Medicaid is major target of last-minute American Health Care Act revisions; employers safe from additional taxation, for now

Both these revisions would be a major change from the current way Medicaid is funded. Under a block grant, states would receive a fixed amount of federal funding each year, regardless of how many participants are in the program. This would reduce federal support for Medicaid even more since the funding level would not adjust for increases in enrollment, which generally happens when the economy goes south.

Another alteration would immediately prevent states from expanding Medicaid, a major concession to staunch conservatives. Under the first version of the legislation, enhanced funding for Medicaid would have been repealed as of January 1, 2020, but nothing barred states from expanding the program before that. Conservatives looking to reform Medicaid clearly wanted it done sooner, rather than later…and Trump’s healthcare architects obliged.

But perhaps what’s most significant about this bill—for employers and employees anyway—is what it does NOT include. The current version does not include any change in the nontaxable treatment of employer-provided health insurance. Earlier drafts of the bill would have imposed income and payroll taxes on employees (and payroll taxes on the employer) if the premium value of the employee’s health insurance coverage exceeded certain thresholds. That is now off the table, and it’s a major win for those offering employer-sponsored health plans.

It remains to be seen if any additional 11^th hour jockeying occurs before the vote happens this week, and what the Senate has to say about the bill in its current form, should it actually arrive on their desks.