Some GOP Governors Flip for Medicaid Funds -- on Their Terms
Policy + Politics

Some GOP Governors Flip for Medicaid Funds -- on Their Terms


Newly ensconced Kentucky Gov. Matt Bevin (R) last week backed away from his campaign pledge to repeal expanded Medicaid coverage for 400,000 low-income people in the face of the widespread popularity of the program.

Early on, the Tea Party conservative vowed to dismantle the hallmark program of outgoing Democratic governor Steve Beshear that reduced the percentage of uninsured Kentuckians by half. But with polls showing that 72 percent of state residents favored the Obamacare program, Bevin toned down his threat.

Related: GOP Fires a Warning Shot in Kentucky in the War Against Obamacare

Now the new Republican governor is sounding a different political tune, declaring he will seek a waiver from the federal Centers on Medicare and Medicaid Services to reform the program in a way that better reflects his conservative principles, that toughens standards for qualifying for coverage and that assures the long-term financial sustainability of the Medicaid program.

Bevin contends that Beshear left behind a $128 million shortfall in the state’s overall Medicaid program this fiscal year that must be addressed through a tightening of the program. “But ultimately, this isn’t just about where we can spend the least amount of money,” he told reporters last week. “More than the dollars, we want to insure that we have people with good health outcomes.”

Bevin’s decision is important because it reflects the changing posture of some previously recalcitrant Republican governors who rejected the Obamacare program but now are feeling pressure to find some middle ground between a full-blown expansion of Medicaid and a more limited approach.

Currently, 20 states have rejected expanded Medicaid coverage, although several are considering changing their decision. A small handful of other Republican governors have changed their positions on terms they demanded through waiver requests like the one Bevin intends to seek.

The financial stakes couldn’t be higher.

Related: Nearly Half of Obamacare Co-Ops Are Closing

Under the Affordable Care Act, the federal government is picking up 100 percent of the total cost through the end of this year and then will gradually ratchet back its share to 90 percent, with the states required to pick up the rest. If all 50 states and the District of Columbia were to take part in the program, the states would have $38 billion more to spend on Medicaid between 2015 and 2024, according to the Kaiser Family Foundation.

Diane Rowland, executive vice president of the foundation, said on Monday that it is dawning on Bevin and other Republican governors who have fought the expanded Medicaid program that they are denying their states vital federal funding at a time of economic uncertainty and declining revenues due to a drop in oil prices.

“A lot of Republican governors are looking at the fiscal impact of doing the expansion and it’s not as negative as they like to say,” she said. “It’s more like, ‘We have substantial needs in our state.’ This is especially the case in the states that are losing oil money.”

Rowland added that by altering the Medicaid program, GOP governors could more easily rationalize going after the federal dollars. “Instead of doing a straight expansion, they can say, ‘I got a waiver. I got the federal government to do it my way,” she said.

Related: The Unintended Consequence of Expanding Medicaid

Joseph Antos, a health care expert with the American Enterprise Institute, agrees that there likely will be more adoption of expanded Medicaid coverage, but not until after the 2016 election and President Obama’s departure from office. By then, he said, some of the GOP political opposition will soften, while the CMS will be less concerned about preserving the president’s legacy than finding common ground with Republican-controlled states.

A 2012 Supreme Court ruling essentially created a dual system of health insurance coverage for poor people by allowing states to accept or reject expanded Medicaid coverage. Most blue states jumped at the opportunity, while many red states rejected the offer to voice opposition to Obamacare.

However, a handful of states that initially opposed the offer – including Arkansas, Indiana, Iowa and Michigan – subsequently obtained waivers. In some cases, dramatic changes were made to the program, including imposing premiums and cost sharing on some beneficiaries depending on their incomes and other measures to bring down the overall cost.

Indiana, for example, won waiver approval for one of the toughest and most complex expanded Medicaid programs in the country – one that not only includes premiums,  co-payments and different tiers of coverage but severe penalties – including temporary loss of coverage – for some low income people who miss their payments.

Related: Doctor Shortage Could Rise Under Medicaid Expansion

The Indiana approach implements Medicaid expansion by requiring most newly eligible adults with incomes from zero to 138 percent of the federal poverty level to pay monthly premiums by contributing to a Personal Wellness and Responsibility (POWER) health savings account. According to an analysis by the Kaiser foundation, “newly eligible adults who pay premiums will be eligible for HIP Plus, an expanded benefit package with co-payments only for non-emergency use of the ER.” 

However, those with incomes from 101 percent to 138 percent of the federal poverty level who fail to pay premiums after a 60-day grace period will be removed from coverage and barred from re-enrolling for six months. Beneficiaries with incomes at or below 100 percent of the poverty level who fail to pay premiums will receive HIP Basic, a more limited benefit package with state-plan level co-payments.

Gov. Bevin said his new administration intends to draft a plan to overhaul the state’s expanded Medicaid program by the middle of this year with the goal of implementing it by the start of 2017. Without spelling out many details, he said that Indiana’s expanded Medicaid plan is “the model we most likely will use.”  

As the 2016 session of the Kentucky General Assembly opens, state lawmakers said they intend to carefully monitor Bevin’s efforts to alter the state’s Medicaid system. "It's going to be interesting to see how it shakes out," said Democratic state Rep. David Watkins, a  retired physician who serves as co-chair of the legislature's Medicaid Oversight and Advisory Committee, told the Courier-Journal.  "We're already at the bottom of the heap here in Kentucky. We don't need to go down any further."