Why Democrats warmed to severing Medicaid eligibility from the Covid public health emergency

Republicans have long demanded an end to the Covid-era Medicaid policy that gives states more funding and bars them from kicking people off the rolls. Now, Democrats are prepared to join them — four people close to the negotiations tell POLITICO.

Congressional negotiators are set to unveil the text of the 2023 omnibus spending bill on Monday. Lawmakers and staff have been scrambling for weeks to find ways to pay for a slew of health care programs, such as permanent telehealth flexibility, providing longer Medicaid coverage for new mothers and avoiding scheduled cuts to doctors’ payments, prompting formerly resistant Democratic members to take a fresh look at moving up the end-date of the Covid-19 Medicaid policy by at least three months — to April 1.

Doing so would decrease federal spending on Medicaid and allow states to remove ineligible people from the program, saving the government tens of billions of dollars. It also provides states more time to prepare for new rules that will put millions in jeopardy of losing their health insurance, something state Medicaid directors have been demanding from legislators.

“We are decoupling the Medicaid continuous eligibility policy from the Public Health Emergency. We are not ending the PHE,” said a Capitol Hill source close to the negotiations, granted anonymity to discuss a deal that is still in flux. “We’re providing certainty to states and giving them a gradual stream of funding and guardrail requirements that protect people. This is something both Democratic and Republican states asked for so that the 90 million people enrolled in Medicaid can be given certainty and protected during this massive undertaking.”

Also fueling Democrats’ shift: pressure from state health officials who have been lobbying Congress to give them a set date when their Covid posture will formally end after years of last-minute extensions from the White House.

“The overriding thing state Medicaid agencies want is certainty about what is coming,” Jack Rollins, the director of federal policy for the National Association of Medicaid Directors, told POLITICO. “That will help us make the concrete plans necessary to make sure this happens in an orderly fashion.”

The non-partisan Congressional Budget Office assumes the public health emergency for Covid is set to expire in July. Lawmakers have struck an agreement to move the end of its Medicaid rules up to April 1, which would allow states to begin removing people from the rolls who no longer qualify, usually because their income has increased.

Under the tentative deal, much of the money saved would go to two Medicaid policies Democrats have long sought: a year of postpartum coverage for low-income moms in states that don’t already offer it and a year of continuous coverage provisions for children at risk of losing health insurance.

“I was, frankly, a little surprised that Dems were not more willing to cut a deal on this earlier,” a health industry lobbyist familiar with negotiations noted to POLITICO. “No one thought the public health emergency would stay forever. And if this passes next week, Congress will essentially give states a 98-day notice.”

Those participating in the negotiations caution that some details remain unresolved and the deal could still fall apart as lawmakers and staff rush to finalize the bill language, but interest from both sides is mounting.

Republicans have long called for ending the public health emergency for Covid-19 and have forced a handful of successful Senate votes that were then blocked in the House. Democrats, in contrast, have been hesitant to tie the administration’s hands as the virus continues to kill hundreds of people each day and a winter surge of several illnesses strains the country’s medical system.

Republicans pushing for the deal have also been reminding Democrats that their original Build Back Better legislative package — which ultimately became the Inflation Reduction Act and passed this year after being significantly whittled down — included a wind-down of the public health emergency as a pay-for.

“Democrats are on the record as being open to that,” a Senate Republican aide told POLITICO. “But because Democrats are squeamish about this, they’re going to use it to drive a hard bargain. It’s clear their support and openness to it is contingent on reinvesting the savings back into Medicaid in a permanent way. The question is: Can they get enough wins to take the political sting off allowing states to kick people off the rolls?”

Amid tense arguments about how to spend the savings from the expedited end to the Medicaid portion of the PHE, lawmakers have also struggled over whether and how to set up guardrails to protect people who make slightly too much to qualify for Medicaid from being left without a private health insurance plan they can afford in 2023. Outside GOP advocates working closely with Congress argued that if those guardrails are built too high, the policy move might not yield the federal revenue that’s driving the discussion in the first place.

“It’s only a pay-for because you’d be removing people from Medicaid,” said Brian Blase, the president of the conservative Paragon Health institute and a former senior Senate Republican aide. “Democrats want to make that harder, but if they put too many restrictions on states’ ability to do that, I’m not sure how the math would work out. Plus, if you funnel people into subsidized Obamacare plans, those are more expensive than Medicaid.”

However, if the guardrails are too flimsy or non-existent, states could see a surge in their uninsured populations right as government Covid funding runs dry, and individuals will have to depend on health plans to cover tests, vaccines and therapeutics for the virus. One mitigation strategy insurers and health officials pushed for: a tweak to the Telephone Consumer Protection Act that would allow health plans and state agencies to call and text residents set to lose Medicaid to walk them through their options.

“There’s always a risk” of scams and abuses should that happen, Rollins cautioned, arguing that the calling and texting ban should only be lifted for the period of the Medicaid redeterminations. “But we need to leverage every method to reach people on the program.”