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Under the Senate healthcare bill, an oil crash could eventually influence poor Americans’ healthcare

A quirk in the Senate bill means poor Americans' fortunes could be dictated by world economic movements that have nothing to do with the cost of healthcare.

People are removed from a sit-in outside of Senate Majority Leader Mitch McConnell’s office as they protest proposed cuts to Medicaid, Thursday, June 22, 2017 on Capitol Hill in Washington.

Senate Republican leadership on Thursday released a draft of its long-awaited healthcare bill, the Better Care Reconciliation Act of 2017.

A fundamental change

Since its establishment in 1965, Medicaid has been an open-ended entitlement program. Anyone who meets the eligibility requirements has a right to enroll, and if costs go up because of new, expensive treatments or increasing healthcare needs, states receive more federal money. While states fund a big portion of their individual Medicaid programs, the federal government matches up to a certain percentage, with bigger matches for poorer states.

Both bills would change Medicaid to a program where funding would be set on a per-capita basis — meaning the federal government would send states a fixed amount of money per Medicaid enrollee, regardless of whether that would cover needs or care — and then peg funding growth to a rate related to inflation.

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"It's no longer an open-ended matching program," Richard Frank, a professor at Harvard Medical School professor, told Business Insider in May. He added that changing funding to per-capita cap grants "fundamentally changes the kind of contract that exists between the states and the federal government."

The BCRA would take it a step further.

The AHCA called for growing funding by

The difference between CPI-M and CPI-U since 2000:

The problem with per-capita cap grants

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One of the most obvious pitfalls would come with the aging of the Baby Boomer generation, Frank said.

By 2050, the population of people 65 and older is expected to have increased to 83.7 million — nearly double the 43.1 million in 2012 — according to a 2014 US Census Bureau report, with big increases in the number of people over the age of 85, as well.

Under the BCRA, the cost to cover Medicaid recipients in those categories would be determined by their 2019 spending patterns and then increased according to medical-care CPI until 2025, at which point it would be determined by CPI-U.

The problem, according to Frank, is that healthcare costs for elderly people would increase at a far higher rate than CPI-M.

In addition, the per-capita system would divide Medicaid recipients into different categories, such as elderly people or people with disabilities, to determine the size of payments.

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However, those categories are broad. For instance, 65 year olds would be in the same category as 85 year olds, even though healthcare costs go up substantially as people age.

When Frank spoke to Business Insider in May, he estimated that the AHCA plan would lead to a 9% shortfall in the coming decades, or about $10 billion a year that states would have to make up for. The BCRA's change to CPI-U would almost certainly lead to an even larger shortfall.

"Even under the best-case scenario for the per-capita cap, you are going to fall behind. That assumes there are no new drugs or treatments. Together, that's problematic," Frank said. "The states are going to take a big hit here."

Current CBO projections for AHCA say Medicaid spending under the per-capita system would be about 25% less than it would be under the ACA by 2026. A CBO score for the BCRA is forthcoming.

The choice for states

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To stay above water, states would either have to spend more money on their Medicaid programs — a daunting proposition for poorer states like West Virginia, where one-third of its population is on Medicaid — or cut costs.

Because Medicaid is already one of the lowest-cost providers of healthcare, a state could either cut benefits, which would affect the quality of coverage, or reduce who is eligible for the program, which could hurt people with disabilities, older people, or people suffering from substance abuse.

One of the first things to go could be treatments for substance use and mental illnesses, Frank said.

Even if state Medicaid programs don't cut coverage for substance-use treatments, the per-capita proposal would likely be devastating in terms of the opioid epidemic.

Opioid-overdose deaths increased by about 15% in 2014 and 2015, and Medicaid has paid for more than 50% of substance-use treatment services in some states, according to official statistics. Medicaid recipients' access to treatment has increased by between 20% and 25% over the past several years, according to Frank.

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Those numbers far outpace a growth in spending fixed to CPI-M or CPI-U.

If the proposal were to become law, Ohio, Pennsylvania, and West Virginia — among other states suffering the brunt of the opioid crisis — would be ill-suited to handle the loss in funds, government officials and treatment experts say. And that's to say nothing of states like Florida, where a disproportionately aging population could suffer.

The plan wouldn't likely be popular with the public. When presented with a choice of accepting the Republicans' proposals to limit Medicaid spending or keeping the program the same, 65% of respondents said they would want the program to stay the same, according to a tracking poll released in February by the Kaiser Family Foundation.

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