Health Reform: Implications of Optional Medicaid Expansion

by astanhaus

Originally submitted for an independent research project comparing North America’s welfare states with Professor Antonia Maioni at McGill University.

The American political structure limits the ability of comprehensive health reform. Marmor and Oberlander note, “If the U.S. instead had a Westminster-style parliamentary system, it is likely that America would have adopted national health insurance over 60 years ago when President Harry Truman proposed it.”[1] America’s system of checks & balances with inherent veto points maintains the status quo with The Patient Protection and Affordable Care Act (ACA). Marmor and Oberlander describe the ACA as, “patching-up the existing patchwork of public and private insurance.”[2] The ACA creates coverage for the uninsured by tinkering with the established components of American medical financings, namely employer-sponsored insurance, Medicare and Medicaid.[3] In June 2012, the Supreme Court ruled that the federal government’s forceful “tinkering” with Medicaid, a state program, was an abuse of its power.[4] A premier patch of The Patient Protection and Affordable Care Act–Medicaid expansion–is now optional; if not implemented, despite overwhelming financial incentives, yet another coverage gap will be unintentionally created by America’s most recent attempt at comprehensive health reform.

In order to best provide coverage for the uninsured, an individual purchases insurance in a subsidized exchange or becomes a Medicaid beneficiary, depending on whether their income is above or below 133% of the federal poverty level (FPL).[5] To incentivize expanding state Medicaid programs, the federal government would foot the expansion bill; Marmor et al. explain, “The federal government is willing to pay the entire cost of new beneficiaries in the period 2014-2017. The federal government’s contributions will then decrease slightly until they reach a steady state of 90% federal/10% state funding for 2020 and thereafter.”[6] Medicaid is already a great expense on a state’s balance sheet, so the federal government fully-funding its expansion should be welcomed.[7] The ACA’s Medicaid expansion provision relied on state cooperation; despite overwhelming financial incentives, states and business were resistant to reform and their case was taken by the Supreme Court.

In June 2012, the Supreme Court did not alter the provisions of The Patient Protection and Affordable Care Act, but Medicaid expansion became optional.[8] Breaking with a tradition of recognizing Congress’s ability to make federal grants to states conditional, the court found that the ACA’s conditions were “unconstitutionally coercive.”[9] “Genuine choice” was key to the Roberts plurality, as the Kaiser Family Foundation describes, “The Roberts plurality found that Congress had unconstitutionally threatened non-compliant states with the loss of all of their existing Medicaid funds, which amounted to a ‘gun to the head.’”[10] The Ginsburg Concurrence argued Medicaid expansion was constitutional; Congress reserved the right to amend the program from conception in 1965 and had frequently expanded the population and services covered.[11] While the Supreme Court decision left the ACA intact, the Kaiser Family Foundation explains, “the practical effect of the Court’s decision makes the ACA’s Medicaid expansion optional for states because, if states do not implement the expansion, states can lose only ACA Medicaid expansion funds.”[12] Breaking with tradition and ruling in favor of the states, the Court’s ruling creates a coverage gap due to the nuances of the ACA.

With the patch of Medicaid expansion now optional, a gap that was supposed to be covered will not be. The Kaiser Family Foundation describes how this coverage gap came to be, “The ACA envisioned people below 138% of poverty receiving Medicaid and thus does not provide premium tax credits for the lowest income. As a result, individuals below poverty are not eligible for Marketplace tax credits, even if Medicaid coverage is not available to them.”[13] The Kaiser Family Foundation calculates, “Nationally, nearly five million poor uninsured adults will fall into the ‘coverage gap’ that results from state decisions not to expand Medicaid, meaning their income is above current Medicaid eligibility but below the lower limit for Marketplace premium tax credits. These individuals would have been newly-eligible for Medicaid had their state chosen to expand coverage.”[14] Now that a key component of the ACA is optional, the goal of affordable health coverage for all is unattainable in the states not participating in the Medicaid expansion.

States that do not expand Medicaid will notice a drastic difference in their balance sheet compared to their neighbors who do expand Medicaid.[15] Maioni notes that the non-uniform expansion of Medicaid will “exacerbate regional and state differences.”[16] Yet, without a deadline, states can expand their Medicaid programs at any time.[17] States contemplating Medicaid expansion will be encouraged by the results of Tsai et al.. Their study reviewed the insurance implications for the chronically homeless, comparing those with Medicaid coverage to those who rely on state assistance and concluded:

chronically homeless adults who received state and local assistance were largely similar to Medicaid enrollees in reported health status and health care use patterns suggesting that states and localities could potentially experience savings from the decreased use of state and locally funded services if these people transitioned to Medicaid. Savings will be particularly substantial for adults who are made newly eligible by the expansion, since coverage for newly eligible individuals will be 100 percent federally funded until 2016, after which federal funding decreases to 90 percent over time.[18]

By transitioning citizens currently reliant on state assistance to Medicaid, the federal government would pay for these previously state expenses. Writing as an expert in public health and state senator in a state opposed to Medicaid expansion, Wisconsin’s Kathleen Vinehout points to America’s past, “Back in 1965 only half of the states participated but over the next few years almost all joined up. If saved lives didn’t trump ideology then, money did. I sure hope Wisconsin is smart enough to do the same now.”[19] States must act, perhaps against their ideology, if only to shuffle expenses off their balance sheets and on to the federal government’s, not to mention providing health insurance coverage for their citizens.

[1] Theodore Marmor and Jonathan Oberlander, “The Patchwork: Health Reform, American Style,” Social Science & Medicine 72, no. 2 (2011): 126.

[2] Marmor and Oberlander, 127.

[3] Theodore R.Marmor, Jerry L. Mashaw and John Pakutka, Social Insurance: America’s Neglected Heritage and Contested Future (Thousand Oaks: CQ Press, 2014), 124.

[4] Kaiser Family Foundation. “A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion,” August 2012, http://ow.ly/qwQXN, 1.

[5] Depending on how the federal poverty level is calculated, the cut-off can be 133% or 138% of the FPL.Please see the American Public Health Administration’s explanation here, http://ow.ly/qzkAX.

[6] Marmor, Mashaw and Pakutka,124.

[7] Ibid.

[8] Kaiser Family Foundation, “A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion,” 10.

[9] Ibid, 4.

[10] Ibid, 5.

[11] Ibid, 6.

[12] Ibid, 10.

[13] Kaiser Family Foundation, “The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” October 23, 2013, http://ow.ly/qwPEE. Also, please see note #5 about FPL.

[14]Kaiser Family Foundation, “The Coverage Gap.”

[15] Please see Kaiser Family Foundation’s Status of State Action on the Medicaid Expansion Decision for details http://ow.ly/qyZ7A.

[16] Antonia Maioni, “Obamacare vs. Canada: Five key differences,” The Globe and Mail (Montreal, QC), Oct. 2, 2013.

[17] Kaiser Family Foundation, “The Coverage Gap.”

[18] Tsai, et al.,”Medicaid Expansion: Chronically Homeless Adults Will Need Targeted Enrollment and Access to a Broad Range of Services,” Health Affairs 32, no. 9 (2013): 1557-58.

[19]Kathleen Vinehout, “Biography,”  http://ow.ly/qz0Mk & Kathleen Vinehout, “Medicaid Expansion: The High Cost of Ideology,” Feb. 8, 2013,  http://ow.ly/qz0NX.