The House Energy subcommittee will look at Medicaid change discussion drafts Tuesday. (Photo: Thinkstock)

Current Medicaid formulas give states a perverse incentive to cut spending on benefits for children and poor adults with disabilities before they cut spending on benefits for higher-income, able-bodied adults.

Josh Archambault, a Medicaid policy specialist at the Naples, Florida-based Foundation for Government Accountability, makes that argument in written testimony he prepared for a Medicaid hearing.

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The House Energy and Commerce oversight subcommittee is preparing to hold the hearing at 10 a.m. Tuesday.

Drafters of the Affordable Care Act encouraged states to expand access to Medicaid for adults earning up to 138 percent of the federal poverty level by having the federal government pay most of the Medicaid expansion costs. This year, the federal government is paying 95 percent of the cost of covering the able-bodied adults who have Medicaid expansion coverage, Archambault said, according to a written version of his testimony posted on the hearing website.

The federal government pays states an average of 57 percent of the cost of providing Medicaid coverage for children and poor adults with disabilities, Archambault said.

States might like getting the extra money for the ACA Medicaid expansion enrollees, but, because of the way the funding formulas work, a state that needs to cut Medicaid spending now has a big incentive to cut spending on children and people with disabilities first, Archambault said.

A state has to cut $20 in spending on Medicaid benefits for able-bodied, childless adults to cut state spending by $1, Archambault said.

The same state can save $1 in state spending by cutting just about $2 in spending on Medicaid for children and adults with disabilities, he said.

Some states are responding by taking steps such as cutting spending on transplants for traditional Medicaid enrollees, or putting traditional Medicaid enrollment targets on waiting lists, Archambault said.

In related news, another House Energy subcommittee, the health subcommittee, is holding a hearing on Medicaid-related discussion drafts at 10 a.m. Tuesday.

At press time, the discussion drafts on the hearing website related to topics such as improving efforts to verify that people applying for Medicaid are in the United States legally and tightening the eligibility rules for Medicaid users who win the lottery.

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