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Public Statements

Capacity to Implement the ACA

Floor Speech

Location: Washington, DC

Mr. GRASSLEY. Mr. President, the Supreme Court decision on the Affordable Care Act has put the brakes on Medicaid expansion for now.

The Federal Government can no longer force States to expand their Medicaid programs.

With the expansion and the billions of dollars that States would have had to spend on hold, and as we look at solutions to address our 16 trillion dollar national debt, now is a good time for us to step back and ask what role health care should play for States in our Federal system.

Mr. President, as of today, the primary function of a state is health administration--not primary and secondary education, not public safety, not roads and bridges.

According to the National Association of State Budget Officers, Medicaid is the single largest spending line in state budgets at 23.6 percent.

The economic downturn and high unemployment have resulted in an increase in Medicaid enrollment as individuals lose job-based coverage and incomes decline.

Medicaid enrollment increased by 5.1 percent during fiscal 2011 and is estimated to increase by 3.3 percent in fiscal 2012.

In governors' recommended budgets for fiscal 2013, Medicaid enrollment would rise by an additional 3.6 percent.

This would represent a 12.5 percent increase in Medicaid enrollment over this three year period.

Medicaid enrollment surged during the economic downturn with enrollment rising by 7.2 percent from June 2009 to June 2010.

Although Medicaid enrollment is easing for now, the implementation of the Affordable Care Act would have greatly increased the individuals served in the Medicaid program in 2014 and thereafter.

The Affordable Care Act, as passed, required States to cover all childless adults beginning in 2014 under Medicaid that heretofore had not been covered.

The expansion to 138 percent of the poverty level was expected to cover 16 million people.

States would get 100 percent of the cost of new individuals enrolled paid for by the Federal Government for the first several years before the Federal payment levels for those new individuals would fall to approximately 92 percent.

The Supreme Court rejected the mandatory expansion.

Quoting from the Supreme Court ruling

The threatened loss of over 10 percent of a State's overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.

The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the ``right to alter, amend, or repeal any provision'' of Medicaid.

But the expansion accomplishes a shift in kind, not merely degree.

The original program was designed to cover medical services for particular categories of vulnerable individuals.

Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level.

A State could hardly anticipate that Congress's reservation of the right to alter or amend the Medicaid program included the power to transform it so dramatically.

The Medicaid expansion thus violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion.

As a result of the Supreme Court ruling, the Federal Government can no longer threaten the States with withdrawal of all Federal Medicaid funding if States do not expand their Medicaid programs.

States now have the option to expand coverage.

Several States have now suggested they will not expand in 2014.

The Congressional Budget Office now estimates that only one-third of the potential newly eligible population will reside in States that choose to fully extend coverage.

According to CBO, about one-half of the potential newly eligible population will reside in States that only partially extend Medicaid coverage.

The remainder, about one-sixth of the potential newly eligible population, will reside in States that do not extend Medicaid coverage at all in the next decade.

CBO's predicted Medicaid coverage under the Affordable Care Act has been reduced by 35 percent.

Clearly CBO accepts the proposition that if States are not forced to extend coverage to the ACA mandatory population, they will not.

Mr. President, right before the August recess my office released a report from the Government Accountability Office on State capacity to meet the Medicaid requirements under the ACA.

It shows why CBO's skepticism is appropriate.

The report discusses challenges States are facing with information technology, guidance from CMS, and the budgetary uncertainty of increased enrollment of those currently eligible for Medicaid.

The GAO surveyed the States and found that the vast majority expect to have additional costs related to administering their current program, developing eligibility systems, enrolling newly eligible individuals and enrolling additional individuals who are currently eligible.

The GAO focused particularly on the challenges faced by States in updating their eligibility systems.

In the report, GAO found four main deterrents to States as they consider the challenge of expanding their eligibility systems to meet the goal of Medicaid expansion.

First, many States face a lengthy procurement process as they look to upgrade their technology to handle expansion.

Second, designing new eligibility systems is complex and may involve the replacement of existing, outdated systems.

Third, States often have systems that operate across multiple programs further increasing the cost and complexity of upgrading.

Fourth, as States have fought against their own budgetary problems, many have reduced personnel resources to manage projects as complex as Medicaid expansion.

The GAO further found problems with the guidance CMS has been providing the States.

30 of the 36 responding to the GAO survey found that CMS guidance was only slightly useful or not useful at all.

Mr. President, many outside observers have treated the expansion of Medicaid as a foregone conclusion, that States couldn't possibly turn down so much supposedly ``free money.''

The evidence from CBO and GAO is crystal clear.

When the Federal Government is involved, there's no such thing as a free lunch.

States absolutely can turn down the option to expand and every State faces a difficult decision in how they choose to move forward.

However, Mr. President, the Medicaid expansion in the Affordable Care Act is not the only fiscal pressure States face from the health care administration.

One of the most expensive and complex populations receiving Federal health care services are those dually eligible for Medicare and Medicaid, commonly referred to as DUALS.

They are poorer, sicker and often in need of more extensive and expensive coordinated care.

The inefficiency created in the misaligned incentives of the Medicare and Medicaid programs is frequently cited as one of the areas in health care in greatest need of reform.

The Affordable Care Act created an office in CMS charged with creating demonstration projects to allow for greater coordination of dual eligibles.

Those demonstration projects have been moving forward at breakneck pace with as many as 26 States looking to participate.

Essentially all the demonstrations seek to give States greater control of the acute care of dual eligibles.

CMS has legal authority under the ACA to take these demonstrations nationally if they are successful.

Many outside groups are concerned about the size, scope and pace at which demonstrations are proceeding citing California's initial proposal to take control of one million dual eligibles as an example of the outsized nature of the demonstrations.

In July, Senator Rockefeller wrote a strongly worded letter to CMS suggesting they should halt the demonstrations for similar reasons.

Mr. President, no one argues that the way Medicare and Medicaid coordinate for dual eligibles works.

Coordination today is akin to asking my wife and me to compose a letter with her writing the consonants and my writing the vowels.

Giving the States greater control of duals may be the right answer, but when you consider the fiscal challenges faced by States, this should be a decision considered by Congress examining all possible alternatives rather than something occurring through regulatory action.

Finally, the Affordable Care Act gives States broad leeway in creating State-based Exchanges.

These State exchanges are the mechanism where people with incomes above Medicaid eligibility will go to get health insurance.

It would be an understatement to say the States haven't moved very rapidly to get these Exchanges up and running.

I do acknowledge that many States may have been waiting for the Supreme Court ruling before moving ahead with their Exchanges.

However, I do think it remains equally plausible that States are moving cautiously as they look at one more role in health care where they are being asked to expand.

Mr. President, for the States, health care is a chaotic mess.

The Federal Government is asking the States to take greater roles in administering coverage for the uninsured in Medicaid, the dually eligible and the uninsured in the private sector.

As we move forward in 2013, we will revisit, perhaps repeal, the Affordable Care Act.

We will examine proposals to reign in the cost of our heath care entitlements.

Mr. President, as we do so, I strongly recommend we step back and reconsider what is the appropriate role for health care in our Federal system.

In July, Robert Samuelson wrote in the Washington Post about a proposal often associated with my friend from Tennessee, Senator Alexander, known as the ``grand swap.''

In this proposal, the Federal Government would assume all responsibility for Medicaid and the States would assume all responsibility for education.

Samuelson raises the proposal because, in his words,

Only the federal government can devise a solution to control health costs; concentrating government health spending at the federal level would intensify pressures to do so.

States have tried mightily to control spending with at best partial success.

For example, Medicaid reimbursement rates average only 72 percent of Medicare levels.

The low rates have caused some doctors not to accept Medicaid patients.

Mr. President, Samuelson raises a significant question, which Congress needs to consider in entitlement reform.

Congress should consider what States should do in health care and what are reasonable expectations.

If Congress wants States to administer benefits for the aged, blind and disabled, and low income individuals along with managing the exchanges for individuals with incomes up to 400 percent of poverty, Congress can do so.

If health care is the primary responsibility of States, it is because of decisions made by Congress.

If States are being asked to do so while also overseeing education, public safety, roads and bridges and meet in most cases a balanced budget requirement, Congress should temper its expectations regarding the resources States will be able to devote to health care.

With significant restructuring of Medicare and Medicaid possible in 2013, we should use this as an opportunity to reconsider the role of the States in providing health care coverage inclusive of populations and services.

What we ask of the States should be thoughtfully considered in any reform discussion.

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