(Bloomberg View) — Senate Republicans may not realize it, but their repeal-and-replace health care legislation, if passed, would set the U.S. on the road to European-style price controls and rationing of prescription medications. This would follow fairly directly from the enormous cuts to Medicaid that the bill would impose.
By 2026, according to the Congressional Budget Office, federal spending on Medicaid would be reduced by 25%. And the cuts would build further every year thereafter.
Starting in 2025, the federal reimbursement to states for each person covered by Medicaid would rise only at the rate of overall inflation — far less than the rise in medical costs for those beneficiaries. Consider that, over the coming decade, spending per person on Medicaid is expected to grow by about 4.5% annually, while the overall inflation rate is projected to be more like 2.5%. A per capita cap that increases only at the rate of inflation would thus amount to a cut in federal spending on Medicaid of about 2% a year.
After a couple decades of this — on top of the cuts through 2026 — federal support for Medicaid would be cut to about half the level it would be without this legislation.
How would states respond? The CBO says they “would continue to need to arrive at more efficient methods for delivering services (to the extent feasible) and to decide whether to commit more of their own resources, cut payments to health care providers and health plans, eliminate optional services, restrict eligibility for enrollment, or adopt some combination of those approaches.”
One specific and perhaps underappreciated thing states could do would be to aggressively restrict Medicaid beneficiaries’ access to drugs, and impose price constraints on the medicines allowed.
This would come as a blow to both beneficiaries and drug manufacturers, because Medicaid is the largest insurer in the country. In 2015, it spent about $30 billion on retail prescriptions for its 70 million beneficiaries — about 10% of the national retail drug spending total.