Is State Opposition to Medicaid Expansion Mostly Bluster?

When the Supreme Court ruled last month that states cannot be penalized if they refuse to expand their Medicaid programs to meet the new coverage requirements of the Affordable Care Act, the health status of 6 million low-income individuals was thrown into limbo.

The health law directed states to provide Medicaid coverage for residents earning up to 133 percent of the federal poverty level (FPL) or about $14,800 for individuals and $25,400 for a family of three. This provision was expected to provide coverage for some 17 million of the uninsured. Currently, 33 states limit Medicaid eligibility for working parents to less than 100% of FPL, with half of those limiting eligibility to less than 50% of the poverty level. Only 9 states offer any coverage at all for impoverished adults who are not parents.

Since the ruling, 29 governors—all from Republican states—have announced that they are considering rejecting the federal government’s offer to cover 100% of the cost of Medicaid expansion for three years (scaling back to 90% by 2020) in order to maintain the status quo or even reduce benefits for their poorest residents further. According to a survey by USA Today, seven states, including Texas, Louisiana and Florida, have already pledged to sidestep the law. The USA Today survey provides an excellent interactive map  that lists the percentage of uninsured in each state, as well as details about where states stand on forming health insurance exchanges and the Medicaid expansion. Not surprisingly, many of the states (like Texas) with the highest percentage of uninsured residents (at 25%, the highest in the nation) are voicing the most opposition to forming exchanges and expanding Medicaid.

Much ink has been used to explain why states oppose the Medicaid expansion but the official line from holdouts boils down to two objections; money and distrust of the federal role in state health programs. (Of course political partisanship is the unstated but always looming background for any discussion of “Obamacare”.)

“We struggle to fund our Medicaid program in its current condition,” Mississippi Gov. Phil Bryant, a Republican, tells USA Today. The state can’t afford an expansion “that would put one out of every three Mississippians on the program.” Florida’s Rick Scott also follows this same line of reasoning, saying that his state just can’t afford the 10% share of the expansion by 2020. There’s no question that states are burdened by growing Medicaid rolls. A report by the State Budget Crisis Task Force found that Medicaid currently represents about one-quarter of states’ general spending and that costs to states grew at 7.2% per year across the last decade, far outpacing the 3.9% growth rate for state revenue.

Rick Perry, on the other hand, wants no part of expanding what the Texas governor calls “an unsustainable program.” Perry told Fox News, “Medicaid is a failed program. To expand this program is not unlike adding a thousand people to the Titanic.”

There are several problems with this reasoning. First of all, the Congressional Budget Office released a report last week that estimated the additional cost to the states from the expansion to be a 2.8 percent increase over what they would have spent on Medicaid from 2014 to 2022 without health reform. An Urban Institute analysis finds that state Medicaid expenditures would likely increase by at most 1.4 percent over a similar time period.

The CBO’s estimate—already shaky due to uncertainties about which states will expand their programs in the first place—also doesn’t consider new savings from the expansion. As a brief from the Center for Budget Priorities explains:  “By sharply reducing the number of people without health insurance, the Medicaid expansion will reduce state and local costs for hospital care for the uninsured. In 2008, state and local governments shouldered $10.6 billion, or nearly 20 percent, of the cost of caring for uninsured people in hospitals, according to Urban Institute research.” The Medicaid expansion will also reduce state costs in providing mental health services to the uninsured, which in 2009 amounted to another $17 billion. “Put another way, part of a state’s new costs under the Medicaid expansion will actually substitute for existing state spending on the uninsured.”

Finally, future projections of state Medicaid costs fail to include the cost-saving potential of innovative payment and delivery reforms that are already underway in demonstration projections around the country. These include moving patients to new forms of managed care such as accountable care organizations that better coordinate treatment and prevention efforts for the chronically ill and the use of community health centers as medical homes. Oregon, for one, has convinced the federal government to invest nearly $2 billion over the next five years in a Medicaid plan that relies on several “coordinated care organizations” set up in major cities that will stress preventive and routine care and offer caseworkers for chronically ill patients to help them navigate a range of services.

Under the new Oregon system, the quicker a patient gets better, or the fewer patients that are admitted to hospitals, the more money the coordinated care organization can keep. According to Kaiser Health News, “[Gov.] Kitzhaber believes that over the next five years, Oregon will be able to save the federal Medicaid program every penny of the $2 billion the state’s been promised.” He tells KHN; “We estimated that if every state Medicaid program in the country were to adopt this model, the net savings would be about $1.5 trillion dollars over 10 years.”

Aside from the cost issue, it is also important to address charges like Perry’s that Medicaid is so deeply flawed as to be irreparable. It is true that Medicaid has long held second-class status in this country. Its enrollees do not represent a powerful political lobby; it is instead comprised of the poor, disabled and fragile elderly residing in long-term care facilities. Candidates do not bother playing to this crowd with the intensity they pander to the powerful Medicare lobby.

Over the years the system, too, has been plagued by fraud and abuse—some of it practiced by the states themselves who devise schemes like double-billing to increase their share of federal matching funds. In many states doctors have stopped seeing Medicaid patients as reimbursements have been cut to levels below those paid by private insurers and Medicare. This has led to difficulties for Medicaid patients in accessing care, especially in securing appointments to see specialists in a range of critical care areas.

But despite those significant “flaws,” studies have found that Medicaid coverage clearly helps improve people’s lives, reducing adult mortality by 6% in states where expansion has already taken place, as well as improving access to care and self-reported health status. Most recently, researchers concluded in the New England Journal of Medicine that in three states, “large expansions of Medicaid eligibility in three states were associated with a significant decrease in mortality during a 5-year follow-up period, as compared with neighboring states without Medicaid expansions. Mortality reductions were greatest among adults between the ages of 35 and 64 years, minorities, and residents of poor counties.”

This latest study backs up findings from a unique experiment in Oregon that compared one group of poor adults without Medicaid coverage to those who had secured benefits through a state lottery. Last year I wrote about this study’s findings; “Low-income people with Medicaid coverage go to the doctor more regularly, have reduced financial stress and generally report feeling happier and healthier than their uninsured cohorts who must depend on safety net services like free clinics or emergency rooms to access care—or forgo it altogether.”

In the end, it is hard to predict the result of all of this posturing by Republican-led states in the weeks just following the Supreme Court’s Medicaid ruling. Of course, some of the threats coming from conservative governors could be just bluster. There are powerful healthcare industry players that include hospitals, insurers, drug companies and medical suppliers that have strong vested interests in seeing Medicaid expanded. Without new coverage, hospitals will have to keep providing uncompensated care, leading to rate increases that ultimately get passed along to employers, workers and other people with private insurance, in the form of higher premiums and prices. Stakeholders, along with state legislatures, will likely pressure some of the holdouts to accept federal funding for the expansion and cover millions of low-income uninsured residents.

If some states ultimately do refuse to extend Medicaid benefits to poor adults and only slightly less destitute families, 6 million of our nation’s chronically uninsured residents will continue to suffer from sub-par health and increased risk of death. Most will not qualify for federal subsidies in the state insurance exchanges that are expected to begin operating in 2014; those that do may still find coverage unaffordable. States and the federal government will save money and–in some cases–face, in the short term; but by abandoning the most vulnerable in our society we do so at the risk of serious ethical and public health consequences.