Pro/Con: Are Medicaid Caps a Necessary Part of Healthcare Reform?

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Republicans and Democrats are once again fighting like cats and dogs on Capitol Hill. Republicans claim the Left refuses to come to the negotiating table; Democrats claim the Right wants to kill Americans by cutting health coverage. Even inside the house of emergency medicine, the debate burns with only a slightly lesser degree of vitriol.

Proposed Medicaid Cuts Turn Back the Clock on Positive Progress
by Cedric Dark, MD

The recent House and Senate bills would have fundamentally changed course from the healthcare policy direction of the Obama administration. The most dramatic changes would have occurred in Medicaid, and so that is where we will begin.


Hitherto an open-ended entitlement for states to help fund care for the poor, Medicaid would have found its growth severely constrained under both schemes. The BCRA and the AHCA would have limited Medicaid spending either with a flat amount or with a per-capita cap that would limit growth far slower than what experts estimate the program might otherwise cost.

Under projections from the CBO, the proposals would have decreased the growth of Medicaid over the next 10 years by approximately $800 billion compared to what would otherwise be spent. This amounts to the equivalent of eliminating 25% of the program in the year 2026. To accommodate that degree of spending reductions, states would either find ways to eliminate patients from the Medicaid rolls, issue deep payment cuts to physicians and hospitals, or find other creative ways to lower costs.

While there is a clear downside for our most vulnerable patients, there is a clear upside for physicians come next April 15th. Physicians, who often command high incomes, would have directly benefited from the AHCA and BCRA because both offered hundreds of billions of dollars of tax relief for high-income earners. Notably, they each repeal a 3.8% investment tax and a 0.9% surcharge on the Medicare tax on people making over $200,000 per year. However, for the average emergency physician, those tax cuts amount to under $500 unless he or she is making significant money by trading stocks.


With the current rate of average Medicaid payments for emergency care, one could simply earn that $500 by seeing four or five extra patients that have Medicaid in lieu of being uninsured.

A recent study in Annals of Emergency Medicine revealed that the ACA’s Medicaid expansion has led to a positive shift in payer mix nationwide. There was a nearly 9 percentage point increase in Medicaid payer mix in expansion states combined with a concomitant decline of 5 percentage points by the uninsured. Contrary to that trend, however, Medicaid expansion states experienced a slight decline in private coverage. Another study, using data from TeamHealth, similarly illustrated these trends with 27% more Medicaid visits, 31% fewer uninsured visits, and 7% fewer privately insured visits in expansion states.

Do the gains from more Medicaid patients offset the losses from fewer privately insured ones? A third study, from an emergency physician group in Maryland with 11 hospital contracts, answered this question. It indicated that overall professional revenue on a per RVU basis increased by $3.97 in the years following implementation of the ACA’s Medicaid expansion. That amounts to nearly $10,000 extra revenue for the average emergency physician over the span of 1 year.

Repealing the ACA would be a terrible deal for both emergency physicians and our patients. The American College of Emergency Physicians (ACEP) and American Academy of Emergency Medicine (AAEM) have likely made the same calculations when deciding to oppose both the House and Senate bills.


ACEP President, Dr. Rebecca Parker, has said that the BCRA “makes sweeping changes to the health care system that directly contradict ACEP’s principles and endanger patient safety and patients’ lives…of immediate concern is the gutting of Medicaid coverage for millions of Americans who will likely be uninsured or underinsured as a result.” As described above, vast coverage losses will negatively impact not only the lives of patients but also the livelihood of emergency physicians who care for low-income patients.

We emergency physicians often experience the flaws our nation’s health care system firsthand. We understand what is at stake while our politicians seem hell-bent on passing any law that they can claim repeals the ACA. That our profession would eschew personal tax cuts so that the public can continue to have access to emergency care is illuminating.

Capping Medicaid Spending at Current Levels is Logical, and Essential to Reform Efforts
by Mark Plaster, MD

In any discussion of healthcare reform it is hard to avoid the hyperbole and moralizing that seems to be the stock and trade of today’s political warriors. It goes ways – both parties have a tendency to villainize the other. So let us start with an assumption that we all want the same things. We want a system that provides quality medicine to the most if not all people, at a compensation/price that is both fair to the provider and reasonable to the patient. I would maintain that before we even discuss quality and price we need to commit to having a system that is financially sustainable. The best health care in the world, if it is paid for by debt to be repaid by future generations, is not sustainable.

And therein lies the difficulty. The Affordable Care Act’s expansion of Medicaid to pay for an additional 10 million people was noble and provided care for some people who previously had none. But like any federal program it is expected to balloon in cost. Simply look at the budget for Medicare. As a result, one of the pillars of healthcare reform proposals involves capping spending. Critics of the current reform packages claim that Medicaid would be “cut” up to 25% over the next ten years. Does a cap constitute a cut in spending? Only if you anticipate expansion of the program. Such claims (that caps are actually cuts) admit that the program will naturally expand by 25% over the next ten years if spending is not contained. I would argue that a 25% increase over 10 years in a program of this magnitude is simply unsustainable.

State governments know this. Unlike the federal government, many state budgets are constrained by balanced budget amendments to their state constitutions. And even though the Affordable Care Act provides for federal support of the program, there are still state government costs. So regardless of how much the feds pick up, state contributions to Medicaid have the ability, over time, to swallow up the state budget.

Medicaid spending must be contained. If we see only the moral nobility of providing care now and ignore the cost burden placed on future generations, we claim for ourselves a benefit that is paid for by our children.

But what about simply paying for Medicaid expansion by increasing taxes on the wealthy? Good question. This is a question where people of intelligence and civility can respectfully disagree. There are many economic theories and computer models for both sides. But I simply remember the Reagan years when tax rates were cut and the total federal revenue increased due to more people making more taxable income, even at lower rates. That seems to me to be a win-win. But taxing the wealthy, especially out of envy, is a lose-lose proposition if the tax structure depresses the general economy by suppressing business investment, putting more people out of work, thus making more people eligible for Medicaid. The cost of a federal program increases as the revenues from taxation falls over time. It is my opinion that this approach is unsustainable.

Finally, about essential services. Should an individual be allowed to turn down insurance that covers emergencies and just cast themselves on the good will of the system when an emergency inevitably happens? Or worse, should providers by required by law to provide emergency care without an equal responsibility being placed on the consumer of that care? Of course not, but isn’t this a bit of a red herring? Would anyone buy insurance that didn’t cover true emergencies? I doubt it. But would someone buy a policy that limited the range of services? Probably so. We all know the patient who comes to the ER out of convenience. Even minor problems result in large insurance bills. Is it not reasonable to limit that abuse in some way? Yes, it will effect our gross incomes as emergency physicians. But again, I think it will add a measure of sustainability to our profession if we are able to find a nuanced balance to this question.

Making law has been compared to grinding sausage. That may be true, but let’s not grind each other up in the process. Let’s look for the other’s point of view to find common ground.


Dr. Dark is the Founder and Executive Editor of the Policy Prescriptions® blog, where clinicians discuss ways to fix the American healthcare system.

FOUNDER/EXECUTIVE EDITOR Dr. Plaster has been an emergency physician for more than 30 years, working exclusively night shifts for the past 20 years in emergency departments across the country. During that period, he joined the U.S. Navy and served two tours in Iraq. Dr. Plaster is the founder and executive editor of Emergency Physicians Monthly and the founder of Plaster Publishing.

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