Per-person Medicaid caps could cut funding for dual eligibles by $44 billion

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Spending on beneficiaries who qualify for both Medicaid and Medicare could drop by $44 billion over the next ten years if the Medicaid program moves to a limiting per-capita system, according to new research.

An analysis released Thursday by Avalere Health studied two potential per-capita limits that have been included in talks to repeal and replace the Affordable Care Act, and the impact they would have on spending for dual eligibles, the elderly and people with disabilities.

Federal funding limits based on medical inflation would slash spending for dual eligibles by $44 billion, while spending on aged beneficiaries and disabled beneficiaries would be cut by $13 billion and $91 billion, respectively, the analysis showed. In total, that funding model could reduce states' funding for duals between 6% and 9%.

A cap formula of medical inflation plus 1% could come closer to covering the expected costs for Medicaid beneficiaries, Avalere reported. Dual eligibles would see a $20 billion increase between 2020 and 2026, while elderly beneficiaries would receive a $26 billion funding increase. Beneficiaries with disabilities, however, would still see an $8 billion funding cut.

While Medicaid's future remains uncertain along with that of the ACA, proposed changes to the program could “inadvertently encourage states to reduce benefits for low income elderly beneficiaries,” said Dan Mendelson, president at Avalere.

“If not carefully designed, reduction in Medicaid coverage for duals — particularly in the provision of post-acute care — could reduce quality and increase Medicare spending through higher rates of hospitalization and more intensive use of services in these vulnerable populations.”