States of Health: Winners & Losers in Medicaid
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The Fiscal Times
June 11, 2013

On a good day it only takes nine minutes to drive across the Ohio River between Clarksville, Ind., and Louisville, Ky.  But for hundreds of thousands of uninsured poor and disabled people who live throughout Indiana and Kentucky, that short span defines a boundary between winners and losers in the political battle over expanding Medicaid coverage as part of the Affordable Care Act.

After the Supreme Court upheld the Affordable Care Act last June against opposition from Republicans, seven of the nine justices agreed that Congress exceeded its constitutional authority by coercing states into participating in the Medicaid expansion – or risk losing federal payments. Once free to decide for themselves whether to go along with expanding Medicaid coverage – at virtually no cost to them during the first three years –18 states so far have rejected the offer while 22 states and the District of Columbia have agreed to the coverage.

The issue for Republicans is higher taxes, even though the Federal Government will pay the cost of the expansion for 3 years followed by 90 percent of the additional costs.  But some of the GOP governors are skeptics.

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Last February, for example, Republican Indiana Gov. Mike Pence and GOP lawmakers rejected efforts to expand traditional Medicaid coverage in Indiana, instead seeking federal permission to use a threadbare existing state Medicaid program that requires participants to share costs. That decision will have a profound effect on the lives of as many as 400,000 currently uninsured Hoosiers. 

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Eligibility for current Medicaid varies from states to state, with applicants having to meet differing standards to qualify. For example, pregnant women and children with incomes below the poverty level usually qualify for Medicaid in most states, but poor single men frequently do not. In Louisiana, the Medicaid cutoff for a working parent is 25 percent of the federal poverty level or $4,633 for a family of three, but in Nevada the cutoff is 87 percent. Typically, the cutoff for Medicaid benefits in most states is 100 percent of the federal poverty level.

As originally written, the goal of the Affordable Care Act was to eliminate all of these different state requirements and simply make Medicaid available to everyone with income up to 138 percent of the poverty level. This would not only simplify things and make it easier for the poorest Americans to qualify in most cases, but would increase the number of people who could get Medicaid by raising the eligibility bar to 138 percent of poverty.

HOW STATES BENEFIT
In May, Democratic Gov. Steve Beshear of Kentucky announced that his state would expand its Medicaid rolls by as many as 308,000 uninsured people currently earning no more than 138 percent of the federal poverty level. In effect, poverty-stricken individuals and families who by chance live in the Blue Grass State will qualify for health insurance coverage, while people with virtually the same income and medical needs living in an adjoining state will be denied the same coverage.

“I have repeatedly said that I believe it is in the best interest of the Commonwealth and its citizens to provide better access to health care for our people. My only concern was the cost,” Beshear said at the time. “We have now done the exhaustive research – and our conclusion matched what most other states have found: by expanding Medicaid, Kentucky will come out ahead in terms of both health outcomes and finances. In fact, if we don’t expand Medicaid, we will lose money.”

The Medicaid program created in 1965 has long been a patchwork of state operated health care programs for the poor and disabled with vastly differing eligibility requirements and quality and availability of services. Obamacare sought to make Medicaid eligibility more uniform by mandating that anyone earning up to 138 percent of the poverty level – or $15,856 a year – would be eligible for the program. The Supreme Court ruling invalidated that federal mandate on constitutional grounds of protecting states’ rights. This set the stage for tough battles and debates in every state capital across the country.

In states that have rejected the Medicaid expansion, low-income people earning between 100 percent and 138 percent of the poverty level have the option of turning to the insurance exchanges for subsidized insurance coverage.  But the poorest of the poor with earnings below the federal poverty level would be out of luck – unless, of course, they decided to move to another state with the expanded coverage. The Affordable Care Act made no provision for granting subsidies to uninsured people below the poverty level because the administration and Congress assumed they would automatically go into the Medicaid system. That, however, was before the Supreme Court ruling.

At one time, health care and budget experts estimated the proposed Medicaid expansion would provide health care coverage to 10.7 million low income or impoverished people -- people who frequently turn to hospital emergency rooms or community health clinics for both emergency and routine care. But if as many as half the states refuse to expand the program beginning next year – which now looks increasingly probable, then only 5.3 million fewer people would end up joining Medicaid.

States that have already turned down Medicaid expansion constitute a wide swath of southwestern and southern states, from Texas and Oklahoma east to Louisiana, Mississippi, Alabama, Georgia, North Carolina, South Carolina and Florida. They also include Alaska, Idaho, Wyoming, Wisconsin, Nebraska, South Dakota, Indiana, Missouri, and Pennsylvania.

An estimated 1.9 million of those 5.3 million people excluded from the program likely would be able to obtain subsidized private health insurance under the Affordable Care Act. But that would leave 3.3 million poor people – with incomes below the official federal poverty level – with no insurance because governors or state legislatures in their home states chose to reject the offer.

HIGH TAX FEARS
Texas Republican Gov. Rick Perry said he would reject the Medicaid expansion that could have benefitted more than one million low-income people for budgetary reasons. "It would benefit no one in our state to see their taxes skyrocket and our economy crushed as our budget crumbled under the weight of oppressive Medicaid costs,” he said.

Pence made a similar argument in Indiana, arguing that “Medicaid is broken” and that “In Indiana, an expansion of traditional Medicaid under the Affordable Care Act would cost our taxpayers upwards of $2 billion over the next seven years.”

Indianapolis Democratic Senator Jean Breaux argued at the time that by trying to use the state program as a substitute for expanded Medicaid coverage, the state runs the risk of losing out on cash. “If we do not do something here in Indiana then our dollars will be going out to fund healthcare for other states while our own constituents, our own Hoosiers, do not have healthcare for themselves,” he says.

Indeed, a new  RAND Corp. study recently concluded that Texas and the other states that have rejected Medicaid expansion will forgo about $8.4 billion a year in federal funding and have to spend an extra $1 billion in uncompensated care – all while ending up with about 3.6 million fewer insured residents.

“There has always existed a lot of state to state inconsistency within the Medicaid program,” said Caroline Pearson, a vice president with Avalere Health.  “One state’s eligibility levels may look quite different from another. A person in similar economic status in one state may qualify for nearly all of their health insurance costs covered, versus no coverage in another state.  That is the kind of perhaps irrational baseline that we are starting from. “

“But I think the Affordable Care Act really intended to eliminate a lot of that inconsistency and bring all states to a standard level point, and that’s really what we’re not going to see as a result of the Supreme Court,” she said. “There’s just going to be tremendous inconsistency across states and you’ve really got this gap in coverage for the lowest income and perhaps most vulnerable set of people in the country where there is just not going to be another way for them to afford insurance in many states – in the majority of states – that are not planning to expand.”

Conservative Ohio Gov. John Kasich, is fighting the State Legislature to opt into Medicaid expansion, saying it “makes sense for the state of Ohio,” though he’s made clear he is not a supporter of Obamacare.

“I’m obviously doing everything I can to try to get the Medicaid reform through, and we will see,” Kasich told Statehouse News. “I don’t know if it will be in this budget. It’s been made pretty clear to me that it won’t be in this budget…. but let’s see if we can get it done somehow.”

Another staunch opponent of Obamacare, Arizona Gov. Jan Brewer has also come out in support of Medicaid expansion, insisting that it “saves the state money and lives.”

”We were all so adamant that we didn’t like Obamacare. We fought tooth and nail. But there comes a time, and you have to look at the reality. You have to do the math,” Brewer told POLITICO. “I did not make this decision lightly. … It’s not only a mathematical issue, but it’s a moral issue.”

The Fiscal Times’ Brianna Ehley contributed to this report.

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.