The American Health Care Act Could Chip Away At The Medicare Savings Programs

The American Health Care Act (AHCA) is not just an alarming, slapdash effort to repeal the Affordable Care Act—it’s also a plan to radically weaken Medicaid, our nation’s health care safety net. Indeed, the US House-passed bill’s most dramatic savings—$834 billion according to Congressional Budget Office estimates—are achieved by slashing federal funding to Medicaid, which provides health coverage to nearly 75 million low-income Americans, and undoing the program’s basic guarantee.

Nevertheless, these draconian reforms have been among the lesser told stories of the AHCA’s anticipated impact. The breakneck speed and secrecy surrounding the bill’s construction left little time to unpack how Medicaid per capita caps would affect the many populations, including older adults, people with disabilities, families, and children, who rely on Medicaid to afford quality health care. This includes the 11 million Americans—older adults and people with disabilities—who are enrolled in both Medicare and Medicaid. Of these millions of dually eligible beneficiaries, roughly 80 percent qualify for help paying for their Medicare coverage through the Medicare Savings Programs (MSPs). The US Senate is now repeating this exact process, meeting in secret and rushing to vote on a bill that will dismantle the Medicaid program.

Medicare Savings Programs: Medicaid Assistance With Medicare Premiums And Cost Sharing

There are four different MSPs—the Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), Qualifying Individual (QI), and Qualified Disabled and Working Individual (QDWI) programs—each with its own eligibility criteria. Depending on an individual’s income and assets, Medicaid will pay for the individual’s Medicare Part A premiums (QMB, SLMB, and QDWI), Medicare Part B premiums (QMB, SLMB, QI), and Medicare cost sharing (QMB). Enrollment in an MSP also automatically qualifies a person for help paying Part D prescription drug costs through the federal Low-Income Subsidy or the Extra Help program. The QMB program is the largest of the MSPs; in 2013, the program enrolled about 7 million people with Medicare.

Federal law sets baseline income and asset limits for each MSP but grants states flexibility to expand access to these vital programs. The federal limits are exceedingly low. In most states, full Medicare premium and cost-sharing assistance is only afforded to individuals with annual incomes at or below 100 percent of the federal poverty level, amounting to about $12,000, and with personal savings totaling a little more than $7,000.

To date, 12 states and the District of Columbia have opted to exercise the available flexibilities to increase eligibility for MSPs. Alaska, Connecticut, the District of Columbia, Hawaii, and Maine have higher income limits. Alabama, Arizona, Connecticut, Delaware, the District of Columbia, Mississippi, New York, and Vermont have no asset limits. In addition to expanding access, adopting such flexibilities can relieve administrative burdens on both beneficiaries and states, even creating savings for state agencies.

In 2015, Medicaid spent about $15 billion on premiums and cost-sharing help for Medicare beneficiaries. In December 2015 alone, Medicaid helped 8.5 million Americans afford their Medicare premiums and cost sharing. In Exhibit 1, we provide state-specific data for that month.

Exhibit 1: December 2015 Medicare Savings Program Enrollment

States and District of Columbia	Qualified Medicare Beneficiary program only	Qualified Medicare Beneficiary program plus full Medicaid benefits	Specified Low-Income Medicare Beneficiary program only	Specified Low-Income Medicare Beneficiary program plus full Medicaid benefits	Qualifying Individual program	Total
Alabama	66,392	68,564	36,398	3,893	19,319	194,566
Alaska	35	10,846	218	---	251	11,350
Arizona	5,471	108,988	26,528	3,494	17,214	161,695
Arkansas	28,678	52,053	21,081	4,338	10,686	116,836
California	14,571	1,208,258	7,013	166	18,385	1,248,393
Colorado	21,129	39,273	10,903	6,465	6,411	84,181
Connecticut	80,218	62,550	8,472	1,292	4,826	157,358
Delaware	7,902	7,242	4,519	18	2,904	22,585
District of Columbia	9,083	13,424	48	---	24	22,579
Florida	223,575	297,039	109,761	14,840	64,179	709,394
Georgia	90,884	15,118	46,311	2,286	30,881	185,480
Hawaii	469	28,626	3,175	503	1,391	34,164
Idaho	8,838	18,602	5,339	2,180	3,011	37,970
Illinois	10,812	167,693	18,777	22,491	16,127	235,900
Indiana	47,329	100,310	6,827	4,761	3,178	162,405
Iowa	9,041	36,031	5,697	8,861	3,694	63,324
Kansas	12,856	23,251	7,460	2,975	3,924	50,466
Kentucky	44,740	64,074	22,070	3,441	11,138	145,463
Louisiana	52,318	85,114	29,309	4,556	18,277	189,574
Maine	23,631	44,201	7,458	668	4,613	80,571
Maryland	30,397	74,124	14,470	25	8,678	127,694
Massachusetts	1,299	214,218	12,807	6,546	7,720	242,590
Michigan	6,866	194,222	23,578	9,955	14,305	248,926
Minnesota	2,059	73,546	9,698	10,800	5,157	101,260
Mississippi	48,205	51,890	20,554	---	12,717	133,366
Missouri	14,421	86,941	16,576	11,665	8,353	137,956
Montana	4,706	10,046	3,090	1,254	1,454	20,550
Nebraska	117	25,365	2,047	164	1,352	29,045
Nevada	13,612	20,968	7,229	1,181	4,261	47,251
New Hampshire	6,106	9,263	3,957	1,605	2,178	23,109
New Jersey	436	162,211	18,482	37	6,552	187,718
New Mexico	22,831	15,061	6,513	2,969	4,317	51,691
New York	52,112	420,436	46,707	15,769	39,930	574,954
North Carolina	7,775	196,260	45,865	5,006	25,127	280,033
North Dakota	1,320	3,056	1,183	385	427	6,371
Ohio	67,002	109,122	33,758	18,713	20,977	249,572
Oklahoma	192	73,659	13,655	6,725	7,948	102,179
Oregon	22,684	49,080	14,337	5,595	9,394	101,090
Pennsylvania	5,786	277,172	48,020	17,998	30,762	379,738
Rhode Island	1,321	23,032	3,756	15	2,219	30,343
South Carolina	399	107,571	15,191	14	10,620	133,795
South Dakota	4,142	8,842	2,148	813	1,139	17,084
Tennessee	65,876	51,263	59,942	11,384	131	188,596
Texas	171,803	311,556	86,549	15,291	40,625	625,824
Utah	783	19,124	3,152	3,127	2,219	28,405
Vermont	1,912	14,433	2,835	2,682	2,927	24,789
Virginia	28,867	91,624	22,993	3,153	12,068	158,705
Washington	29,276	117,989	17,914	1,477	10,505	177,161
West Virginia	19,530	5,963	10,473	1,816	5,760	43,542
Wisconsin	9,559	78,628	8,274	13,884	3,784	114,129
Wyoming	2,206	2,885	1,018	3,705	556	10,370
Nationwide	1,401,572	5,350,807	954,135	260,981	544,595	8,512,090

Source: Centers for Medicare and Medicaid Services, Medicare-Medicaid Coordination Office, “March 2017/Release of Medicare-Medicaid Enrollee State and County Monthly Enrollment Snapshots.” Data on Qualified Disabled and Working Individual program unavailable.

Per Capita Caps And Block Grants In The AHCA Could Undermine Medicare Cost-Sharing Supports

Under current law, the federal government pays a set percentage of all costs incurred by a state’s Medicaid program—including the MSPs—to all eligible individuals. Unlike other Medicaid expenses, the AHCA excludes federal payments for MSPs from the per capita caps and the alternative block grant payment states may select. As such, if the AHCA became law, the federal share paid toward MSPs would be expected to continue as is under current law—but that doesn’t mean these programs are safe.

As the federal government starts to pay a smaller share of Medicaid funding under Republican plans to cap or otherwise limit federal support for the program, states will face heightened budgetary pressures. States that have opted to build a more effective and efficient safety net by offering more generous MSPs may eliminate those expansions altogether. Indeed, when faced with unexpected and sizable Part B premium spikes in 2016, the state of Arizona signaled it would no longer accept applications for the QI program, one of the MSPs that covers only the Part B premium. While this crisis was ultimately averted by the Bipartisan Budget Act of 2015, which mitigated steep premium increases for those not held harmless under existing law, it sends an ominous message about how states will respond under Medicaid per capita caps—in this case, undercutting the affordability of health care for low-income older adults and people with disabilities.

As the AHCA is taken up in the Senate, MSPs may be targeted more directly, and possibly, more severely. For example, in a leaked draft of the Republican governors’ working paper on Medicaid reform, federal funding for per capita caps would be set by establishing base cap amounts for most Medicaid eligibility groups, including children, pregnant women, and disabled individuals. But states could choose to eliminate their contribution to MSPs. The governors call on Medicare to take full responsibility for the MSPs, but it’s highly unlikely that this Congress would secure the federal funding necessary to replace that shortfall.

The Value Of The Medicare Savings Programs

An example helps to show just how essential the MSPs are to low-income Medicare beneficiaries. Today, an 80-year-old widow with an annual income of $7,000 meets the QMB eligibility requirements. Her assistance currently includes $109 a month for her Part B premium, as well as any deductibles and coinsurance. Without the QMB program, she would spend 18 percent of her annual income on her Medicare premiums alone.

One calculation researchers use to determine if a person is underinsured is whether a household with an annual income of less than 200 percent of the federal poverty level spends more than 5 percent of its income on medical care—excluding premiums. The widow would reach this point with out-of-pocket costs of $350, and without the QMB program, her out-of-pocket expenses could add up very quickly. For example, if she has three primary care doctors’ visits a year, she would pay the Part B deductible of $183 and then 20 percent of the Medicare-approved amount after the deductible was met. Assuming those visits were each $100, the total for all three appointments would be about $206 ($183 for the deductible and $23.40 for the coinsurance).

But if she needed an additional appointment with a specialist, she may face far greater out-of-pocket costs, including coinsurance for certain tests. One conservative estimate for an initial cardiology appointment with a stress test could add another $50. It is also likely that she would need several prescription medications. Without the QMB program, even one hospitalization at an additional cost of $1,316 would be financially devastating. Even if she incurred no additional health care costs, her total spending on health care would be $2,880—more than 40 percent of her income.

This example may seem extreme, but it’s not. A counselor on the Medicare Rights Center national helpline helped Ms. A—a cancer patient in her late 60s—sign up for QMB. Enrollment in QMB meant Ms. A also gained access to Extra Help, allowing her to pay only $8.25 per month for a $16,000 cancer medication. Ms. A also saved on her monthly Part B premiums and on the 20 percent coinsurance for her frequent visits to the oncologist. Without QMB, Ms. A’s ongoing cancer treatments would be entirely unaffordable.

Like Ms. A, most people with Medicare live on low or fixed incomes—making access to the MSPs critically important. In 2016, one in four people with Medicare lived on an annual income below $15,250. Similarly, most Medicare beneficiaries have limited assets; one-quarter have personal savings of less than $14,550, and 8 percent have no savings at all or are in debt. Enrollment in MSPs can free up limited funds to allow people to afford groceries, utilities, and other basic needs. Exempted or not, the AHCA’s per capita caps threaten to undermine this critical program for our nation’s most vulnerable people with Medicare.

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