Medicaid Ruling Could Have Far-Reaching Effects

The Supreme Court ruling making the Affordable Care Act’s intended expansion of Medicaid optional for states is gaining attention as a sleeper issue that could destabilize some of the compromises struck to gain support for the law.

“The Roberts Court actually punched a big hole in the law, potentially reducing its historic coverage expansion by as much as a third,” Jeff Goldsmith, PhD, wrote on The Health Care Blog. Goldsmith is a professor of public health sciences at the University of Virginia.

Several governors have said that they will not expand Medicaid, even though, on first look, it appears to be a sweet deal for states. The federal government pays about 60 percent of the costs of the current Medicaid program. In the expanded version, people with family incomes up to 133 percent of the federal poverty level would be eligible for Medicaid. The federal government will cover 100 percent of the cost for these newly eligible people in 2014 and 2015, then pay a declining share to 90 percent from 2020 on.

Even so, at least half a dozen Republican governors running cash-strapped states have said that they will not expand the program for both ideological and financial reasons. Medicaid spending is already a huge portion of state budgets, second only to education, taking 12 percent of state-generated revenues (those not including the federal contribution) in 2009. Some say that any expansion would come at the expense of taking money from education, public safety, and other priorities.

The Congressional Budget Office estimates that the expansions of Medicaid and the Children’s Health Insurance Program would provide new coverage for some 16 to 17 million people, and providers were counting on receiving at least some payment for treating them. A lack of expansion could continue to leave millions without coverage.

“Hospitals are watching these developments with mounting alarm,” Goldsmith wrote. “They gave up $155 billion in future Medicare payment reductions to gain 30 million new paying patients, and consented to the reduction of disproportionate share payments intended to compensate them for their bad debts and charity care. A cancelled Medicaid expansion would place the safety net hospitals in those states at serious economic risk.”

Another worry for states is that the health care exchanges the ACA calls for could lead to their current programs becoming overloaded. In addition to offering insurance policies, the new exchanges are designed to lower the barriers to Medicaid enrollment. Many people could go to one intending to buy a policy, but find out they are eligible for Medicaid and enroll online, without the need for an in-person trip to a state office.

“In some states 5 to 8 percent of the entire population under age 65 are uninsured despite being Medicaid-eligible. Nationally, this ‘woodwork effect’ could draw out more than 9 million uninsured adults and children,” write Benjamin J. Summers, MD, PhD, and Arnold M. Epstein, MD, both of the Harvard School of Public Health, in the New England Journal of Medicine. “Millions of low-income Americans are currently eligible for Medicaid but do not participate because of enrollment barriers, poor retention, or lack of information.”

And if the new enrollees are eligible under the old Medicaid rules, the federal share of the payment is at the old level, leaving states to pay up to half their costs.

August 2012 (Vol. 4, Number 8)