Why It Matters

Senate Republicans held an Aug. 4 hearing on Medicaid spending and program integrity that Democrats condemned as political cover for major health care cuts. The Senate Budget Committee convened to examine spending growth, improper payments and fraud in the program, but the hearing became a broader partisan battle over whether Republicans are protecting Medicaid from abuse or weakening health coverage through changes enacted under President Donald Trump.

The dispute comes after Republicans enacted a sweeping reconciliation law containing more than $1 trillion in cuts to health care services, most of them involving Medicaid, according to Sen. Patty Murray (D-WA). Murray said more than 15 million Americans could ultimately lose health coverage when Medicaid changes are considered alongside the expiration of enhanced Affordable Care Act premium tax credits and other health policy changes.

The Big Picture

The Aug. 4 hearing, titled “Medicaid: The Reality,” was convened by Senate Budget Committee Chairman Ron Johnson (R-WI). Republicans focused on Medicaid spending growth, improper payments and concerns about the program’s financing structure.

The hearing featured Brian Blase, president of the Paragon Health Institute, and Jonathan Ingram, vice president of policy and research at the Foundation for Government Accountability, alongside Democratic witness Andy Schneider, a research professor at Georgetown University’s Center for Children and Families.

Johnson’s focus on Medicaid spending and fraud comes as states prepare to implement major Medicaid changes enacted in last year’s reconciliation law. The law requires certain adults in the Medicaid expansion population to meet work or community engagement requirements beginning after Dec. 31, although states may implement them earlier.

The Centers for Medicare and Medicaid Services has also proposed changes to state-directed Medicaid payments. The proposed rule would implement statutory limits enacted in the reconciliation law and extend payment restrictions to additional state-directed and targeted payments. The proposal’s public comment period closed July 21.

What They're Saying

The hearing revealed a fundamental disagreement over what Medicaid’s spending growth says about the program.

Republican witnesses argued that Medicaid’s financing structure encourages excessive spending and leaves the program vulnerable to improper payments and abuse. Blase argued that federal Medicaid policy can incentivize states to prioritize certain populations and spending arrangements at the expense of people he characterized as the program’s most vulnerable beneficiaries.

Murray rejected the Republican framing and called the hearing a “sham” focused on Medicaid fraud after Republicans enacted what she described as the largest Medicaid cuts in U.S. history.

Murray also questioned Ingram about President Trump’s pardons and commutations involving people convicted in health care fraud cases. “I’m all for a major crackdown on fraud,” Murray said, before arguing that Republicans should also scrutinize the president’s clemency decisions.

Schneider testified that last year’s budget reconciliation law produced the largest Medicaid reductions in the program’s history. When Murray asked how many people could lose coverage specifically because of the Medicaid cuts, Schneider said the latest estimates were approximately 11 million. Murray placed that figure within the broader health care changes and said more than 15 million people could lose insurance when other coverage changes are included.

Sen. Rick Scott (R-FL) focused on how fraudsters and providers can exploit Medicaid and argued that combating improper payments is necessary to preserve resources for legitimate beneficiaries. Ironically, Scott himself previously led a company that was at the center of a major federal health care fraud investigation.

While Scott was CEO of Columbia/HCA, federal authorities investigated the hospital chain over systematic fraudulent billing involving Medicare, Medicaid and other federal health programs. While Scott was never personally charged, the Justice Department ultimately recovered $1.7 billion from HCA through civil and criminal settlements, concluding in 2003 what DOJ called the largest health care fraud investigation in U.S. history at the time.

The Georgetown Center for Children and Families has separately criticized some state efforts to implement the reconciliation law, arguing that provisions targeting immigrant eligibility and other beneficiaries do not meaningfully address Medicaid fraud.

The National Health Law Program submitted a statement for the record emphasizing the role of home- and community-based services in allowing people with disabilities and older adults to receive care outside institutional settings, pushing back against characterizations of increased spending in that area as evidence of program abuse.

Political stakes

The hearing comes as Congress and the administration continue implementing major changes to Medicaid enacted through reconciliation, a legislative process that allows certain tax and spending measures to pass the Senate with a simple majority rather than the 60 votes generally required to overcome a filibuster.

Republicans argue that the changes are necessary to improve program integrity, control federal spending and concentrate Medicaid resources on vulnerable beneficiaries. Democrats argue that the changes will cause eligible people to lose insurance, weaken hospitals and shift costs to states.

The consequences are particularly significant for hospitals that rely heavily on Medicaid. The American Hospital Association warned that the administration’s proposed changes to state-directed payments could reduce resources available to hospitals and other providers. In comments to HHS, the association warned that reductions of the magnitude contemplated by the policy could force affected institutions to reduce services and staffing, limiting access to care.

Republicans argue that the hearing addressed legitimate structural problems in Medicaid rather than providing political justification for coverage reductions. They point to rapid spending growth, improper payments and federal financing arrangements that they contend encourage states to maximize federal reimbursements without sufficient regard for cost.

Democrats and health care advocates counter that spending growth alone does not demonstrate fraud and that policies designed to reduce federal Medicaid spending can also reduce coverage or payments to health care providers.

Families USA, which has been running a “Defending Medicaid” campaign, has warned that implementation of the new work requirements could create administrative barriers for people who remain legally eligible for Medicaid, particularly beneficiaries attempting to document medical exemptions.

What's next

The hearing produced no formal legislative action on Aug. 4, and no legislation was formally associated with the proceeding. Under the reconciliation law, states must implement the new Medicaid community engagement requirements beginning no later than the first quarter after Dec. 31, although states have the option of beginning implementation earlier. Meanwhile, the public comment period for CMS’ proposed rule governing Medicaid state-directed payments closed July 21. The administration must review those comments before issuing a final rule.

The bottom line

The Aug. 4 Senate Budget Committee hearing exposed the central political divide surrounding Medicaid after Republicans enacted sweeping changes to the program: Republicans argue that tighter eligibility rules, payment restrictions and greater scrutiny are necessary to curb waste and preserve Medicaid for vulnerable beneficiaries, while Democrats argue those policies amount to historic Medicaid cuts that will reduce coverage and strain health care providers.

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