DC Residents Deserve Affordable and Thorough Health Care Coverage

Chairperson Henderson and members of the committee, thank you for the opportunity to submit written testimony. My name is Tazra Mitchell, and I am the Chief Policy and Strategy Officer at the DC Fiscal Policy Institute (DCFPI). DCFPI shapes racially-just tax, budget, and policy decisions by centering Black and brown communities in our research and analysis, community partnerships, and advocacy efforts to advance an antiracist, equitable future.

My testimony focuses on the mayor’s proposal to shift more than 25,000 adults with low incomes from Medicaid into a Basic Health Plan (BHP) in her fiscal year (FY) 2026 budget proposal.^[1] While this shift may save DC local funds, it could come at a high cost to struggling residents via reduced benefits, with a rushed timeline that could disrupt continuous care, and with many unanswered questions about the to-be-designed BHP, particularly given the looming federal threats to affordable health care coverage.

DCFPI is very concerned that this proposal will disrupt affordable and thorough coverage for tens of thousands of DC residents with low incomes, particularly those with incomes above 200 percent of federal poverty level (FPL) who will lose coverage entirely. And while DCFPI has witnessed the Health Benefit Exchange (HBX) accomplish impressive and well-implemented launches of health care plans in short amounts of time, such as HealthCare4ChildCare, we are concerned that the goal to stand up this new program by October 2025 may be rushed and could lead to externalities.^[2]

As the committee weighs the proposed shift, DCFPI encourages its members to:

• Determine what program design elements you would like to mandate in committee markup of the Budget Support Act (BSA);
• Reinvest some of the savings from the Medicaid shift to require the BHP to provide intensive behavioral health services and dental and vision benefits and to offer a state-premium wrap to those shifted into the marketplace;
• Interrogate whether the swift rollout is feasible or whether the shift should happen at all, and at minimum, require an annual report on outcomes in the BSA; and,
• Conduct contingency planning due to uncertainty at the federal level on health care coverage.

Some Adults on Medicaid Would Lose Coverage Entirely or In-Part Under the Shift

DC has been a national leader in promoting access to health care and health reform innovation, which has contributed to its very low uninsured rate of 2.7 percent, or the 2^nd lowest rate in the nation. The mayor’s proposed financial plan will likely increase the uninsurance rate, on net, due to cuts in the Healthcare Alliance program and the Medicaid shift—and the harm is likely to fall disproportionately on Black and brown residents given DC’s deep and persistent income disparities.^[3]

The mayor’s budget eliminates Medicaid coverage for adults without dependent children and caregivers with incomes greater than 138 percent FPL, or about $21,600 for an individual.^[4] Currently, Medicaid coverage for these groups is capped at 210 percent FPL and 216 percent FPL, respectively.^[5] The mayor’s plan would shift adults with incomes above 138 percent FPL and below 200 percent FPL into a to-be-developed BHP and push the remaining adults with somewhat higher incomes into the marketplace to find commercial coverage on their own.

The mayor failed to provide an estimate for the number of adults who fall into the various groups affected by her proposal, but a new Department of Health Care Finance presentation shows that approximately 25,575 Medicaid participants would be affected, with 90 percent of them being eligible for BHPs and 10 percent for marketplace coverage.^[6] The mayor estimates the shift would lead to $36.2 million in annual local fund savings by anticipating the ability to shift the cost to the federal government.^[7]

Federal policy created BHPs to provide an affordable coverage option to low-income people who earn too much for Medicaid under their state’s eligibility rules but struggle to afford marketplace premiums. Yet, the mayor’s proposal would work in reverse, stripping these adults from Medicaid where they already have access to higher quality coverage at zero cost to them. For example, Medicaid must cover non-emergency medical transportation and adult dental and vision care, but the same is not required of BHP and marketplace plans. Federal law only requires that BHP plans cover the 10 essential health benefits specified by the Affordable Care Act, a list that excludes certain rehabilitative behavioral health services for people with serious mental illness or severe substance use disorders.^[8] If DC’s BHP were to exclude these services, then the proposed shift would eliminate critical coverage for residents who have some of the most intensive needs.

Another concern for affected adults is that the same fair hearing and due process rights do not attach to BHPs and marketplace coverage, which could harm retention of benefits for some adults.^[9] And, DC lawmakers and HBX would need a transparent and accountability process for making sure that BHP enrollees not only have health care coverage, but that they are actually getting access to the care for which they’re entitled. HBX could include in their contracts with carriers that HBX has the authority to review access to care issues—such as denials of claims and prior authorizations—and end participation with carriers that inappropriately deny access to care.

The Mayor’s Plan Alarmingly Lacks Detail, Especially Amidst Federal Uncertainty

The mayor did not include a design of the BHP plan in the unveiling of her proposal and has instead tasked HBX with part of that role. This week, HBX launched a BHP Advisory Council that will help public officials devise the program’s design, draft the BHP “Blueprint” for federal review, and inform implementation steps to have IT systems in place by October 1, 2025. DCFPI agreed to participate in this group.

At the first advisory meeting, DCFPI learned that HBX is conducting actuarial analyses to determine whether DC could offer BHP plans to residents with no premium and no-or-low-cost sharing, and what package of services could be possible under those scenarios. HBX confirmed that their analyses so far include a baseline assumption of no enhanced premium tax credits because the enhancement is scheduled to expire by the end of 2025, with preliminary results showing it may be possible for the BHP to have no premiums if the benefits are limited to the commercial benefit structure. Further, DCFPI commends HBX for setting a goal of ensuring continuity of care and a seamless transition for the adults losing their Medicaid coverage. This is a worthy goal because a change of this significance, on such a short timeline, could lead to mass disruption and confusion among the affected Medicaid recipients.

If Congress allows the enhancements to the premium tax credit to expire at the end of the year, it would lead to skyrocketing premiums, increased uninsured rates, and widening racial and ethnic disparities in health coverage. The low-income adults that would lose Medicaid but not be eligible to participate in a BHP under the mayor’s proposal would face significantly higher premiums under such an expiration. Analysis from the Center on Budget and Policy Priorities shows that, based on national averages, a 40-year-old with an annual income around $30,000 would go from free Medicaid coverage to owing between $144 and $168 per month ($1,726 to $2,011 per year) for a silver benchmark plan in the marketplace.^[10] HBX and DC lawmakers should make the transition to the marketplace for this group as seamless and affordable as possible, possibly by offering a state-premium wrap using some of the $36.2 million savings, if the proposal moves forward.

Not only are the enhanced premium credits scheduled to expire, but the US House of Representatives recently passed a budget bill that would reduce the amount of funds that would otherwise flow to DC for a BHP, including eliminating certain lawfully present immigrants from getting premium tax credits and various other enrollment barriers that are likely to shrink enrollment, worsen the risk pool, and raise costs in the marketplace.^[11] On the other hand, the House budget bill also includes extreme work requirements in the Medicaid program that would cause up to 114,000 DC adults without children to lose coverage—but the bill does not apply work requirements for childless adults to BHPs.^[12]

DCFPI encourages the committee to interrogate the tradeoffs of this program, and if it chooses to move forward with this proposal, to work with HBX and the Advisory Council to inform program design and conduct contingency planning due to uncertainty at the federal level. At minimum, DCFPI encourages lawmakers to reinvest some of the savings from the Medicaid shift to ensure the BHP includes coverage for intensive behavioral health services and dental and vision benefits to minimize harm—and mandate that coverage in the BSA. We also encourage this body to interrogate whether this change should be made at all, whether an October rollout is feasible, and at minimum, require an annual report on outcomes in the BSA.

Thank you for the opportunity to testify, and I am happy to answer any questions you may have.