Obamacare Creates a Two-Tiered Medicaid System
Policy + Politics

Obamacare Creates a Two-Tiered Medicaid System

REUTERS/Mark Makela

Nearly a year after the Supreme Court limited the expansion of Medicaid under President Obama’s health care reform law, the federal-state health program for the poor and disabled is evolving into a disturbingly stark dual system in which the  availability of health care is being determined largely by the same political divide that settled the 2012 presidential election.

The historic 5 to 4 ruling last June 28 upheld the Affordable Care Act in the face of bitter opposition from conservative groups and Republican state officials. But 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 – 20 states and the District of Columbia agreed to the coverage. But 14 other states rejected the offer and a dozen more states are leaning against it.

That means that tens of millions of poor or disabled people currently living on the Eastern Seaboard or in parts of the Midwest or along the Pacific Coast will be in line to obtain Medicaid health care coverage for the first time next year. Yet millions more – living primarily in the South and Southwest and portions of the Midwest – will be denied coverage because of political and budgetary calculations by their state political leaders and lawmakers.

And while many low-income people locked out of the Medicaid expansion can still qualify for government subsidized insurance under the new health care law, the poorest of poor living below the federal poverty level will be denied insurance of any type.

“It’s ironic that the people who need health coverage the most and can least afford it are the ones who will be totally left out in the cold,”   Ron Pollack, the executive director of Families USA, the national organization for health care consumers, told The Fiscal Times Wednesday. “There are a number of states where we don’t know yet [whether they will participate or not], but I think it’s fair to assume there will be an approximate half-and-half division of the states” by early next year.
Two years ago, CBO estimated that 34 million uninsured individuals would gain coverage as a result of the ACA’s proposed expansion of Medicaid and other insurance market reforms. But last month, CBO sharply reduced that projection by nine million people – largely because of the number of states that have turned down the Medicaid offer.

A new non-profit RAND Corporation study released this week forecasts that 4.4 million people will be denied Medicaid insurance in the 14 states refusing to take part in the program. But that number is certain to rise substantially when other states opt out as well.

Obamacare sought to make Medicaid eligibility more uniform by mandating that anyone earning up to 138 percent of the poverty level – or $15,856 in 2013 dollars – would be eligible for the program. But the Supreme Court ruling invalidated that federal mandate and set the stage for tough battles and debates in every state capital across the country.

“A lot of [this] has to do with whether Medicaid programs can absorb the additional people in a way that doesn’t disadvantage everybody in the program,” said Joseph Antos, a health care expert with the conservative American Enterprise Institute. “I think that is a big issue that nobody ever talks about.” 
The controversy over whether or not to sign on to Medicaid 2.0 has roiled the political waters, in some cases pitting GOP governors against their conservative state legislatures in trying to win approval of the expanded coverage. Governors Jan Brewer of Arizona, John Kasich of Ohio and Rick Snyder of Michigan are all locked in bruising battles to persuade state lawmakers to go along with the program. Florida Republican Gov. Rick Scott, an ardent critic of Obamacare, changed directions and endorsed the Medicaid extension, but his efforts have been blocked by the GOP-controlled state legislature.

When Texas Republican Gov. Rick Perry said he would reject the Medicaid expansion, he contended the decision was 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.

The new RAND report, however, concluded that Texas and the 13 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.

Carter Price, the RAND study’s lead author  told The Fiscal Times Wednesday that while the Supreme Court allowed states to opt out of the expansion, it didn’t exempt them from other provisions of Obamacare, including new taxes and fees.

“In a very real sense, the citizens of their states are paying for Medicaid expansion, regardless of whether or not the state chooses to do it,” Price said. “So those states that choose not to extend Medicaid are paying for something they are not getting.”

G. William Hoagland, a senior vice president at the Bipartisan Policy Center and a former health care industry executive, warns that  with so many states refusing to take the offer, “You’re going to start to have a two-tiered system out there . . . and it sets up what I think will be further disparities in some states.”

With a handful of notable exceptions, states accepting the expanded Medicaid coverage are blue states that helped reelect President Obama last November – while those turning down the offer are red states that voted for Republican Mitt Romney, a critic of Obamacare.

Those states saying no include the southern states of Alabama, Georgia, North Carolina, South Carolina, Mississippi and Virginia; the Midwestern and Southwestern states of Wisconsin, Iowa, Indiana, Texas, Oklahoma and Nebraska, as well as Idaho and Alaska, according to Avalere Health, a consulting firm. All but Iowa, Wisconsin and Virginia supported Romney last November. Meanwhile, governors or state legislatures in seven other red states – Montana, Wyoming, South Dakota, Kansas, Missouri, Louisiana and Utah – are thought to be leaning against Medicaid expansion.

The expansion is one of the two primary ways that Obamacare would provide coverage to millions of uninsured Americans starting next year. The other is through state health insurance exchanges, which will sell policies to individuals whose incomes are too high to qualify for Medicaid.

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.