June 28, 2017 / 11:04 PM / 5 months ago

States' Medicaid spending to increase under Senate bill -report

NEW YORK, June 28 (Reuters) - The now-delayed U.S. Senate healthcare overhaul bill would boost state spending on Medicaid by $565 million in 2022, according to an independent report issued on Wednesday, while credit agencies said it would cause states to face downward pressure on their credit ratings.

Senate Republican leaders on Tuesday postponed the vote on the bill, which they hoped would take place before their July 4 recess.

According to credit rating agencies Moody’s Investors Service and Fitch Ratings, the legislation would negatively impact states because of changes to the core funding of Medicaid and the phasing out of the Medicaid expansion plan.

The Urban Institute, a Washington, D.C.-based think tank, issued a report on Wednesday estimating state Medicaid spending would increase by $565 million in 2022 under the proposed legislation. It also estimated federal funding for Medicaid, which funds medical care for the poor and indigent, would be $102.2 billion lower in that year.

The National Governor’s Association, which on Monday advocated for more time to review the financial impact of the bill, welcomed the delay.

Members of the Senate Republicans’ own party resisted the measure, which the non-partisan Congressional Budget Office said would cause 22 million Americans to lose insurance over the next decade and reduce federal outlays for Medicaid by $772 billion over that time.

Moody’s senior analyst Genevieve Nolan told Reuters the legislation in its current form would be a credit negative for states, mainly because of reduced federal funding for Medicaid.

“Obviously this bill is ACA (Affordable Care Act) repeal and replace, but even more than that, it’s Medicaid repeal and replace. Medicaid is a more than 50-year-old program, a partnership between states and the federal government, and both the Senate bill and the House bill propose really fundamental restructuring of how that program is funded,” Eric Kim, Fitch’s director of U.S. Public finance, told Reuters.

STATE IMPACTS

A mix of Republican and Democratic governors criticized or strongly opposed the bill, including Connecticut Governor Dannel Malloy, Colorado Governor John Hickenlooper and Ohio Governor John Kasich.

Connecticut’s Office of Policy and Management said in a report on Tuesday the bill could cost the state about $2.9 billion per year by 2026.

The report also said the cap to federal payments would “force” states, including Connecticut, to assume costs, limit benefits, decrease the number of people served or reduce rates to providers.

In Virginia, the bill would cost the state’s Medicaid program at least $1.4 billion over seven years, according to Governor Terry McAuliffe’s office. It would “blow a hole in Virginia’s budget,” McAuliffe said in a statement. (Reporting by Stephanie Kelly; Editing by Daniel Bases and Dan Grebler)

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