At Finance Hearing, Portman Raises Concerns with a Proposed Federal Takeover of the Medicaid Program

October 20, 2021 | Press Releases

WASHINGTON, DC – During a Senate Finance Committee hearing earlier today, Senator Portman addressed concerns he had with a section of the Democrats’ spending and tax bill that would create a fully federalized Medicaid program, stating that it would stifle innovation and put states that already expanded Medicaid, like Ohio, at a disadvantage. Portman also had concerns that this federal expansion of hundreds of billions of dollars would have a negative impact on inflation.

Senator Portman also addressed Home and Community Based Services, a program that he says can save costs and improve care. He raised concerns that the funding in the Democrats’ proposal would make it even more difficult for some states to use the HCBS program in a flexible way.

A transcript of Senator Portman’s questioning can be found below and video can be found here.

Portman: “Well, first I thank the witnesses for being here today and for the good information they provided. I want to focus on a couple of issues. One is what's in the reconciliation plan that is being talked about, one thing is expansion of Medicaid, and this is something that I think is important for all of us to take a look at because states like mine in Ohio did expand Medicaid. We took on a lot of new expenses with that. My understanding is that this is to create a federal Medicaid program. It essentially will force those states that have not expanded Medicaid to partake in a federally run, federally funded health care program. First of all, is that fair to states like Ohio that took on this cost themselves? Our Medicaid program now in Ohio makes up a significant amount of our spending every year.

“Prior to the expansion we were at about 24 percent of our total state expenditures and now it's about 38 percent of our expenditures. So this new program, as I understand it, would be paid by federal taxpayers, by the federal government. And it would go to some of these states that chose not to expand Medicaid and no benefit to states like Ohio. It also is a blatant disregard for state choice, which has been a subject of number of cases before the Supreme Court, that states have the opportunity under Medicaid to make these decisions. I guess what I would say is to Dr. Holtz-Eakin you know, is this the right way to go? Taxpayers being forced to fund an expensive expansion at the federal level? By the way, the cost is about $323 billion based on CBO or $635 billion based on other analyses.

“So between $300 and $600 billion and again, a direct departure from the original intent of the Medicaid program, to allow states flexibility, not just to make this choice, but once they have Medicaid under this federal program, the existing flexibility to test new and innovative ways to deliver care would be gone. For example, in Ohio, we've got a big issue with regard to opioids, as many of you know, and so we have a substance abuse disorder demonstration waiver that allows us to have the flexibility to provide essential services to substance use disorder treatment services that we want to battle the opioid crisis in Ohio. Apparently that kind of flexibility would not be permissible. So Dr. Holtz-Eakin, I know you've looked at this, how would this new proposal inhibit the ability of states to innovate?”

Dr. Holtz-Eakin, President of American Action Forum: “Well, first of all, Senator with regard to that, that range in the numbers, I'll just point out that we're responsible for the high end of that range and the difference between CBO and the Center for Health and Economy at AAF is really not in the proposals. It's the fact that CBO has in its baseline anticipated expansions in Medicaid and so we don't do that. So all of the Medicaid here would be new coverage, whereas CBO would only be doing the increment above the anticipated expansions. And so there's no great mystery to why that range is there. It has to do with the assumptions about the future and the CBO baseline. With regard to the structure of the program, this is a dramatic change in Medicaid. Medicaid has always been a federal-state partnership and states have always been responsible for the business model that they want to pursue in their state. And as I mentioned in my opening remarks, there's an enormous track record of success in moving into managed care organizations as a central plank of Medicaid. Competition among them is even better. And that gives the opportunity to have the basic approach of a capitated payment for cost incentives and quality metrics to make sure that we get high value care. To my eye, there's no guarantee of that strategy in what's being proposed in the reconciliation bill.”

Portman: “Yeah, because it pulls away at that flexibility. Also, do you agree with me that the states like mine would be unfairly penalized by this, if we've gone ahead and made these decisions and now the federal government comes in, in other states?”

Dr. Holtz- Eakin: “Yeah. There's clearly dissimilar treatment with the federal taxpayers picking up the entire tab.”

Portman: “Let's talk about inflation for a minute. Everybody's concerned about it – as we should be. Everything costs more, the food we're buying at the grocery store, or going to the gas pump. It's a 42 percent increase this year on average at the gas pump. Unbelievable. Inflation is being driven in part by the fact that we have dumped so much stimulus into the economy. That's what economists say. That's what Larry Summers warned about, who's a former Democratic Treasury Secretary. The Federal Reserve Bank of San Francisco just released a report saying that the large spending plan passed – $1.9 trillion earlier this year – contributed to inflation.

“So this seems to be a consensus among economists. Now we're talking about a lot more money, $300 to $600 billion on this Medicaid program, the Medicare expansions, hundreds of billions of dollars, depending on what you do. I know there's discussion about various ways to change Medicare. We talked earlier, and I'm a big supporter of the Medicare Advantage programs in Ohio and elsewhere because they work to provide seniors with choices, but this would be a federal expansion of hundreds of billions of dollars. And the Affordable Care Act expansion is about $200 billion, the last numbers that I saw. So, these hundreds of billions of dollars start to add up and the question is, 'What's going to be the impact on inflation?' Can you give us a sense of that?”

Dr. Holtz-Eakin: “Well certainly what we've heard in the discussions about the structure is one strategy is to shorten the amount of time that the spending programs are in place so they front load all that spending, leave in place permanent tax increases. So essentially backload the pay force and that's a stimulus bill. The $1.9 trillion in March was poorly timed. The economy was growing at six and a half percent. It was way too big for any macro-economic problem we faced. And it was poorly designed. This would be a repeat of exactly that exercise.”

Portman: “Yeah. So bad timing. In terms of spending this kind of money, even if you believe that some of this was a good idea in terms of its impact on inflation. Another concern I have in here is the Home and Community Based Services. I'm a big fan of what's called HCBS, which is again, Home and Community Based Services. If you look at this proposal, it creates some problems. It doesn't give states the opportunity to use it as flexibly as we would like. Right now, we've got long waiting lists, a shortage of qualified providers, shortages of affordable, accessible housing for these programs. And the funding here that's in this proposal would make it even more difficult for some states to use this HCBS proposal in a flexible way. Do you anticipate that all states will be able to take advantage of this enhanced funding to bolster the HCBS programs, given the new requirements that they would put on home-based care?”

Dr. Holtz-Eakin: “I think that's a real concern. My remarks were about creating a high value system. To do that, you have to allow the flexibility to innovate and find cheaper ways to reach quality outcomes. Getting the money with a whole bunch of restrictions is at odds with that approach.”

Portman: “Yeah. Well, I think my time has ended or is close to being ended, but I do think there are a bunch of bipartisan proposals we should look at, including our Senior Care Act, Bob Casey and I have improving Your Ticket to Work Program, that are bipartisan, that do make sense in this area. And my hope is that we don't put too many restrictions on the home care and community based health care system, because that to me is a way to save costs and improve care. Thank you.”