Jim Capretta [00:00:02]:

One thing about the bill I think is a legitimate can be criticized for is that they didn’t really provide an answer for: well, wait a second. If you’re saying they can’t get on Medicaid, where are they supposed to get health coverage?

Narrator [00:00:16]:

Welcome to Hospitals in Focus from the Federation of American Hospitals, here’s your host, Chip K.

Chip Kahn [00:00:26]:

With the passage of the one big Beautiful Bill Act, Congress has taken a major step towards reshaping large parts of the nation’s health care coverage through cuts, restrictions and regulatory changes that set us in a new direction. The obbba’s most consequential provisions like work requirements and provider related cuts are not going into effect until 2027 and and 2028, leaving room for uncertainty and political recalibration. As we look to what comes next, what are the prospects for meaningful health reform? Is this a retrenchment on Medicaid and Obamacare or the start of a deeper policy shift? And where do we go from here to assure a more stable, sustainable system that supports patients, their coverage, and the providers and clinicians they depend on who for their care? To help us unpack these questions, I’m joined today by Jim Capretta, senior fellow at the American Enterprise Institute. Jim is a veteran policy expert who brings a long view to developments in healthcare policy, not just on what’s in the obbba, but what it reveals about the current direction of health reform and the fault lines that continue to divide the public parties and policymakers. Thanks for joining me today, Jim.

Jim Capretta [00:01:50]:

Thank you, Chip. I’m really glad to be with you on the program, so thanks for having me on.

Chip Kahn [00:01:55]:

Jim, just to get things rolling, a lot of major health legislation over the years has moved the dial on coverage on health care programs. What has the OBBA done in your mind in terms of the health aspects of the legislation?

Jim Capretta [00:02:14]:

Well, I would say the health aspects were in a sense pursued to achieve the other objectives that the sponsors of the major legislation were trying to pursue. Really, let’s be honest, it was the tax provisions that were driving this train and some fiscal concerns attached to the tax provisions which led the Congress to look and think through where can we find savings. Of course, the big entitlements, Medicare and Medicaid are where all the money is. And in some ways it became the de facto, you know, the default way of going about it was to go and look at hard at Medicaid because Medicare in a sense was taken off the table. So Medicaid became the focus of trying to find a lot of savings to help the tax objectives get across the finish line. I think that’s really what happened politically.

Chip Kahn [00:03:12]:

Jim, that’s a very interesting point you make and I think hearkens back to earlier periods, years ago, before Obamacare, before the Medicaid Modernization act, when there were many budget bills. And I used to say that the health care provisions were the tail, not the dog. Whether it was deficit reduction or tax cuts, they were really the driving forces. But whatever the motivation for the inclusion, and even with the objective of deficit reduction or spending reduction being part of it, this still was a very big health initiative and probably changes the nature of the Medicaid program and clearly will have a significant effect on the operation of the marketplaces. I’m going to separate those two and allow you to take a second to try to unpack on the Medicaid side what you see as the significant aspects of clearly not just the largest Medicaid cuts in history, but maybe the largest changes in the basis of Medicaid we’ve seen in a very long time.

Jim Capretta [00:04:33]:

Yeah, I think there were really two very consequential provisions enacted. There are obviously many in the bill affecting Medicaid. But the two most important, of course, have gotten a lot of press attention. Which one is the work requirements, which is the first time Medicaid, at least in statute, now has a provision saying that anyone who’s entering into the program, not through the old channels of being disabled or you know, categorically eligible based on their status, but just has a low income and otherwise is uninsured and wants to get insurance through Medicaid for that able bodied population. Put that in quotes. The law is requiring some participation in the workforce or other activity related to participation in the workforce at a level of I think 80 hours a month. So that’s a big change and it’s an expectation expected in the community that many millions of people will be screened out of the program based on that expectation. I think part of the difficulty we’ve had in debating this over the last several months is some lack of evidence and confusion about what will happen if you do this.

Jim Capretta [00:05:48]:

Many people say that the requirements actually aren’t that hard to meet because you can volunteer, you can go to school, you can do other things to meet the requirement. But a lot of other people say, well, yeah, but when it’s been tried, it ends up being just a block, you know, a paperwork block. And therefore many millions of people will become uninsured because they won’t be able to jump through these hoops, so to speak. So I think Some of it remains to be seen about how it plays out state by state. But there’s no question it’s a major shift in policy. And you know, there’s a lot of aspects to it that can be debated. Should the country be conditioning health insurance enrollment based on participation in the workforce or should people be able to get health insurance, maybe that will help them stay healthy and then they can go back to work? Of course, there are arguments in both directions on that. That’s one.

Jim Capretta [00:06:44]:

The second big provision is the one that’s going to affect the provider community even more directly, which is changing how the states are allowed to raise their share of the money to pay for provider payments, so called provider taxes, supplemental payments. These were tightened up very substantially going forward. Back ended though, so that they don’t kick in for quite a number of years in terms of their real pinching in terms of how much they’re going to affect the states. But if they do remain in place, they’ll force the states to adjust quite substantially to how they pay providers and also how they raise money for their share of the costs. So it’s a, overall, I would say the bill is a, has those two aspects to it, which means it’ll be harder for people to sign up for Medicaid without working and it will be harder for the states to finance Medicaid through provider taxes, which in effect can kind of ease their burden and put more of the burden on federal taxpayers.

Chip Kahn [00:07:47]:

We also saw some changes in the marketplaces that led to some savings that were included in this legislation. The changes in Medicare, Medicaid as well as these were under the guise of waste, fraud and abuse. But do you believe that the impact of the program integrity changes included in the bill, and actually there was also a recent regulation, will affect the numbers in terms of those covered. Will it create sort of obstacles too? Like in a sense you’re saying we could have obstacles on the Medicaid side regarding work or re verification of eligibility?

Jim Capretta [00:08:28]:

I do, you know, one person’s obstacle might be another person’s program integrity check kind of thing. So I don’t, I don’t mean to make light of it, but you know, there are always going to be rules around which you enter into public programs that, you know, in effect provide taxpayer support to various, you know, households. The question is how tight do you make them? How narrow is the window? And you know, to be honest with you, there’s been over the last 10 years or so a lot of liberalizations that made it easier and easier to get into the marketplaces to get it into Medicaid. And, and there’s no doubt that program enrollment has soared on both, both sides. So the uninsured rate came down by, you know, 15 million, 20 million people. But the number of people on Medicaid and on the premium credit programs was multiples of that, meaning that some people who were otherwise covered in other ways prior to the ACA being enacted have now migrated into Medicaid and the premium credit structure. And the question is, is there a balance to be struck? The people who wrote the bill wanted to be very tight about it, but people who oppose the bill say, hey, you’re going overboard and you’re going to push a lot of people out who can’t otherwise be insured any other way. So some of this is going to have to be debated, I think, continually going forward, maybe some of it implemented and then adjusted over time, too.

Chip Kahn [00:09:58]:

One of the problems here is this. I mentioned waste, fraud and abuse. One man’s waste, fraud and abuse is getting to goals of more coverage. Another is an abuse of what the taxpayer intends his or her funds to be used for in public policy. Going back to the balance question, how do we, assuming that we want everyone covered and that we want everyone, to the extent possible, covered in the private sector, albeit that public funds may be involved, do you have any ideas how we get to that balance? How can we work our way through this ideological battle we have over how we do something that we know is good for everyone, which is health care coverage?

Jim Capretta [00:10:51]:

Yeah, I mean, I think the big difficulty here, Chip, is that they took a valid objective, which was to say the public budget, the federal budget is overburdened with medical care spending. Medicare and Medicaid are quite expensive and have grown very substantially relative to our tax base over the last half century, and they’re expected to continue to grow. So it is a legitimate public question, how do we deal with this? What is the answer? My problem with the way they proceeded with the bill was they then said, well, we can cut a lot of spending if we make it harder for people to get on Medicaid and the premium credit structure, which I think is sort of the wrong way to think about it. They should have maybe been thinking about how do we bring down the costs of enrolling in insurance so that it’s less expensive both for the federal budget and for private payers out there to secure insurance and get medical care services. That’s an entirely different and much more difficult question than just saying who’s eligible for signing up for public subsidies, which if you tighten that up, you know, one thing about the bill I think is a legitimate can be criticized for is that they didn’t really provide an answer for, well, wait a second. If you’re saying they can’t get on Medicaid, where are they supposed to get health coverage? And of course they say, well, they need to go to work, I think. But you know, depending on someone’s life circumstances that may or may not happen. And so what happens then? So I think a lot of this gets down to lowering the overall bill for medical care expenses, which would then allow bringing down both Medicare and Medicaid costs.

Jim Capretta [00:12:39]:

I think it was a mistake also, by the way, to focus entirely on Medicaid and not bring into the equation are there ways to save money further in Medicare, which is an even bigger program and frankly directly under the control of the federal government.

Chip Kahn [00:12:54]:

I’m going to I want to drill down a little bit further into the point you’re making now, but before I get there, I guess I have to ask the question, do you believe these reductions, at least the ones regarding Medicaid are actually ever going into effect? And why do I ask that question? Well, if we look at Obamacare, it included reductions in what’s known as the disproportionate share payments inside of Medicaid. You know, those have gotten pushed off every year, those reductions. And here we have legislation, as I mentioned in my introduction, that doesn’t big, major portions of it don’t begin in the Medicaid reductions until 2728. So that leaves a lot of time for advocates to go to their legislators and say, well, hey, wait a second, do you really want to do this even though the bill is passed and signed into law, how do you see that playing out? Is this just too big to change or do you think this could get changed and put off?

Jim Capretta [00:14:06]:

I don’t think there’s any question it could get changed. First of all, they wrote a bill that affects some of these provisions won’t take effect for even beyond 20 out in 2030, 2031. So there’s a lot of things scheduled way out in this bill and a lot depends on elections in this country. It’s still a big, a big factor in all of this is who wins the election. And so you have a midterm election in 2026, another presidential cycle in 2028. Both of those elections could have major effects on not just what passed here in 2025, but what what they propose going forward. Let’s assume, you know, Republicans Kind of stay in the power position here for a little while, maybe five years. If that’s the case, then these cuts or some modified version of them have a pretty good chance of going forward if the fallout from them is, turns out to be substantial as people, many people think they will be.

Jim Capretta [00:15:09]:

Then of course, once that happens, they might start losing elections, but that could be well down the road. So I think you’re onto the right track here, Chip, which is that elections have consequences. And we got a couple of that might still affect what happens here going in through 2028.

Chip Kahn [00:15:29]:

Let’s assume for a second though that these cuts do take effect, at least the major ones. And there has been some discussion about, particularly in the expansion states, which is most of the country, those Obamacare expansion states in Medicaid that this is really all about, and the work requirements are really all about, you know, mid 20 year olds in their parents basement playing, you know, playing computer games, being covered by Medicaid and not working. Well, frankly, if that’s the case, those people probably aren’t going to be sick and use health care dollars anyway. A lot of these people who will, you know, fall through the cracks because of these changes are still gonna require healthcare and they’re gonna show up at hospital emergency rooms or community health centers or whatever to get their care. How is that gonna play out if we assume that these cuts will go forward even if it’s a year and a half or 24 months away?

Jim Capretta [00:16:38]:

You know, I think part of the confusion here is that Medicaid doesn’t have a disability definition that really fits, fits with the way the debate played out. People were saying, well, if you’re able bodied, that means you’re not on Medicaid because you’re disabled, really, you know, therefore you can go to work. But of course, as I think your question Chip is pointing at, there’s an awful lot of people who end up on Medicaid. They don’t qualify for Social Security disability or ssi, which means they don’t become categorically eligible for Medicaid. But they might still have a lot of health problems that hold them back a little bit in terms of employment and earnings and certainly makes it difficult for them to secure health insurance outside of a public program. So I think that, I think is going to be where much of the controversy is going to center. You know, people who are diabetic and maybe struggle to manage it for any number of different reasons. People with mental health problems, substance abuse problems, many people could end up on Medicaid.

Jim Capretta [00:17:43]:

For reasons other than being fully and totally disabled. And so, yeah, I think you’re right that a lot of that care and coverage will still be provided and there’ll be pressure to figure out a new system to make sure these people can be taken care of if they’re not allowed to stay on Medicaid. Now, having said all that, I do think once this became federal law, which it now is, that you have to meet these work requirements to stay on Medicaid, the states are really in the driver’s seat and implementation of these provisions. So some states may find ways to make it as easy as possible for people to stay covered. And I think a lot of the states that really care about coverage will do so. And so it’s not totally clear yet if a state like California or New York or some other place, you know, if they want to, they might be able to retain much of the coverage they have today by helping the people meet this requirement in any number of ways.

Chip Kahn [00:18:44]:

You know, I’m going to ask a question and then I’ll go big, a small question, and then I’m going to go big. So my small question is, with all these changes that have taken place or will take place because of this legislation, with the predictions by Congressional Budget Office of tremendous loss in coverage because of these, in that context, how do you see sort of the one big health care issue in coverage that didn’t get settled here playing out, and that’s this enhanced premium tax credit that was put in a few years ago that I think over half of those on the marketplace coverage take advantage of today. I think half have almost no premium at all that expires at the end of 25. How do you see that playing out in the fall, looking towards sort of a last chance to get that extended, do you think there’s a chance that could be extended even with Republicans concern over a Obamacare and the marketplaces and spending generally?

Jim Capretta [00:20:01]:

I do. I think they could be extended. I’m not guaranteeing they will be, but I do think it’s possible. I mean, candidly, I didn’t support the bill for fiscal reasons. It was a major budget buster, frankly, for a lot of reasons. But I also didn’t really like what they’re doing in health care, mainly because I think their attitude about coverage is all wrong. I think instead of for the last several years, I’ve had the exact opposite instinct to what motivated this bill, which is we ought to be building a system that isn’t so complicated in terms of securing coverage. It ought to be Easier, more straightforward rules based on real data and real income data.

Jim Capretta [00:20:43]:

And you get placed into the various buckets based on hard earnings data, not estimates, not projections, not possibilities. But what did you earn for the last six months? Therefore, here’s what you get, and you get it for an extended period so you don’t have to worry about it for another 12 months. I think that would be a much better system. That brings me to your question, which is, with these tax credits expiring at the end of this year, I think the Republicans, if they were on their toes, they would say, hey, this, this may be our most high leverage point in recent history to change how people get subsidized into coverage. If they don’t like the marketplaces, if they don’t like the premium credit system, they could use the money that is expiring and say, hey, we’ll work with the Democrats on a new way to make sure just as many people get covered, but in a way that we like a little bit better. You know, if they want them to go into employer plans more, design a new way to support that. If they want more individual insurance enrollment outside the marketplaces through, you know, HSA based, you know, high deductible plans, find a way to do that. I think there’s ways they could take the impulse to extend those credits, which is very powerful, and say, hey, we’ll work with you to design something that isn’t entirely just the ACA model, but tries to extend coverage to this population through several additional channels, including trying to keep as many people as possible in employer plans, if that is a possibility.

Chip Kahn [00:22:24]:

So let’s build off of that. I mean, in a sense, you’re giving us the beginning of your vision of where we ought to go on the coverage side. And let me sort of hit with the two big themes here from our conversation. One is we really want all Americans covered. We can talk about how it’s achieved, but, you know, that’s a positive end so that they have financial security that protects them against healthcare disaster or catastrophe for themselves or their families. And on the other hand, the federal government over the years, whether it’s through Medicare, Medicaid, the Obamacare aspects, even the tax system that provides incentives for employers to provide coverage that, you know, tax exclusion of employer provided coverage, we have this tremendous subsidization and frankly, the country has a spending problem. How do we bring all that together in your mind to have a more sustainable system? Because people really should deserve and expect good healthcare and certainty about their access to healthcare. And that access really depends on having coverage because you’ve gotta be part of a group.

Chip Kahn [00:23:52]:

Whether it’s a private group or a social insurance group. Most of us can’t afford any major healthcare expenditure. We need to be part of a group. Fortunately, most of us are not sick at any given time. So the group can help us afford that, whether it’s private or public. How do we make all that work?

Jim Capretta [00:24:15]:

Well, that’s sort of a half century long struggle, as you know, better than most people. So yeah, people have been working on it a long time and you know, I would say we’ve been making some progress here and there. It’s like American healthcare is one of those frustrating exercises where we do a little good here and a little good there and we also have some disasters here and there that kind of set us back. So it’s a mix, always a mixed bag. But let’s take a big picture look, you know, we’re at about 18% of GDP on total spend on healthcare. Most of our peer countries are at about 12. You know, they probably should be at 13 or 14 if they weren’t over regulating their system. But we’re a big rich country and so it’s probably not unusual that we spend a little bit more on health, which is a preferred good.

Jim Capretta [00:25:00]:

That is when you have more money, you tend to spend more on something like this because it’s very highly valued. So the fact that we’re spending 18 or 19% of GDP on it and not 12 or 13 isn’t the end of the world. But we probably are wasting a few percentage points still. You know, we’d be better off, we’d all feel better if we were down at 16 or 15 rather than 18 or 19. And we probably could be at 15 or 16 if we were more efficient and disciplined about how we went about things. I think we all know there’s a fair amount of leakage out there. Yeah, it’s a good system by and large, and it’s pretty efficient in certain ways. But there’s a lot of excess.

Jim Capretta [00:25:40]:

I mean, you know, people getting the same test, you know, two or three times in a three month period. Right. You know, or just because the records are never kept up, you know, and clear and they move around and it’s fragmented and lack of coordination and maybe overuse of certain services and people are in poor health too. And how do we have interventions that kind of slow down that deterioration rather than waiting until they’re really, really sick. So all of those are opportunities to bring more discipline to it. My vision has always been, my thought has always been that to help that happen, we need two things. One is we need a little more structure to it. I think there’s a little bit too much confusion and lack of transparency and difficulty in navigating through all this, which makes it very hard for payers, that is employers, but also just people, individuals to find ways to kind of lower their own bills a little bit.

Jim Capretta [00:26:47]:

And I think we ought to be putting more structure around the marketplace, not hard rules. Like, I don’t want to micromanage things. I want more rules around pricing and make it more clear to people when they could get better value by migrating to a lower cost setting. I think that’s, that’s critical and, but see, you know, as you know, Chip better than almost anybody, really, it’s very hard to do for a lot of reasons. And, but I think it is critical. I do think we need to help both the employer community and those they are serving, individuals and those in public programs to help them lower their own bills, which would also lower the public bill.

Chip Kahn [00:27:32]:

Well, I guess we can hope for a better day in terms of the policy process because we seem to be in this great political divide and Obamacare, healthcare since 2009, 2010 particularly, has been part of that great political divide. And not sure that even if people agree, you can get them to consensus because they seem to want to just disagree for general principles and for other agendas. But at the end of the day, I, I’m with you. We’ve got to find some way to make the structure more rational and, and then all of us are going to have to agree that we can’t spend as much, quite as much money as we do and, and, and accept the limitations, which will be few, but the limitations that come with that. So with that, really appreciate you coming today, Jim. And I think this conversation sort of went from the specific of this legislation to the general that we’ve been talking about now. But I think we’ve at least laid bare some of the big issues that will have to be faced in the upcoming years, I think by policymakers.

Jim Capretta [00:28:57]:

I agree very much with that conclusion and I appreciate you giving me the chance to share my thoughts.

Chip Kahn [00:29:04]:

Great, Jim, thanks so much. Thanks, Jim, for joining Hospitals in Focus today. What we’re seeing in the OBBBA isn’t just about policy mechanics, as we’ve discussed. It’s about deeper questions of direction. Are we going to build a sustainable system that protects access and supports providers, or are we going to keep swinging from one extreme to the next? Frankly, coverage can’t be assured and costs can’t be sustained without a stable, coordinated framework that reflects the real needs of patients and and those who provide care. Policymakers must look beyond short term wins and start asking the harder questions. What’s the vision? What’s the purpose? What’s the end game? And how do we build a system that works for all Americans and at the same time is affordable?

Narrator [00:30:13]:

Thanks for listening to Hospitals in Focus from the Federation of American Hospitals. Learn more at fah.org. Follow the Federation on social media @FAHHospitals and follow Chip @ChipKahn. Please rate, review and subscribe to Hospitals in Focus. Join us next time for more in depth conversations with healthcare leaders.

Jim Capretta is a senior fellow at the American Enterprise Institute where he studies health care and entitlement policy. He is also a senior adviser with the Bipartisan Policy Center. He previously served in senior positions at the Office of Management and Budget and on the staffs of two congressional committees. He has an MA in public policy studies from Duke University and BA in government from the University of Notre Dame.

He is the author of US Health Policy and Market Reforms: An Introduction, published by AEI in 2022.