Introduction and Episode Overview
[00:00:00] Stacey Richter: Episode 469. "The Impact On Plan Sponsors of Medicaid Cuts." Today I speak with James Gelfand.
[00:00:25] Stacey Richter: I was talking to Cora Opsahl the other day, and the topic of Medicaid came up, mostly how the current Medicaid goings on will impact plan sponsors, if at all. But if so, what would a savvy plan sponsor be doing in this moment to not get caught flat footed?
So, and I will admit there were martinis involved, there was speculation between Cora and I and hypotheses offered. But at one point Cora said, you know, if you're going to talk about this on the podcast, who you really should be speaking with is James Gelfand, president and CEO of the ERISA Industry Committee, otherwise known as ERIC.
So yeah, I'm good like this.
To listen to this episode, please visit the episodes page which also includes all of the mentioned links.
Guest Introduction: James Gelfand
[00:01:06] Stacey Richter: And today I am welcoming James Gelfand to the pod for this this double episode. What is in store for you, you may be wondering, and why with a double episode? Well, let me put it to you straight. When I tracked down James Gelfand, we started chatting about the possible ways this show could go.
James said, Just as important as or maybe more important for plan sponsors than the Medicaid goings on are what's happening with Medicare site neutral payments and also with updates to HSA health savings account legislation. And here we are with our two part episode today. I briefly toyed with jamming it all into one show, but then decided it would be, yeah, just a little too long.
You can let me know what you think, though, should you have commentary on this decision of mine to break it into two shows. James thought you could handle it all in one, just saying, by the way.
Medicaid Cuts: Key Issues and Impacts
[00:02:00] Stacey Richter: This first show will be the down low on what's happening with Medicaid cuts. And I'm so thankful to James for straightening out a lot of question marks for me.
For example, the Cornhusker Kickback. You familiar with this? I was not. But this Cornhusker Kickback kind of plays center stage role in the current Medicaid possibly cuts. So yeah, listen to the show to get up to speed on that. And also James Gelfand's opinion on how much and how proposed Medicaid cuts may impact employers in ways that may be more or less obvious.
For example, how many of an employer's members are actually on Medicaid? Also, if states have to pay more for Medicaid, will they raise the corporate tax to cover their new Medicaid costs currently being funded by the federal government?
Another impact on plan sponsors, hospitals, who could very easily and probably will use this as a quite opportunistic reason or as an excuse, depending on the hospital, to raise their prices. And that matters because 50 percentish of most plan sponsors spend these days is on hospitals. Listened to the shows with, my goodness, there are many. Vivian Ho, PhD, most recently. Marilyn Bartlett also talked about the impact of hospital prices on plan spend. Cora Opsahl, of course.
Yeah, that's a good trifecta for you there if you want a place to start. There's an article, by the way, about the hospital/plan sponsor/Medicaid dynamic in Modern Healthcare the other day that quotes Shawn Gremminger and Elizabeth Mitchell, and both of them are quoted as saying, don't even think about it, major consolidated hospitals. The title of the article is pretty blunt to that end. It's called "Medicaid Cuts Cannot Increase Hospital Rates, Employers Warn”.
Big caveat I just want to throw in here is that the situation is fluid. This show with James Gelfand was recorded the first week of March 2025, and it represented what was going on at that time.
A lot of this conversation is great historical background information, however, which will be no matter what happens, it is extremely relevant, again, no matter how reality winds up unfolding, but yeah. Lots of forces at play that could impact the outcomes here so do check on the latest.
James Gelfand, as aforementioned, is president and CEO of the ERISA Industry Committee, otherwise known as ERIC. ERIC represents the largest self-insured employers advocating for comprehensive benefits and health care policies that impact millions of employees.
James Gelfand brings nearly two decades of experience in healthcare advocacy, having worked at the Chamber of Commerce and on Capitol Hill.
When you are done listening to this show, do queue up part two of this particular double episode where we talk site neutral payments and honest billing practices there, and then also HSA, health savings account reform.
My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.
James Gelfand, welcome to Relentless Health Value.
[00:05:00] James Gelfand: Thanks for having me today.
[00:05:02] Stacey Richter: In the other part of this episode, we are going to talk about or have talked about depending on the order in which you, the listener, are going about this endeavor. But we talked about site neutral Medicare payments and also HSA reforms, both what's up and then also your advice so plan sponsors don't get caught flat footed.
Right now, however, let's pivot and chat about Medicaid. This is a significant source of consternation for many, to put it in the absolute mildest terms, including plan sponsors. Maybe you could take it from the top here. What's up with Medicaid?
[00:05:37] James Gelfand: There's quite a bit of work being done on the federal level right now on a big tax package. I'm sure you followed some of the news coverage about it, a lot of which is focused on cutting the Medicaid system.
[00:05:49] Stacey Richter: Let's just dig in a little bit because I think that probably most listeners are familiar with the eight hundred and it was eight hundred and eighty billion dollars number, right? And you know, I think you often don't realize that like sixty four percent of babies born in this country are being paid for by medicaid, and there's a significant number of elderly folks in nursing homes. Also, SNFs that are being paid for by Medicaid. But what are things that aren't known that should be known?
[00:06:15] James Gelfand: The 880 billion number is definitely very intimidating. And when you see chyrons on the news saying 880 billion, and millions and millions of people are going to lose Medicaid, they'll be out in the street, you know, it's obviously extremely jarring.
But if you listen to what Congress is really talking about to the changes that they're really exploring in the Medicaid program, they're not anywhere near as perhaps exciting or horrifying, depending on which side of the aisle you sit on, for instance, I think the four major categories of Medicaid changes that I think that they're seriously looking at, you know, number one is waste, fraud and abuse, right?
So they're going after improper payments that never should have taken place in the first place.
[00:06:59] Stacey Richter: Okay, so FWA, Fraud, Waste and Abuse, and there's going to be some there but, yeah, not $880 billion in savings. So what else we got?
Medicaid Work Requirements and Provider Taxes
[00:07:12] James Gelfand: Number two is work requirements for able bodied adults in the Medicaid program, which again, already been tried in certain states, didn't really rock the boat all that much.
[00:07:21] Stacey Richter: I think they tried them in Georgia. I think there were over 100,000 people, like 120,000 people or something like that, that were eligible for Medicaid. And only like 5,000 made it through the gauntlet to actually get Medicaid.
Many of the people who didn't may have actually been working, you know, like they couldn't take off time of work to go sit in the office or whatever to figure out how to, or they weren't literate enough, whatever, to actually make it through all the different steps to get on Medicaid.
So there was this just like went from 120,000 people to 5,000, right? So I guess they saved money, but of the dollars that were subsequently spent, admin costs were super high. I think admin costs were actually two thirds of the spend at that point. So yeah, I don't know if that is representative of how other work requirement programs would go, but okay.
I mean, I guess they save money. So work requirements.
[00:08:19] James Gelfand: Number three has to do with these so called provider taxes. This is a scheme. In fact, the Paragon Institute calls it Medicaid money laundering. But it's a scheme by which hospitals, providers, and state governments work together to essentially defraud the taxpayers and the federal government to draw down way more money than they should be drawing down from the federal government by charging fake taxes to hospitals and then giving the hospitals the money back.
So they're looking at reeling that in to some extent. And again, it's, it's been regulated a little bit. The Obama administration actually went after this a little bit. So they're going to just try to get a little bit stricter on that.
[00:08:58] Stacey Richter: Wow. Okay. So reeling back so called provider taxes, that's number three.
The Cornhusker Kickback Explained
[00:09:03] James Gelfand: And then number four is dealing with the so called Cornhusker Kickback from the ACA. And I don't know if your viewers are familiar with the Cornhusker Kickback.
[00:09:12] Stacey Richter: Yeah. Talk to me about the Cornhusker Kickback.
[00:09:14] James Gelfand: Right. So when the Affordable Care Act was first being debated in 2009 and 2010, the big question was, okay, we have all agreed we're going to expand Medicaid to up to 130 something percent of the federal poverty level.
Every state's going to have to expand this this number.
[00:09:35] Stacey Richter: So this is what Medicaid expansion means. Expanding eligibility to Medicaid coverage over the federal poverty limit, FPL, or whatever it was in the state before, up to 130ish percent of the federal poverty level.
[00:09:54] James Gelfand: And, you know, it was going to be only Democrats voting for the bill and they had exactly 60 senators.
So they had to make every single senator comfortable with voting for the bill. The senator at the time from Nebraska was a Democrat named Nelson. And he said, well, I'm not going to vote for the bill if Nebraska is going to have to pay the cost of all these new people who are going to be added to the Medicaid program in our state.
And so the Senate Majority Leader at the time, Harry Reid from Nevada, he said, okay, well, what we're going to do is we're going to say for Nebraska, in your state, all these so called newly eligible Medicaid enrollees, the federal government will pay all the costs of those guys. So you won't have to pay for that. It'll be free for Nebraska.
Now what do you think happened? Well, of course, all the other senators representing all the other states say, wait a minute. What about us? Why should our states have to pay? And in the news, people started talking about this special deal with Nebraska. They were calling it the Cornhusker Kickback.
So in the end, what they did in the ACA was they changed it. And they said, instead of just Nebraska, every state that expands Medicaid, the federal government is going to pay almost all of the costs of the new people who are added to Medicaid and started at almost 100 percent and it tamps down to like 90 percent but you've still got the federal government paying basically all of the costs.
Meanwhile, for traditional Medicaid enrollees, so this is disabled people, this is poor women and children for those people in many states, the state has to pay as much as half or even more of the cost of those Medicaid enrollees. And so one of the things that I think Congress is going to look at is they're going to say, you know what, that Cornhusker Kickback, we got to reel this in some, we got to get the federal taxpayers off the hook for some of these costs and say to the states, you need to treat these new enrollees the same way that you treat the rest of your Medicaid enrollees.
[00:11:52] Stacey Richter: Okay. So this is the fourth Medicaid cut way to save money that is being reviewed to get rid of the federal government paying for what you said is called the Cornhusker Kickback. So if I'm understanding this, first of all, you had a whole bunch of states that had expanded, they had pretty big Medicaids even before the ACA, correct?
So, we're only talking about the states that expanded Medicaid subsequently and the enrollees that enrolled subsequently so that they were part of the expansion, not part of whoever that state would have covered, that state Medicaid would have covered anyway.
[00:12:35] James Gelfand: That's right. I have not heard anyone in Congress talking about reducing payments from the federal government for people who are outside of that so called expansion population.
[00:12:46] Stacey Richter: And the expansion population is, I'm sure every state is different, but there's some federal poverty level number there like, Oh, if you're a hundred percent of the federal poverty level, then the Medicaid expansion, it takes in people who are like a hundred.
[00:13:00] James Gelfand: It's 101 through 138.
[00:13:02] Stacey Richter: Traditional Medicaid covers anybody who is. At or below the federal poverty level, but the expansion covers people up to 138.
[00:13:13] James Gelfand: Right. Essentially, the expansion population are people who made too much money to be on Medicaid before ACA, but didn't make enough money to qualify for the marketplace subsidies that are available to people who purchase through an ACA exchange.
[00:13:29] Stacey Richter: That's what's on the chopping block.
[00:13:31] James Gelfand: So for those people, the states would be expected to pay something closer to what they pay for all the rest of the Medicaid enrollees.
[00:13:41] Stacey Richter: Which, as you said, is half or so.
[00:13:42] James Gelfand: In many states, it's somewhere around that. I think it's probably also worth noting that a lot of states are going to be deeply unhappy about this, because this means that they're going to have to devote part of their budget to towards filling this gap, and they're going to have to make tough decisions.
And so a number of states have attempted to call this bluff. And one of the ways they did it is some of these states actually passed so called trigger laws and the trigger law says, if the federal government stops paying all the costs of these people, then we're going to stop paying for them at all.
And we're going to kick them off Medicaid. Ha ha ha. We dare you, federal government, you know, come and give us a try. But do you really think that the states are just going to let that happen?
[00:14:20] Stacey Richter: Well, I mean, it's, it's certainly a bluff that has some consequences. So I guess it's, um, yeah, this is a dramatic unfolding tale here, it sounds like to me.
[00:14:32] James Gelfand: Yes, I think so. The reality is that you're going to have some shuffling that's going to take place. You're going to have, in some cases, the shuffling is going to be dollars where the states are going to have to shuffle certain money that they were spending on other things instead into the Medicaid program, which is bloated and expensive, but we're not looking at reforming it. We're just changing some of that around.
And in some cases, you're going to have shuffling where people who were on Medicaid because it was the best deal for them are going to say, you know what? Maybe I want to enroll in an employer sponsored plan. Or maybe I want to enroll on my spouse's plan. Or maybe I am 24 and I want to go on to my parents plan, etc.
So you're going to have people shuffling between the different insurance options that may be available to them.
[00:15:13] Stacey Richter:: It sounds like if I'm just kind of recapping this and then I definitely want to get to Does this impact plan sponsors? This all? It sounds like it mostly affects those who are above the federal poverty limit, but under 138 percent of it.
So it's that cohort in states that are part of this Cornhusker arrangement that they expanded Medicaid after the ACA, right? So it's those states and that slice of individuals in those states, unless there's some state that put the triggers in there where they're just gonna hope that, I guess, other people are very, very concerned about people in their state enough that, yeah.
[00:15:54] James Gelfand: My guess, for those trigger laws is going to be that a state very quickly make a change here and put something more moderate and they're going to reconvene their legislatures and get together and they're going to say, okay, well, listen, we obviously don't want these hundreds of thousands of people to have no health insurance.
So we're going to shuffle around some the money. Maybe we will go up to 138%. Maybe, you know, we'll make some changes there, or maybe we will otherwise, you know, reform our Medicaid program to drive some savings out of it and then reinvest that money to cover the expansion population.
[00:16:27] Stacey Richter: It always strikes me as odd when I hear states thinking that others outside of their own state can be counted on to care about making sure that people in their state have access to medical care and will stand up and shell out for it more than those in the state. I don't know.
Implications for Plan Sponsors
[00:16:46] Stacey Richter: So if I'm a plan sponsor, what am I doing right now? We went through four ways that Medicaid may be cut or savings derived. If I'm a plan sponsor, what am I doing about all of this?
[00:16:58] James Gelfand: Well, so the two key things that we have to try to figure out to answer that question are number one, are there plan sponsors that have a ton of people who are on Medicaid right now?
And I'm sure you've heard for instance, big box stores. Or gig economy type employers, some very specific industries are certainly accused of having a large Medicaid population. Is that true? I don't know the answer to that. I know that in the wake of the ACA, a lot more employers started offering comprehensive benefits to their part-time population.
Most employers, because of the employer mandate under ACA, which says that for employees who are offered coverage, they can only be required to pay a certain percentage of their income towards that health insurance. If they have to pay greater than that percentage, the employer actually gets a pretty hefty fine from the IRS.
So most large employers, I think have updated their health benefits since 2014 when all of this came into an effect. So that's the question number one. How big is the Medicaid population, the working Medicaid population?
Question number two is depending on changes that take place in the Medicaid population, how are states and how are healthcare providers going to react, right? Are states going to turn around and say, well, I'm, you know, increasing the state corporate income tax in order to offset the increased costs we're going to have for Medicaid.
Or hospitals going to say, oh, well, you know, we think that we're going to lose some patients from Medicaid and they're going to now be uninsured, but they're still going to come to our emergency room. So, therefore, we're jacking up our prices.
I guess that's not even really a question. Is it Stacey? They're definitely going to say that and do that, but is it grounded in reality in any way? And that's going to affect employers because we're going to potentially be left footing the bill and filling some of that gap.
[00:18:55] Stacey Richter: Let's just quickly review. The first thing that you said, the first question to be had here is whether there are sectors of the economy or plan sponsors who actually have a lot of their workers who are on Medicaid. And I, you know, just personally, I have been sent pictures of the bulletin board in the lunchroom.
And there's a how to enroll in Medicaid poster that's hanging on the bulletin board. But to your exact point, like how many of any given company's workers are actually on Medicaid that now may not have access to Medicaid? Because I would think that it's going to be exactly those people in the 101 to 138 category there, right? Like, because they're, they are working.
So if they get caught off of Medicaid, then that might be something for a plan sponsor to consider that they may wind up actually having a lot more people on their plans or uninsured. I mean, all of that does, I could certainly see have consequences, but the magnitude of those consequences are really going to depend on what percentage of workers any given plan sponsor may have in that category. So I think that was the first point that you made.
Then the what is going to happen with hospitals mainly, right? Because if you wind up getting people who are now newly uninsured, let's just say, where you just did a whole show on how emergency room volume is going way up and how it is increasingly happening that plan members patients are using the emergency room for nonemergent things like primary care or whatever, and it is a very expensive care setting in order to get this.
But if it's an uninsured member, then the hospital is going to serve those patients, then they're going to say they have all this uncompensated care, and then they're going to turn around and tell the local planned sponsors in that particular area that will obviously our prices have to go up, and it is very tough as Al Lewis says to negotiate emergency room prices, etc. So it could be a thing.
In fact, there was just a whole article in Modern Healthcare the other day, and this is the title of the article, "Medicaid cuts cannot increase hospital rates, employers warn".
So the point that you are making is the hospitals are going to try, that's what they're going to do. So if I am a savvy plan sponsor, what am I doing right now?
[00:21:14] James Gelfand: So to address the first issue, what I would do if I was a plan sponsor would be to do an audit of my employees.
And determine those who theoretically were they single, right, because you don't know their modified adjusted gross income, their family income. But, thinking of them as single individuals who currently are not enrolled in your employer sponsored health benefit who could potentially decide to switch to enroll.
And are you prepared for that influx of employees? How might it affect your risk pool? How might it affect your, your annual budgeting, right? So. It's a guessing game, I know, but you could at least be a little bit prepared for it. If you figure out what is the maximum potential population that I have that could potentially suddenly migrate into my employer sponsored benefit plan.
So that would be step number one. In terms of how you're going to deal with the hospitals as they, you know, wailing and gnashing of teeth commences. You know, I think the first thing you need to do is to talk to your TPA and say, hold the line, stand firm. If there is a conflict between the state government and the federal government and the hospitals, because they don't like the numbers that are coming down, that's up to them.
But we're already paying twice or more what Medicare pays for the very same services. Paying, the highest rates in the world. This can't continue. We're not going to sit here and be the ones to hold the bag when this is all said and done.
[00:22:45] Stacey Richter: One of the things I do just want to mention here is the other wrinkle is that obviously not all hospitals are the same. So you've got major consolidated hospitals with billions of dollars in their endowment funds. They have trusts that are literally billions of dollars.
And then you've got hospitals that are actually essential safety net hospitals who are actually struggling and may actually be on the precipice of going out. And, there is a document that's flying around that shows at risk hospitals and how many there are in every state, etc.
Right. So I do also think that from the employer standpoint, it might be something to do to take stock of whether there are essential hospitals like that, you know, safety nets that are not part of these major consolidated entities that have tons of money. So I think everything that you're saying is, is definitely applies there.
But if those indies either, if they get themselves into financial straits and go out, they are actually probably the most cost effective places for plan members to go. So if they go out, then all of a sudden you wind up with the cost of consolidation and the price increases that go along with that.
Have you thought about that at all? Is that relevant ?
[00:24:00] James Gelfand: In loss of competition, obviously, it's going to be very negative for plan enrollees as well as for plan sponsors. I think that it's overblown. I have yet to meet a hospital that hasn't said that they're on the cusp of bankruptcy, even if there sitting on $10 billion endowments and they've got it 14 new wings being built and it's a giant crystal skyscraper, you know. They're all talking about how they're constantly about to go out of business.
It's very tiresome, but there certainly are those hospitals that are actually at risk. They're actually rural hospitals. By the way, rural hospital doesn't mean anything anymore, at least not the way that we think about it at the federal government level, because now all of these city hospitals have claimed to be rural.
But, there is this small subset of hospitals who legitimately need help. And that's on states and on the federal government to find ways to help them, but you can't hold the entire Medicaid system hostage and the entire federal government and the entire tax code hostage because we're worried about this problem.
Where we don't really know what the scope of it is. So to those hospitals that are actually in those dire straits. Our hearts go out to you and we don't want you to fail, right? Employers don't want those hospitals to fail, but at the same time, we have to find a way to help them that doesn't destroy the rest of the system with unsustainable costs.
Conclusion and Final Thoughts
[00:25:17] Stacey Richter: James Gelfand, if anyone is interested in learning more about your work or about ERIC, where would you direct them?
[00:25:23] James Gelfand: Check out our website on eric.org.
[00:25:26] Stacey Richter: James Gelfand, thank you so much for being on Relentless Health Value today.
[00:25:29] James Gelfand: Thank you for having me.
[00:25:30] Shawn Gremminger: This is Shawn Gremminger, President and CEO of the National Alliance of Healthcare Purchaser Coalitions. If you like this podcast, I strongly recommend subscribing and leaving a review.