CHN: Medicaid Expansion Favorable for States, Yet Some Still Refuse to Cooperate

Article from the August 7, 2012 edition of the CHN Human Needs Report:
On June 28, the Supreme Court made an historic decision: they upheld the individual mandate in the Affordable Care Act. This news came with a bitter pill for low-income advocates, however – that states now have the option to refuse to expand Medicaid to cover people with incomes up to 133 percent of the poverty line, choosing to forego federal funds provided to them for this purpose.

The Medicaid expansion is fully funded by ACA for its first three years (after which the federal match phases down to 90 percent by 2020). If a state chooses not to expand Medicaid however, many low-income people will remain uninsured. The Affordable Care Act was designed assuming that those individuals with incomes below the poverty line would be covered by Medicaid. Based on this assumption, Congress set the income eligibility range for subsidies aimed at helping people purchase coverage in insurance exchanges at 100 to 400 percent of the poverty line. If a state does not accept the Medicaid expansion, individuals living below the poverty line who are not now covered by their state’s Medicaid program will not be eligible for premium subsidies either.  The Congressional Budget Office estimates that because some states will refuse to expand Medicaid, 6 million people will not receive health coverage through that program.  Of these, CBO expects 3 million with incomes from 100 – 133 percent of the poverty line will get subsidized coverage through their state’s insurance exchange.  The remaining 3 million will fall into the “coverage gap” – left without any coverage at all. For further details, see this piece from Robert Greenstein at the Center for Budget and Policy Priorities and this blog post from the Center.

The expansion is a very favorable deal for states, and not only because it is almost fully federally funded. Hospitals also benefit from the expansion because they are ensured Medicaid payment for services that are not currently reimbursed. Essentially, for a small cost to states that would be partly offset by savings in uncompensated care, CBO had estimated that the Medicaid expansion with all states participating would cover an additional 17 million low-income people.

So why are so many states threatening not to take the Medicaid expansion? Governor Rick Perry of Texas, along with Republican governors from at least 10 other states, has announced that he will not expand Medicaid. Many advocates believe their opposition is based on partisan politics or ideology, although these governors claim that states would bear a financial burden by expanding Medicaid (see this color-coded map from ThinkProgress to see which way states are leaning).  The small proportion states would pay is expected to amount to a 2.8 percent increase over their Medicaid costs without the expansion, less the savings from reducing uncompensated care payments to hospitals (because more patients would have insurance).  To most anti-poverty advocates, accepting the expansion seems like a no-brainer for states because of the benefits it provides and the fact that is almost fully funded by the federal government. Health care providers who expected more insured patients through the ACA are already starting to exert pressure on states to accept the option.  How many states will refuse the expansion money is yet to be seen – while they decide, the coverage of millions of low-income Americans hangs in the balance.

The Supreme Court’s validation of most of the health care law does not change the fierce opposition to it among right-wing members of Congress.  The House of Representatives has taken more than 30 votes to repeal the law, all of which have been rebuffed by the Senate.  The House has also attempted to deny the funding required to implement the law, most recently by cutting about $8 billion from the Department of Health and Human Services in the appropriations bill that was approved by a House subcommittee (see Appropriations article, this issue).  The Senate and the President will prevent the law from being de-funded, but the partisan attacks on the law can be expected to continue.

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