(Updates and corrections are in green.)

A knowledgeable friend pointed out a $29 B Medicaid gimmick in the reconciliation bill that has so far, to my knowledge, not been publicly discussed.

Both the huge amount of hidden spending and the irresponsible policy should offend responsible policymakers. The reconciliation bill would create a new funding cliff for doctors in Medicaid, parallel to the Medicare doctor funding cliff in current law that fouls Congress up each year. By creating this funding cliff the bill’s authors were able to shave $29 B off the CBO score and once again make the bill appear less expensive than it really is.

In the late 90’s the feds gave up authority to determine Medicaid payments to providers, leaving all that authority in the hands of States. States liked this because they could squeeze payment rates to providers (hospitals, doctors, nursing homes) to save money.

You’ll remember from an earlier post that Medicaid is a shared federal-State financing arrangement. On average the feds pay 57 cents of each dollar spent in a State Medicaid program, and the State covers the other 43 cents. This federal match rate varies by State.

The bill passed by the House last November contained a huge Medicaid win for doctors and their lobby the American Medical Association, although at the expense of federal taxpayers rather than States:

  • Through their Medicaid programs, States would be required to pay primary care doctors no less than Medicare pays. In some cases this would significantly increase the amount a doctor received for performing a service in Medicaid. This was a reversal of the late 90s bipartisan policy change giving States complete flexibility to set Medicaid payment rates to providers.
  • The federal government would reimburse States for any the increased Medicaid costs that result from this mandated payment rate increase. The federal match rate for the incremental cost would be 100%.

This was a $57 B win (over 10 years) for primary care doctors in the House-passed bill. This is in addition to a much-discussed separate $210 B side deal commitment to the AMA from the White House and Democratic Congressional Leaders to support separate legislation that would prevent Medicare payments to doctors from declining in future years. I will surmise that the $267 B of additional Medicare and Medicaid payments to doctors are the primary reason AMA supported the House-passed bill.

CBO charged the House-passed bill with $57 B of additional spending for this provision.

For reference, the relevant legislative language can be found in §1721 of the House-passed bill (H.R. 3962). The $57 B figure can be found on the line for §1721 on page 7 of the CBO estimate.

Now we have a new reconciliation bill that the Speaker will try to pass on Sunday. §1202 of the new reconciliation bill (p. 60) is identical to §1721 of the House-passed bill except for the dates.

The House-passed bill contains this policy as a permanent windfall for primary care doctors beginning in 2010 (it’s phased in over the first two years).

The reconciliation bill’s authors have limited the House-passed provision so that it applies only for 2013 and 2014.

CBO charged the new reconciliation bill with only $8 B of additional spending, since the provision is in effect for only two years.

For reference, the new legislative language is in §1202 of the reconciliation bill, and the $8.3 B figure is on the line for §1202 on page 10 of the CBO estimate.

The reconciliation bill would therefore create a new Medicaid (not Medicare) “primary care doctor payment cliff,” beginning after 2014. Just as Congress is under unbearable pressure now from doctors to prevent Medicare payments to doctors from being cut, the reconciliation bill would create exactly the same thing in Medicaid, beginning January 1, 2015.

If you assume Congress will not allow that newly created Medicaid funding cliff to bite beginning in 2015, they will spend an additional $29 B in the first decade, beginning in 2015.

This is an intentional gimmick designed to reduce by $29 B the scored cost of the reconciliation bill. As policymakers on both sides of the aisle bemoan the mid-90s Medicare policy change that created today’s Medicare funding cliff, the Speaker and her allies propose to create an exact parallel in Medicaid, beginning Monday.

It’s hard to say which is worse: intentionally hiding $29 B of spending, or intentionally creating a funding cliff. I’ll call it a tie.

(photo credit: bitzcelt)