Second, Clinton’s plan allowed for far more generous spending increases, which, if Republicans applied this spending path to their current proposal, would lead to no projected cuts at all.
Third, in Clinton’s first term, there was still a legitimate concern that Medicaid’s per-capita spending growth was rising too fast. In the years running up to 1995, Medicaid’s per-beneficiary costs were only just starting to slow after eight years of spending growth, averaging 7.5 percent annually—a rate faster than that of Medicare, GDP, and inflation. After Clinton resisted the deep Medicaid cuts proposed by Gingrich, Clinton never supported, nor put forward, such per-capita caps again, and instead began instituting a series of reforms (expanded by his successors and taken up by the states) that caused the annual average growth rate of Medicaid spending per enrollee to drop from 5.9 percent between 1991 and 1999 to 2.8 percent between 1999 and 2005.
Today, there’s no reason to consider per-capita caps to be anything other than a means to bring about the very things Clinton avoided: ending the guarantee of care, and scaling back Medicaid to pay for tax relief for high earners.
And as deep as the Medicaid cuts in the AHCA are, once Trump and Congress succeed in moving Medicaid from a strong guarantee to a program subject to artificial caps, there will likely be little to stop the further tightening of such caps any time the White House or Congressional leadership sees the need to fund additional tax cuts, or meet spending-cut targets.
Furthermore, block grants or per-capita caps don’t just shift costs and hard decisions to the states—they shift all the risks as well. As mentioned above, if anything drives health-care costs higher than they were projected to rise, it’s the states and hospitals—not the federal government—that will be left covering the extra costs. Governors will be the ones dealing with much of the fallout from these cuts and risk-shifting, as it becomes clearer that these Medicaid cuts would threaten the viability of many hospitals (particularly rural ones), forcing them to raise prices and provide less care in order to cope with increased uncompensated treatments.
All of this makes it truly puzzling why any governor would support the AHCA. The entire Medicaid approach smacks of the president and Congress’s desire to fund their high-income tax cuts by whatever means necessary, while choosing to delegate painful health-care rationing choices to the states. It is the federalism equivalent of the old Life Cereal commercial in which the two older brothers are too afraid to try a new cereal, until they seize on the idea of getting their little brother Mikey to try the new cereal for them. Here, Congress seems to have discovered that it can get the governors to try out the harsh rationing for them.