There's Nothing Bipartisan About Medicaid Cuts

Republicans looking to Bill Clinton to defend cuts to the health-care program for low-income Americans are distorting history.

With Republican senators’ Affordable Care Act replacement, the Better Care Reconciliation Act drawing as little as 12 percent approval nationwide—and even majorities of Republicans disapproving of their assault on Medicaid—it is understandable that the plan’s defenders would be looking far and wide for political cover. But arguing that the approach is “borrowed from a nearly identical 1995 proposal by President Bill Clinton,” as Avik Roy recently did in The New York Times, distorts Clinton’s efforts to protect Medicaid from then-Speaker of the House Newt Gingrich beyond recognition.

Clinton’s singular goal in this period was to defend Medicaid from the exact same Republican attack we see today: an effort to finance tax relief for the top 1 percent of Americans (and, in this case, pharmaceutical companies and health insurers as well) under the guise of thwarting allegedly out of control Medicaid cost growth. Clinton’s tactical measures, and ultimate commitment to holding the line on the defense of Medicaid, can only be used as historical support for standing firm on Medicaid—not as cover to fundamentally undermine the program—as is sought by defenders of Trumpcare today.

There is no question that defending Medicaid was a harder battle in 1995. The program was far less popular, perhaps because fewer people understood its critical role in helping children get coverage or Americans in nursing homes and with disabilities get the care they need. And while Medicaid today is extremely efficient—with lower per-person cost growth than the private sector—in the mid-1990s it was far more vulnerable to arguments that its growth needed to be reduced.

Despite all of this, Clinton knew from his time as governor of Arkansas that block granting and imposing excessive caps on and cuts to Medicaid—as the Republican leadership was proposing in 1995—would be devastating to the most vulnerable, and shift costs and risk to the states. As a result, he launched a full-court press to defend Medicaid, refusing to sacrifice the program in exchange for a win on Medicare. Indeed, it was an argument on Medicaid that was the triggering event in his decision to shutdown the government that year.

Today as the Trump administration and the Republican leadership are trying to provide cover for their harsh and unpopular Medicaid cuts to pay for tax cuts for the most well-off, they are using the fact that Clinton also had a per-capita-cap proposal as a means to suggest their proposal is less harsh, and even “bipartisan.” That is false.

First of all, the Clinton per-capita-cap was not proposed as a means to cut Medicaid and undermine its ability to provide affordable health care for millions of Americans, but rather as part of a strategy to counter and defeat the Gingrich-led effort to block grant and gut Medicaid to finance tax cuts. Clinton’s move was to insist on fully guaranteeing Medicaid’s entitlement status while also demonstrating a policy response to Medicaid’s high growth rates through a version of what he called a per-capita-cap that still allowed for a generous growth rate.

Indeed, this was so well understood during the government shutdown that every single Democratic senator—from Paul Wellstone to Ted Kennedy to Tom Harkin—signed a letter to the president praising his per-capita-cap proposal and noted the president’s commitment to “veto any budget not containing a fundamental guarantee to Medicaid for eligible Americans.”

Opposition to the Republican Medicaid policy was so strongly felt by Clinton that it was his refusal to bend on Medicaid on the evening of November 13, 1995, that was the triggering event in his decision to shut down the government. As senior policy aides to Clinton at that time, we can vouch for what happened in the cabinet room that night. Nevertheless, we will rely on the account reported by the Pulitzer Prize winning journalists David Maraniss and Michael Weisskopt in their book, Tell Newt to Shut Up, as to what when down after Dick Armey suggested Clinton’s criticisms of the Republican Medicaid and Medicare policies “had frightened his mother-in-law and her friends.” President Clinton responded:

“[L]et me tell you there are a lot of older women who are going to do pretty darn bad under your budget … I want to make one thing clear. I am not going to agree to your Medicaid package no matter what … If you want to pass your budget, you’re going to have to put somebody else in this chair. I don’t care what happens. I don’t care if it all comes down around me. I don’t care if I go to five percent in the polls. I am not going to sign your budget. It is wrong. It is wrong for the country.”

As the journalist Julie Rovner reported in her article “Medicaid divide drives US budget battle,” Clinton was committed to protecting Medicaid. In his December 9, 1995, radio address he said: "If the Republican cuts in Medicaid take effect, the blunt reality is that as many as four million children will simply be denied needed medical care. That is unacceptable in a country that cares about its children. And I will not permit it to happen.”

Second, in sharp contrast to the current proposal, which would sharply reduce Medicaid spending by $772 billion over 10 years, the Clinton proposal would was never meant to produce significant cuts. Indeed, when it was scored in 1997, it was projected to produce only $6 billion in savings over five years. According to an unpublished 2017 Urban Institute analysis, if one applied the same per-capita-cap index the Clinton Administration proposed (a 5-year average of historical growth in nominal gross domestic product per capita plus 2 percent in the first year, and 1 percent thereafter) to the current Medicaid program, the policy would actually allow for an increase in current federal spending by over $200 billion over 10 years, if necessary. Such a level would leave significant room for states to accommodate unforeseen health crises or expensive improvements in treatments and cures, and the burden they would otherwise impose on patients, providers, and taxpayers.

Contrast that with the latest Senate Republican BCRA proposal—which is ultimately indexed to general inflation, which has historically risen more slowly than medical inflation. Together with the elimination of the ACA expansion, and other Trump budget proposals, it would produce cuts as high as 45 percent by 2026.

Third, while Medicaid spending per enrollee today is significantly below private health insurance per person spending, this was not the case during the first several years of Clinton’s presidency. In the years running up to the budget fights in the 1990s, Medicaid’s per-beneficiary costs were only beginning to show a bit of improvement after averaging 9.5 percent annually—a rate faster than that of Medicare, GDP, and inflation. In fact, in the late ‘80s and early ‘90s, the growth rate of the program’s cost was extraordinarily high, sometimes exceeding 25 percent a year. As discussed in a previous piece in The Atlantic, this was driven by higher medical inflation, but, in particular, financing practices by the states that attempted to manipulate the federal matching rate. While  the Clinton Administration preferred more targeted approaches to ensuring Medicaid’s per beneficiary growth rate stabilized—and while there was never justification for harsh caps or block grants of any kind—a generous per-capita-cap was a way for the administration to publicly communicate a commitment to constraining Medicaid growth without relying on block grants or deep cuts.

As the years drew on, the structural policy debates over Medicaid produced a stalemate between Republicans and Democrats, and Clinton agreed to only minor Medicaid savings in the 1997 Bipartisan Balanced Budget agreement with no type of cap. After that, Clinton as well as the Bush and Obama administrations worked to implement targeted policies to mitigate financing abuses and to work with the states to administer the program through creative delivery reforms, and more movement towards managed care in the Medicaid program.

As a result of these measures, the program’s growth rate substantially declined. The annual average growth rate of Medicaid spending per enrollee dropped from 5.9 percent between 1991 and 1999 to 2.8 percent between 1999 and 2005. Over the last 15 years, Medicaid had zero real spending growth per enrollee, much lower than private-sector health spending growth. And because the growth rates are projected to consistently be below private sector health care growth rates, there is absolutely no defensible policy case today for any harsh cuts or caps on Medicaid, other than as a piggy-bank to fund tax cuts for the highest income Americans.

There is no part of the story of Bill Clinton and the Democratic congressional resistance to gutting the fundamental guarantee of Medicaid in the mid-1990s that can be seen as providing justification for harsh cuts to Medicaid over 20 years later, or providing cover for the per-capita-caps now being embraced by President Trump and the Republican Congress. The real legacy was that even at a time when Medicaid was less popular and harder to defend politically than today, holding strong was the right thing to do.

Rather than allowing the Medicaid guarantee to be gutted, President Clinton—with the encouragement of Hillary Clinton, Ted Kennedy, Jay Rockefeller, Henry Waxman, John Dingell and others—protected the program and skillfully and forcefully got an all-Republican-led Congress to agree to and support the enactment and adequate financing of the Children's Health Insurance Program. In the intervening years, Medicaid and CHIP have only grown stronger, more efficient, and more publicly appreciated. There is a bipartisan lesson on Medicaid from the 1990s—and it is to defend, strengthen, and expand Medicaid, not to dismantle, cap, and cut the program.