Public Health & Policy > Medicaid
Medicaid Expansion in Flux
by David Pittman David Pittman, Washington Correspondent, MedPage Today December 23, 2012
As part of the Year in Review series, MedPage Today reporters are revisiting major news stories and following up with an analysis of the impact of the original report, as well as subsequent news on the topic. Here's what's happened with the states' option to expand Medicaid under the Affordable Care Act since we published the first 2012 piece on the effect of the June Supreme Court ruling.
When the Supreme Court upheld the constitutionality of the Affordable Care Act's (ACA) individual insurance mandate in its landmark June ruling, it also invalidated another provision of the law. The justices said the federal government couldn't withhold federal matching funds for states that didn't expand their Medicaid programs.
The law sought to cover 11 million low-income people by upping the Medicaid eligibility limit to 133% of the federal poverty level (FPL). Since eligibility requirements exclude the first 5% of income when making the calculation, the new threshold for coverage effectively becomes 138% of the FPL, which in 2012 amounted to $15,415 for an individual or $26,344 for a family of three.
But the Supreme Court decision gave states the option to opt out of the expansion with no penalty. In the nearly 6 months since the ruling, some states have made their decisions clear while others remain undecided. Meanwhile, the federal government answered states' questions about their options, and the healthcare provider community geared up for a possible increase in coverage.
To date, 10 states from mostly Republican-leaning regions -- including Texas, Florida, Louisiana, South Carolina, and others -- have said they won't expand their programs. Another 23 states remain undecided, while 17 states -- including California, Illinois, and Massachusetts -- as well as the District of Columbia have already opted for expansion.
"I think at this point the federal government has answered the majority of the pertinent questions," said Caroline Pearson, a director at the Washington consulting firm Avalere Health. "It's just a matter of waiting to see how the states respond."
Under the expansion, the federal government will pay 100% of the cost of those newly eligible enrollees for the first 3 years starting Jan. 1, 2014. Federal support will gradually drop to 90% by 2020, where it will remain.
Medicaid expansion was a key piece of the healthcare law's attempt to provide coverage to those with low incomes. Many low-income people who are not eligible for Medicaid will be able to purchase insurance through the ACA's health insurance exchanges, with the help of federal government subsidies.
Covering those low-income individuals could reduce their mortality and improve health, researchers have found.
The new Medicaid enrollees are different from the traditional Medicaid population and more like those with employer-based coverage, Sandra Hunt, principal in PwC's Health Industries Advisory practice, told MedPage Today.
"What you have is childless adults or families with an income that's too high to be Medicaid-eligible," Hunt said. "You're not going to have maternity services."
However, an analysis by PwC found the enrollees are less likely to be English speakers, and they need help navigating the healthcare market.
Not All Good
The expansion is not entirely a win for states, despite the federal government paying at least 90% of the costs for those newly eligible.
An analysis by the state of Georgia -- which has publicly stated it won't opt for the expansion -- found it would have cost that state $4.5 billion to pay for the extra 650,000 people added to its Medicaid rolls in the first decade alone.
Already facing a $700 million budget shortfall in the next 2 years, Brian Robinson, spokesman for Georgia Gov. Nathan Deal (R), said expanding Medicaid would cause Georgia's budget to "explode."
"We can't pay for what we have now," Robinson told MedPage Today. "[Expansion] would make an unsustainable problem even more unsustainable."
The Department of Health and Human Services (HHS) clarified Dec. 10 that states need to fully cover those up to 133% of the FPL to receive full federal coverage of those newly eligible. While states are free to expand below that magic threshold, they won't receive the full amount of generous federal support, but would instead receive their current Medicaid match for each new enrollee, HHS said in a question-and-answer document.
The move upset Republican governors for HHS' lack of flexibility. They had hoped to be allowed to expand below the 133% and still receive the enhanced amount.
The decision also calls into question what will happen to those making less than 100% of the FPL and not in current Medicaid programs in states that opt against expansion. Only those making more than 100% are allowed in the ACA's health insurance exchanges with federal assistance, leaving those who fall below 100% in a lurch -- and likely uninsured.
However, HHS Secretary Kathleen Sebelius has said the federal government won't pursue fines against low-income people who are unable to obtain health coverage.
Washington's Budget Impasse a Hindrance
Another limiting factor for states in making a decision on the Medicaid expansion is the ongoing federal budget talks. State policymakers are uncertain how or if Medicaid will be impacted as those in Washington look to reduce federal spending.
States see the large price tag the expansion comes at for the federal government and are unsure it will survive the figurative ax in ongoing budget negotiations. Lawmakers could reduce the share the federal government pays from 90% to less than that.
"They're really concerned that, in the long term, there's no certainty about the federal funding commitment, and they don't want to extend the benefit to a population that they ultimately can't pay for," Pearson said.
If all states expand, federal spending on Medicaid will increase by $1 trillion in the first decade.
"Nationwide, the new federal costs will be $100 billion a year," Robinson said. "Where's that coming from? Why should we trust that the feds will keep their end of the bargain?"
Also at risk in the current budget talks are efforts to pay Medicaid primary care providers at Medicare rates in 2013 and 2014; Medicare rates are, on average, 66% higher.
The policy intends to expand the pool of Medicaid providers and increase access. "Whether providers at that point decide they're going to back off of that engagement we don't know," Hunt said.
The point becomes moot if lawmakers shelve the program to save the federal government money.
Pressure from Provider Groups
Hospital groups, medical societies, and patient advocates are expected to push states hard to expand their programs. Most groups have been fairly quiet on the issue up to now.
Providers -- particularly hospital groups -- stand to lose billions if their states decide against expansion. Disproportionate share payments to hospitals -- issued to compensate those hospitals that serve a large share of low-income, uninsured patients -- are getting cut on the assumption that more people have access to insurance.
"The drum beat from providers is going to grow over the next 12 months," Pearson said.
Advocates of expansion have more ammunition as they approach state leaders in their decision to expand. A report released in late November by the Urban Institute found states would save a combined $10 billion in the first 10 years of expansion.
While spending would increase a modest $8 billion or 0.3% if all opted into the expansion, the states would save $18 billion in uncompensated care, the analysis and state-by-state breakdown found.
But the report did find that in about half the states costs would increase by less than 5%, and rise by 5% to 11% in about a third of states. Not only do states have administrative costs, they stand to see increased enrollment among currently eligible people (mostly children) with the federal government paying only a regular Medicaid match for those.
It's difficult to find prognosticators to wager how many states -- and which ones -- will ultimately opt for expansion.
Expect those undecided states to slowly make decisions throughout 2014 as legislatures meet and states iron out their budgets. There is no deadline for a decision.
States can opt in or out at any time, but as Pearson noted, it may be tough for a state to pull out once it starts offering the health coverage to those with low incomes.
"I think it's going to be a very fluid environment between now and 2014 on this issue because the states have a lot of political and economic variables that they're weighing when making this decision," Pearson said. "Come 2014 we probably aren't likely to have 100% participation but I do think that most states will come into the program."
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