States' Medicaid expansion fraught with political consequences

By Mary Mosquera
09:17 AM

States are facing complex choices about whether to expand Medicaid coverage since it’s their call now and they will not be forced to do so under the health reform law.

Governors must weigh whether they should extend Medicaid coverage to millions of uninsured, even with initial 100 percent federal funding, at the same time that their budgets are still reeling from the effects of a weak economy and limited revenues.

The decision carries significant political consequences for states that have Republican governors, GOP-led legislatures, or potential changes that will result from the imminent elections. For some states, it may be more pragmatic to straddle the fence on Medicaid expansion until the elections and their aftermath play out.

The states that will participate in the expansion so far are led by Democratic or Independent governors.

Until the Supreme Court ruled on the health reform law in June, state executive and legislative branches tangled mostly on the health insurance exchange question. Now that Medicaid expansion is an option, state legislatures are going to have a voice in that as well, said Matt Salo, executive director of the National Association of Medicaid Directors.

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“Now we’ll be looking at questions about Medicaid expansion, whether to opt in or opt out. It becomes very relevant if the executive and legislative branches can’t agree,” he said at a recent conference sponsored by the Bipartisan Policy Center.

Besides the decision dynamic, states have a timing issue that may affect a state’s expansion participation. “We have a lot of states where legislatures do not meet year round. They may come in for a couple of months, maybe every two years,” Salo said. 

The biggest worry for states, however, is what Congress will do about Medicaid spending in the future, especially as states are considering Medicaid expansion, according to Dan Crippen, executive director of the National Governors Association.

“Medicaid costs will still go up for states. It’s one thing to take on 15 million more people with federal matching. It’s quite another to say in two or three years that, with the 15 million people, they’re going to reduce federal funding,” he said.

Texas, which has the largest number of uninsured, Florida and Mississippi are among six states to date that have already rejected Medicaid expansion participation, according to The Advisory Board Co., a technology consulting company that is also tracking where states stand on Medicaid expansion.

Other states, like Indiana, New Mexico and Wisconsin have sought a waiver from the Health and Human Services Department to limit Medicaid expansion, according to a recent Wall Street Journal report. Under health reform, Medicaid can cover those earning 133 percent of the federal poverty level.

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Republican Indiana Gov. Mitch Daniels punted the question of Medicaid expansion. “Any decision to expand Medicaid in 2014 is entirely the province of the next General Assembly and governor,” he said in an announcement during the summer.

Medicaid has been a growing struggle for states to afford in their budgets, Crippen said, and he anticipates congressional action on debt reduction that may cut Medicaid funding more realistically in two or three years.

“In spending for the last fiscal year by states in the aggregate, the only thing that went up was Medicaid,” Crippen said, adding that when federal funding for Medicaid expansion gradually shrinks from 100 percent to 90 percent over several years, Medicaid will consume most new state revenues.

The debate about Medicaid expansion also presents the opportunity to highlight the need for flexibility in delivering and paying for health care, even aside from the Patient Protection and Accountable Care Act (ACA), Salo said.

“A lot of states are trying to move away from that outmoded 1965 structure of reimbursements to providers and change the way the delivery system works towards more managed care and change the dysfunctional payment incentives,” he said. That could look like an accountable care organization or an emphasis on primary care case management.

“It would absolutely be a no-brainer to try to improve care, trying to do some of these integration demos, like those laid out in ACA. It would be the right thing to do, and we should encourage this. And yet we’re seeing incredible amounts of opposition from all walks of life,” Salo said.

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Certain parts of the electorate, such as Tea Party supporters, make it difficult for states to take on Medicaid expansion even with the 100 percent federal matching, said Bruce Siegel, president and CEO of the National Association of Public Hospitals and Health Systems.

“The most important moment for us will be the 2013 spring sessions of state legislatures. There may be a lot of posturing,” he cautioned.

Crippen doesn’t anticipate the lame duck session of Congress accomplishing more than trying to structure the debate in preparation for dealing in January with the “fiscal cliff” of across-the-board automatic cuts that is sequestration.

“No matter who is elected president, there will be an incentive for delay in implementation of some of these parts, whether it’s exchange or Medicaid expansion,” he said. It’s not just because of the lawmakers, but a lot of states are “earnest about trying to get the exchanges up and running, but just won’t be ready by 2014,” he added.

One of the benefits of delaying implementation is that there will be “some bookable federal savings for Medicaid,” Crippen said.