From a political standpoint, Gov. Larry Hogan’s swift statement of disapproval for the Senate’s Obamacare repeal-and-replace bill was remarkable. Mr. Hogan, a moderate Republican, opposed President Donald Trump in last year’s election but has sought assiduously to stay out of national politics ever since. From a governance standpoint, though, it was a no-brainer. The Senate health care bill would be a disaster for America’s health care system generally, resulting in 22 million fewer people with health insurance within a decade, according to the Congressional Budget Office. But its effects would be even worse for Maryland. Here’s why.
Unique among the states, Maryland maintains a system in which the rates for hospital services are set by a regulatory agency and are uniform for all payers — including both private insurers and public programs like Medicare and Medicaid. We have no public hospitals but rather the costs of uncompensated care are baked into the rates set by the Health Services Cost Regulatory Commission. In other states, Medicare and Medicaid typically pay far lower rates for given hospital services than private payers, and the value of those additional payments in Maryland is substantial — about $2.3 billion a year.
To maintain that deal, though, the state is required to hold down the growth in Medicare spending. Historically, that was measured by the cost of inpatient hospital admissions, but under a new plan approved under the auspices of the Affordable Care Act, the state must now meet certain benchmarks for reducing the growth in overall health care spending and improving health care quality. So far, it’s doing better than the requirements on all measures, but maintaining that trend under the Senate health care bill (or, for that matter, the one already passed by the House) would be all but impossible.
The issue, according to an analysis earlier this year from Maryland’s non-partisan Department of Legislative Services, is that the expansion of health insurance coverage in Maryland under the ACA has reduced the pressure hospitals face from uncompensated care. If the number of people who rack up hospital bills they can’t pay increases, it would jeopardize the state’s ability to meet two of the Medicare waiver benchmarks: limits to the growth of per capita all-payer hospital revenues and limits to per-beneficiary Medicare hospital costs, according to DLS.
The Senate bill would do two things to increase uncompensated care costs in Maryland. First, the elimination of the requirement that people have insurance and cuts to the subsidies the government pays for lower-income consumers to purchase coverage would reduce the number of people buying policies on the ACA insurance exchange. That would have an impact on the rate of uninsured Marylanders, which has declined by a third under Obamacare. But the bigger factor would be what the Senate does to Medicaid.
As of the last count, about 300,000 additional Marylanders gotten Medicaid coverage under the ACA expansion of that program, far more than have bought coverage on the exchanges. The federal government picked up all of the initial costs of new enrollees under the expansion and will, as of 2020, pay 90 percent. Even at that rate, DLS estimates the expansion will cost Maryland $350 million per year. But if the Senate bill became law — and this is one part that surely got Mr. Hogan’s attention — the state’s share of the cost would skyrocket. The Senate bill keeps ratcheting down the federal share of the Medicaid expansion costs until 2024, when it would reimburse costs of those enrollees at the same rate it does for the state’s Medicaid program generally.
In Maryland, that’s 50 percent, meaning that the Senate bill would give whoever is governor at the time an impossible choice. He or she could either raise taxes or gut other services to come up with an extra $1.5 billion a year (and probably more), or drop out of the Medicaid expansion, make hundreds of thousands of people uninsured overnight and blow up the state’s Medicare waiver all in one fell swoop.
And that doesn’t even count the massive transfer of costs from the federal to state governments contemplated by the Senate bill, which, like its House counterpart, goes beyond rolling back the Obamacare expansion and transforms Medicaid from an open-ended federal-state partnership to a capped federal assistance program.
Mr. Hogan’s statement may well be smart politics for a governor working to position himself for re-election in the face of a massively unpopular bill that has made even U.S. Senators from his own party balk and force the delay of a planned pre-July 4th vote. But it is also acknowledgment of simple reality. For him to have done anything less would have been gross negligence.
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