Counties: Health Plan Could Shift Costs, Undermine Medicaid

The National Association of Counties (NACo) today released its preliminary analysis of the U.S. House of Representatives’ long-awaited legislative text intended to repeal the Affordable Care Act (ACA) and replace it with the American Health Care Act (AHCA). NACo expressed optimism that it can work with the White House and Congress to improve the proposal, ensuring that it prioritizes health outcomes and access to care, not just a budget exercise and cost shift.

“Counties provide the local health safety net, and in many cases, are required by law to provide health care to those who can’t afford it,” said NACo Executive Director Matthew Chase. “We strongly support reforms to make Medicaid even more efficient and focused on those with the greatest need, including older adults, people with disabilities and children. Counties are working every day to reduce fraud, pursue innovative strategies and improve health conditions of residents.

“We are concerned that the House proposal could erode the federal-state-local partnership for Medicaid and result in local taxpayers picking up the tab for additional uncompensated care.”

As explained in NACo's letter to House leadership in response to their request for input, counties are most concerned about structural changes to the nation’s healthcare system, particularly to Medicaid, that could unintentionally shift federal and state costs to counties. Such changes could create a more challenging dynamic at the local level because 42 states impose limitations on counties’ ability to raise property tax rates and assessments, typically the primary source of revenue source for counties. Additionally, counties are just coming back from the Great Recession, with many smaller counties – mainly in Southern states – having yet to reach pre-recession conditions. 

In its analysis, NACo outlined several ways that the proposed legislation would impact counties.

1. The proposed legislation would fundamentally alter the important federal-state-local partnership for Medicaid and reduce Medicaid coverage levels.

Since 1965, the Medicaid program has been crucial to helping counties meet their often state-mandated obligations to provide healthcare to low-income populations. Counties help some states administer the program and contribute to the non-federal share of Medicaid in 26 states.

The AHCA would fundamentally transform the nature of the Medicaid program, changing it from an open-ended entitlement program to one in which states would receive a capped amount for each person enrolled in Medicaid.

The demand for Medicaid goes up when the economy goes down; therefore, county costs grow while county budgets and resources shrink. Medicaid was designed to fluctuate based on the economic conditions of states.

NACo opposes efforts to cap federal spending to Medicaid, as it would shift costs to states and eventually counties.

2. The proposed legislation could have indirect and direct impacts on county health systems, including county public health departments.

Although each state is different, county governments play an integral role in paying for and providing health services. Counties invest $83 billion annually – or about one of every five dollars of county budgets – in community health systems. Counties are major Medicaid providers, helping to support 961 hospitals, 883 skilled nursing facilities, 750 behavioral health authorities and 1,943 public health departments – all of which typically serve a disproportionate share of low-income populations and would be greatly impacted by federal reductions in Medicaid spending.

In addition to its indirect effects, AHCA would also directly impact the nation’s 2,800 local public health departments, two-thirds of which are county-based, by eventually eliminating the Prevention and Public Health Fund.

3. The proposed legislation retains the 40-percent excise tax on employer health benefits included in the ACA.

Counties’ role in health care extends beyond that of a health payer, provider and administrator; counties also provide health insurance to our workforce. Counties employ 3.6 million people and invest approximately $25 billion annually to provide quality health benefits to our workforce. The proposed legislation merely delays – rather than permanently repeals – the 40-percent tax on certain employer health benefits instituted under the ACA, or the so-called "Cadillac Tax."

Because county governments are generally not able to compete with private sector wages and salaries, healthcare coverage is the primary benefit used to attract and retain a quality workforce.

“We look forward to working with Congress and the administration to ensure that counties can continue to serve our residents in partnership with states and the federal government,” said Chase. “We stand ready to identify strategies to strengthen our nation’s health system by improving health outcomes and access to care while being responsible stewards of local taxpayer dollars.”

Click here to read the full analysis and related resources.