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Obamacare 101: What's going to happen to 70 million Americans who rely on Medicaid?

It’s the program that everyone confuses with Medicare.

But Medicaid, the half-century-old government health plan for the poor, is actually bigger than its more famous cousin, covering some 70 million Americans at any one time.

Expanding Medicaid was a central pillar of the Affordable Care Act, helping to bring health coverage to more than 20 million previously uninsured people.

Obamacare 101 is a periodic primer on the debate over repealing and replacing the Affordable Care Act  >>

But Medicaid has long been a political football. Now, Republicans are talking about dramatically rolling it back and restructuring the way the federal government pays for it.

How would that happen? And what would the changes mean for the tens of millions of poor Americans who rely on Medicaid? If you’re a little rusty on block grants and other federal funding formulas, here are some Medicaid basics. 

What does Medicaid do?

A lot.

Medicaid (which is called Medi-Cal in California) and the closely related Children’s Health Insurance Program together are the nation’s largest insurer, providing coverage to nearly 40% of American children and almost two-thirds of nursing home residents.

Each state operates its own Medicaid program. All states are required to provide a basic set of benefits to poor people who qualify.

Historically, children were the largest population served by Medicaid, accounting for about half of total enrollment. But elderly and disabled people on the program are by far the costliest, accounting for almost two-thirds of Medicaid costs even though they make up less than a quarter of enrollees.

Medicaid is jointly funded by the federal government and state governments through a complex formula that provides more-generous federal aid to historically poor states and less-generous federal assistance to wealthier states.

Importantly, because Medicaid is an entitlement program, federal funding is guaranteed, even during recessions when enrollment in safety-net programs like Medicaid typically spikes.

What did Obamacare do to Medicaid?

Medicaid originally was designed to cover only certain vulnerable people, including poor children, pregnant women, the disabled and the elderly.

That meant that in most states, poor adults without children, including many homeless people, couldn’t qualify for coverage.

The healthcare law tried to change that. It made hundreds of billions of dollars of new federal aid available to states to help them expand coverage to low-income childless adults.

But the Supreme Court said the expansion had to be voluntary. And 19 states have declined the aid. Republican leaders in those states contend Medicaid is inefficient and financially unsustainable.

Has the expansion worked?

By some important measures, yes.

In the states that expanded Medicaid, the share of adults without insurance has been cut almost in half, from 18.4% in 2013 to 9.3% in the first nine months of 2016.

By contrast, the uninsured rate for adults declined much more slowly in states that did not expand Medicaid, falling from 22.7% to 17.5%, according to survey data from the U.S. Centers for Disease Control and Prevention.

Of course, it’s still too early to say whether giving more people health coverage is going to make them healthier.

But states that have expanded Medicaid have seen a flood of interest from poor patients, many of whom had delayed care for years.

And early evidence suggests that these patients are getting the medical care they need.

So, what’s the problem?

In a word, money.

It costs a lot to provide health coverage to millions of poor people, many of whom hadn’t been taking care of themselves.

This year, Medicaid spending likely will top $550 billion.

Republicans say that’s not sustainable.

Many states leaders also say they want more flexibility to run their Medicaid programs differently. They say they could find more cost-effective ways to provide coverage if they were freed from federal rules.

What are Republicans proposing?

There are basically two ideas on the table: giving states more flexibility and overhauling the way that Medicaid is funded.

Nearly all Republicans agree that states should get more freedom.

That would allow states to charge Medicaid patients higher co-pays when they see a doctor or make them pay monthly premiums for coverage. Some states want to require adults on Medicaid to work. Some want to limit how long people can get Medicaid coverage or restrict which benefits they get.

The second idea is more complicated … and more controversial.

For decades, congressional Republicans have wanted to cap how much the federal government gives states every year for Medicaid.

That’s a big difference from the current system, in which the amount of federal aid depends on how much medical care patients receive. If patients are sicker and have higher medical bills, a state gets more money. If patients are less sick, the state gets less.

Many GOP lawmakers like what’s called a “per capita cap.” That means the federal government would give each state a fixed amount of money every year for every person who qualifies for Medicaid. That amount then would increase annually by a set amount, likely linked to inflation.

Republicans say this would make Medicaid more sustainable.

What would these proposals mean?

There’s a lot of debate about this.

Making poor people pay more for their medical care — or put “skin in the game,” as backers of this approach say — raises a lot of concerns among healthcare experts, who fear it could discourage poor patients from getting the medical care they need.

The evidence from Indiana, which is pioneering broader use of co-pays and premiums in Medicaid, is mixed so far.

Scaling back federal money for Medicaid is potentially even more problematic. Medicaid is currently among the leanest healthcare programs in the country, paying very low rates to physicians and hospitals in many parts of the country.

Basic math dictates that it’s hard to provide as much care with less money.

That has many experts worried that a per capita cap system like the one being discussed by congressional Republicans could force states to scale back protections for many poor patients.

Most patients advocates, disease groups, physicians and hospitals don’t like this approach.

And funding limits always have been more popular with Republicans in Congress than Republican governors.

Many GOP governors, who have to balance their budgets and take care of their poorest constituents, don’t want the federal government to cut what it contributes for Medicaid.

noam.levey@latimes.com

@noamlevey

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