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Why Should You Care Whether or Not Your State Decides to Expand Medicaid Coverage?

By expanding Medicaid, the state-federal partnership that offers health insurance to low-income Americans, the Affordable Care Act set out to cover some 17 million uninsured – or roughly half of the 34 million who are expected to gain coverage under reform. But when the Supreme Court ruled on the Affordable Care Act in June, it struck down a key provision which threatened that if a state refused to co-operate in extending Medicaid to more of its citizens, it could lose the federal funding it now receives for its current Medicaid enrollees.

In a 7-to-2 decision, the justices ruled that this punishment was too coercive: “withholding of ‘existing Medicaid funds’ is ‘a gun to the head’” – that would force states to acquiesce.

As a result, states can, if they choose, opt out of the Medicaid expansion, and some governors are threatening to do just that – even though the federal government has committed to pay 100 percent of the cost from 2014 to 2017. After that, the federal share would gradually decline to 90 percent in 2020, and remain there. This is a generous offer; today the federal government now picks up just 57 percent of the Medicaid tab.

Nevertheless, some states claim that the 10 percent that they would have to ante up after 2020 is more than they can afford. A few go further and admit that this isn’t just about money: by rejecting the federal funds, they are voicing their objection to “Obamacare.”

Health care costs, premiums would rise

What these governors ignore is the impact that the loss of those Medicaid dollars will have on insurance rates in their states, says Joe Paduda, editor of Managed Care Matters. Hospitals have been counting on the influx of new Medicaid dollars to reduce the cost of uncompensated care. Today, hospitals spend billions delivering care to patients who are both uninsured and very poor. If more patients have Medicaid, the pile of unpaid bills will shrink.

Assuming that Medicaid will expand, the Affordable Care Act has already trimmed subsidies to hospitals that care for a disproportionate share of impoverished patients. But now, if states turn down the Medicaid funding, the hospitals in these states “are going to have to make up the revenue loss from somewhere,” says Paduda, “and that ‘somewhere’ is going to be from privately-insured patients. That will lead to health insurance costs increasing much faster in ‘non-expansion’ states than in the rest of the country.”

We have been told that in some red states conservatives “hate poor people.” But my guess is that they’ll hate higher premiums more. If premiums go up, governors who turned down federal Medicaid dollars will have to answer to voters.

Who would be left out?

When Medicaid legislation was originally passed in 1965, Congress spent hours discussing who counted as “the worthy poor.” Ultimately, legislators decided that the disabled, pregnant women and adults with dependent children deserved healthcare. Adults who didn’t have children would not qualify – no matter how little they earned.

Since then a few states have expanded Medicaid to include adults who don’t reproduce, but the majority stuck to the 1965 definition of “worthy.” (It’s worth remembering that back then, everyone was expected to marry – or there was “something wrong.”)

The Affordable Care Act would change that definition, extending the safety net to everyone with incomes below 138 percent of the federal poverty level ($15,415 a year for an individual and $31,800 for a family of four.) Today, the financial threshold varies from state to state: Texas, for example, only covers working adults earning below 26 percent of the poverty line. Seventeen states limit enrollment to parents earning less than half of the official poverty threshold, which last year was $18,500 for a family of three.

Now that some states are balking, the Congressional Budget Office estimates that 6 million of the 17 million who were supposed to be covered by the Medicare expansion will be left out of the program. Fortunately, 3 million of those 6 million will be eligible for sliding-scale subsidies that the ACA provides to help low-income and middle-income Americans purchase private insurance – if they earn between 100 percent and 400 percent of the federal poverty level. ($11,170 to $43,320 for an individual).

What is less fortunate is that the CBO estimates that those subsidies will cost Washington $3,000 more per person than if the same people were covered by Medicaid: private health insurance plans have higher administrative costs than Medicaid and also tend to pay providers more.

3 million left out in the cold

The other 3 million will be left out in the cold. The subsidies, which come in the form of tax credits, are earmarked for those who earn between 100 percent and 400 percent of the federal poverty line. Ironically, if a person earns “too little” (less than 100 percent of the FPL), they are not eligible for the subsidy. (The ACA assumed that they would be covered by the new Medicaid.)

At the same time, if they earn “too much” to qualify for Medicaid in a state that limits eligibility to 50 percent of the FPL, they will be shut out of that program as well – leaving them in a no-man’s land where they have no sure access to medical care.

In those cases where they do receive the care they need, the rest of us will wind up covering their unpaid bills as we watch our insurance premiums climb.

Maggie Mahar is an author and financial journalist who has written extensively about the American health care system. Her book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, was the inspiration for the documentary, Money Driven Medicine. She is a prolific blogger, and recently relaunched her HealthBeat Blog. Previous work for the Health Insurance Resource Center includes Could a missing word really kill the ACA? No. She also provides background on Congressional health care legislation for HealthReformVotes.org, a special project of the Health Insurance Resource Center. This post first appeared at http://www.healthinsurance.org

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Brian McKenzie
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The MLR ( the medical Loss Ratio) requirement of 85% , and its annual reporting is : Section 2718 b 1 (A) i &ii The loss of grandfathering exemption for any ‘substantial’ change to plans, including premium, plan construction, coins, deductible, copayments, or rx formularies is : Section 1302 c 1 (A) & (B) i, ii A – D. and Section 1251 a-e That the premium vs MLR is subject to Federal review and approval, and shall not be beyond the variance of 3 years rata : Section 2718 b 1 (B) i, I & II These are nearly the… Read more »

Maggie Mahar
Guest

junk hash– First, it’s very likelly that the increase to Medicare rates for primary care will be sustained. Secondly, many doctors do take Medicaid goday–even though rates are lower. A great many doctors are committed to helping the poor. In addition, community health centers all take Medicaid patients, and the Affordable Care ACt provides funding to double their capacity. In these centers, both doctors and nurse practioners provide v. good care for entire families on Medicaid. The Affordable Care ACt also greatly increaes funding/scholarships for medical students who choose to “Go Where No ONe Else Will Go”– poor rural areas… Read more »

junkhash
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junkhash

i know that medicaid reimbursements for doctors/hospitals are generally significantly lower than medicare. and for that reason, many states already have trouble finding their medicaid-insured population doctors that are willing to see them(or at least see them in a reasonable time frame).

so how does that play into all this? i understand that the ACA tries to insure more people…but does it do much beyond a 2yr medicaid reimbursement increase to ensure that these new medicaid people will be able to find doctors? i mean, what’s the purpose of having insurance if no doctor accepts it?

Maggie Mahar
Guest

Brian & Mark. I have read the bill– several times. Could you quote the section which you believe says that insurance rates are fixed? Here is what the Congressional Budget Office said in March of this year: “CBO now projects that private health insurance premiums per enrollee will increase by 5.7 percent per year, on average, between 2012 and 2022” That’s just an average; because the underlyling cost of care varies widely depending on where you live, premiums will rise more in some places than in others. If we begin to do a better job of controlling costs, premiums may… Read more »

Mark
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Mark

Maggie Re: “We have been told that in some red states conservatives “hate poor people.” I’ve been told that liberals hate people who create jobs and that polling results showed Democratic voters are so stupid that in 2008 that majority of them thought the Republicans controlled Congress! See, if you are writing to inform and possibly persuade anyone who doesn’t already agree with you it would help if you focused on the analytical approach in your posts and avoided the insulting political rants. There’s a lot I don’t understand about the implications of the Affordable Care Act and am interested… Read more »

Brian
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Brian

Insurance rates wont skyrocket….. READ the bill. They are price fixed for FIVE years starting 2014. There profits will shrink to the extent that many of them will abandon large segments of the market; individual, small businesses – loss leaders in big business – and move to more management funds that will capitalize their profits while limiting the red tape.
Insurance as you know it – is done. The ‘if you like your plan you can keep it’ is pure rhetoric.

Maggie Mahar
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Peter 1– I’m afraid that some of these governors (I think particularly of Texas and Florida) are such passoinate ideologues that they don’t even worry about losing votes. They are completely conviced that they are right– and up to a point, some wealthier voters will agree with them. But during the last presidential election many more low-income voters did go to the polls, particularly African-Americans and Latinos who, in many cases, had never voted before. If the Obama campaign wants to win, it must concentrate on bringing out the low-income vote– white as well as black, brown- and explaining to… Read more »

Peter1
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Peter1

If only low income people voted, the governors would be taking a different stance.