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Trump's proposed trillion-dollar cuts to Medicaid include a 'fundamental change' in how the program would operate

While the plan calls for cuts amounting to $627 billion, it also proposes an even bigger change to how the program has operated since its inception.

President Trump reacts to the AHCA health care bill being pulled by Congressional Republicans before a vote as he appears with Secretary of Health and Human Services Tom Price (L) and Vice President Mike Pence (R) in the Oval Office of the White House in Washington, U.S., March 24, 2017.

The Trump administration's 2018 budget proposal released Tuesday included massive cuts to Medicaid, the government-run health program that provides insurance primarily to pregnant women, single parents, people with disabilities, and seniors with low incomes.

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While the plan calls for cuts amounting to $627 billion over the next 10 years, it also proposes an even bigger change to how the program has operated since its inception.

The budget plan calls for providing states "flexibility" by forcing them to make a choice between receiving Medicaid funds as a per-capita cap grant or a block grant beginning in fiscal year 2020.

That change, first proposed by the American Health Care Act, t

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The CBO estimated that changes to eligibility under the AHCA would most likely result in a loss of 14 million people from the Medicaid rolls by 2026.

"It's no longer an open-ended matching program," Frank said. He added that changing funding to block grants or per-capita cap grants "fundamentally changes the kind of contract that exists between the states and the federal government."

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.

If passed, Trump's budget proposal

would increase yearly according to the medical-care component of the consumer price index — between 2% and 5%, depending on the year.

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Frank said that using medical-care CPI (or any other inflation rate) as a benchmark for Medicaid would become a problem for states because it doesn't take into account changes to population or unexpected crises.

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 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.

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.

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

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Frank estimated that the AHCA plan (which is more or less the same as the budget proposal) would lead to a 9% shortfall in the coming decades, or about $10 billion a year that states would have to make up for.

"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 say Medicaid spending under the per-capita system would be about 25% less than it would be under the ACA by 2026. Block granting presents similar problems.

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.

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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 and block granting proposals 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.

Those numbers far outpace a growth in spending fixed to medical-care CPI.

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If the budget 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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