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This is a complimentary insight written by our Health Policy Analyst Emily Evans. |
It was recognizable by 2023, the Biden administration was pursing a very "easy money policy" when it came to the fiscal affairs of the U.S. government. By 2024 the printing presses were running wide open. Health Care, because it is largely funded through mandatory spending with little to no oversight from Congress, presented a unique opportunity specifically in the areas of Medicaid and ACA exchanges.
Certainly, there are those in government that view an expansive policy for Medicaid and the ACA plans to be important for the health and well being of Americans. However, we must also remember that expansion of the health care sector by the ACA was an important plank in President Barack Obama's post-Great Financial Crisis recovery. Recalling that experience is particularly important when you consider the tenuous political position in which the White House found itself in 2023-24.
The national political mood was just one part, however. The uncomfortable fact is that the executive branch was virtually leaderless for much of the period 2021-2024. By that I mean there was nobody that worked ceaselessly to preserve the legacy of President Joe Biden or even that of his party. When the cat's away, the mice will play.
A number of policies that were long ago rejected, or at least discouraged, were reversed. A prominent one was the use of supplemental payments in Medicaid. (If you are not familiar with the use of state directed or supplemental payments, good explainer here.) MACPAC, CMS and many a think tank have discouraged the practice due to its opaqueness and its favoritism for brick and mortar providers, especially hospitals.
In 2021, CMS relaxed the policy. In 2023 supplemental payments were up 16% YoY with about 10% of the increase coming from the federal government. Anecdote tells us the 2024 will be even higher. The acceleration occurred through the routine approval of state plan amendments that previously would have been rejected.
Now comes a reformer to the White House armed with advanced technology skills to crawl through the vast payment databases of the U.S. Government and see clearly what the cash flows look like without the benefit of an intermediary's report in pdf form. The DOGE team has anchored on 2019, run some numbers and thinks about 700B for "Medicaid and Health" (which would exclude Medicare) should retrace its steps back to the U.S. Treasury. About $6B of that represents an expansion of supplemental payments.
Rightsizing Medicaid could take some time but the trajectory is not at all helped by the dramatic departures from long-standing policy that made it possible. Which makes us only half-joking wonder if it was all just a pump and dump scheme. A few painful years likely await us as we work it off.
Let me know what you think.
Emily Evans
Health Policy Analyst
