et al—its authors—note that this change would create funding gaps for states, resulting in narrowed coverage and/or a reduction in Medicaid enrollees. They also emphasize “states already vary enormously in the proportion of low-income residents eligible for coverage and in the amount spent per enrollee.” Not mentioned is that physicians and hospitals would also lose out on overall revenue if Medicaid-covered patients are unable to obtain medical care due to loss of their insurance.

Medicaid Supplemental Payments

States currently receive supplemental Medicaid payments in the following two separate forms:

  • Disproportionate Share Hospital (DSH) payments;
  • Upper Payment Limit (UPL) payments

The purpose of these supplemental payments has been to aid hospitals disproportionately serving Medicaid beneficiaries, and also to compensate providers for low Medicaid payment rates.

While these Medicaid supplemental payments were already scheduled for phase-out over 10 years under the ACA due to their incompatibility with VBPMs, they will likely be quickly eliminated as a consequence of the belief in a more limited role for CMS by both Price and Verma.

Why ACOs were Vital to a Value-Based Healthcare Model

The assumption underpinning CMS support for ACOs is that patient-centered medical homes (PCMH) enable a better approach to clinical care and prevention of chronic, costly disorders. A related assumption is that a healthier population will help to control US healthcare costs over time. The particular advantage of the PCMH approach is that it can better address lifestyles leading to future chronic disorders through initiation of team-based prevention.

For example, people living below the poverty level often have inadequate nutrition, and this can lead to a high carbohydrate intake (e.g., potatoes) and subsequent obesity. Around 90% of Type 2 diabetics are obese, according to the American Society for Metabolic and Bariatric Surgery. Therefore, diabetes prevention efforts aimed at encouraging weight loss, healthier diets, and increased exercise can be coordinated by the patient’s healthcare team to reduce the risk of developing Type 2 diabetes and its complications.

In a September, 2016 report by the Center for Consumer Engagement in Health Innovation, the authors note that, “the implementation of Medicaid ACOs varies significantly from state to state”, and that “Medicaid also makes up a significant percentage of state budgets.”

Legal Basis for Roll-Back of Medicaid Expansion

Thirty-two states (including the District of Columbia) have thus far chosen to expand Medicaid coverage to enrollees earning between 100-138% of the Federal Poverty Level (FPL). However, President Trump’s anticipated action following assumption of the presidency will be to dispense with appeal of the federal court’s decision in May 2016 (in Burwell v. House of Representatives).

Since this federal district court’s decision was that the ACA health exchanges’ cost-sharing subsidies were illegal—and dropping Obama’s appeal will allow the ruling to stand—that lower court’s decision will likely serve as precedent in undoing the Medicaid expansion.

Meanwhile, states that expanded Medicaid coverage may find that they are no longer able to do so if the federal contribution is lowered. It is likewise probable that the 19 states that did not choose to expand Medicaid—due to the Supreme Court’s decision in 2012 (NFIB v. Sebelius)—will no longer be permitted that option under a Trump presidency.

Consequences of Medicaid Cuts and ACA Repeal

In a report in December 2016 for the American Hospital Association and the Federation of American Hospitals, Dobson et al calculated that passage of the healthcare bill in 2015 introduced by Tom Price—H.R. 3762—would have generated a financial loss between 2018-2026, with an “impact on hospitals of $165.8 billion”.

Additionally, this Dobson et al report estimated that—by 2026—the number of uninsured would increase by 22 million if the ACA were repealed. Lack of insurance has been linked to delaying preventive care or necessary medical treatment, and that delay has been well correlated by the CDC to a lowered overall health status and premature death.

CMS and DHHS Policy Implications for Physicians

If Medicaid payments are severely curtailed under new CMS and DHHS policies, physicians may find themselves in the ethically untenable position of choosing not to accept new Medicaid patients, or accepting diminished annual revenue. However, for those providing care in low-income communities, the option of NOT accepting new Medicaid patients may not be available.

Instead, the consequence may be closure of physician group practices in these communities, which will likely result in support staff job losses as well as difficulties for their patients in acquiring new primary care physicians (PCPs).


The ACA price tag may soon appear to be minimal in comparison to the increase in high-cost infectious and/or chronic disorders caused by cutting costs off the backs of the most impoverished and diseased patients.

The withholding of treatment to HIV/AIDS patients who were drug addicts in the 1980s should be a clear reminder of the consequences of judgmental and short-sighted health policies aimed at curbing costs, in that an unnecessary expansion of the epidemic occurred requiring billions of dollars to control. We shouldn’t have to learn that lesson all over again.