States Seek a Middle Ground on Medicaid

Some Governors Aim to Curtail Program’s Expansion, Steer More People Toward Federally Subsidized Private Insurance

 

By LOUISE RADNOFSKY and CHRISTOPHER WEAVER

A handful of states are considering only partially expanding their Medicaid programs under the federal health-care overhaul—a new twist on how states are interpreting the Supreme Court’s ruling on the law.

Indiana, New Mexico and Wisconsin are among the states asking the federal government to let them omit from the Medicaid expansion residents whose incomes put them just above the poverty level. The states hope to take advantage of provisions in the Affordable Care Act that offer a federal subsidy to help these residents buy private insurance, starting in 2014.

The strategy is the latest fallout fromthe Supreme Court’s June decision, which let states opt out of expanding Medicaid without losing federal funding for the program. A half-dozen governors have already said they would opt out, worried their states will be saddled with extra costs.

State Medicaid-eligibility levels currently vary. Under the law, all states were to open their Medicaid programs to Americans who earned up to 133% of the federal poverty level, which is currently set at $11,170 for a single person. The law also made those with incomes 100% to 133% of the poverty level eligible to buy federally subsidized, private insurance through exchanges.

Some states, however, are asking the Centers for Medicare and Medicaid Services if they can include people in Medicaid up to 100% of the poverty level, but keep people with incomes between 100% and 133% of the poverty level out of the program and instead funnel those people toward the exchanges.

Their main reason: States wouldn’t haveto contribute to the costs of the subsidies to purchase private insurance.

“It’s more expensive for the federal government, but it’s cheaper for the state,” said Seema Verma, a top adviser to Indiana Republican Gov. Mitch Daniels. “Obviously the costs are going to play into it, not just for Indiana, but for every state.”

Allowing partial Medicaid expansions could have broad implications for how the law covers uninsured Americans and add to the cost of the overhaul. The nonpartisan Congressional Budget Office has estimated the federal government would pay about $9,000 of subsidies for each person enrolled in the exchanges, compared with $6,000 for those enrolled in Medicaid.

Federal officials are under pressure tokeep states from opting out of the Medicaid expansion. Hospitals are warning it would leave them with a high number of nonpaying customers, at the same time they are having to absorb federal payment cuts, as a result of the law. Around half of the 30 million Americans expected to gain coverage from the health-care law as it was passed were to gain it through Medicaid.

A report for Indiana’s Family and Social Services Administration by actuaries Milliman, to be released Tuesday, found the state would pay nearly $1.1 billion between 2014 and 2020 to enroll alladults with incomes up to the federal poverty level in Medicaid, but that the full expansion would cost another $326.5 million.

The Department of Health and Human Services has yet to say whether it would let states deviate from the Medicaid expansion as it stated in the law. In other standoffs with the states over the health-care law, the department has tried a conciliatory approach, including offering them the option of jointly running new insurance exchanges.

Erin Shields Britt, a spokeswoman for the department, said it was “evaluating” the question. She pointed out the law covers states’ full Medicaid expansion costs for the first three years and at least 90% in subsequent years. That offers “significant new resources” to states that the administration was “hopeful” they would accept, she said.

Edmund Haislmaier, a fellow at HeritageFoundation, a conservative think tank, criticized Republican-led states forseeking to shift health costs onto taxpayers. “You have the tragedy-of-the-commons phenomenon, where everyone does something in their own interest, but in the aggregate, it’s harmful,” he said, adding that he is advising states not to expand Medicaid at all.

Wisconsin officials have run calculations to figure out the costs of a partial expansion, among other scenarios, saidDennis Smith, health secretary to Republican Gov. Scott Walker. He said thescenario could be attractive to health providers, who want to see the number of uninsured patients reduced but would prefer to be reimbursed by private insurers rather than the government, since private insurers typically pay more.

Officials in New Mexico, led by Republican Gov. Susana Martinez, are also considering a partial expansion, along with other options, said a spokesman for the state’s human services department, Matt Kennicott.

Write to Louise Radnofsky at louise.radnofsky@wsj.com and Christopher Weaver at christopher.weaver@wsj.com

A version of this article appeared September 18, 2012, on page A6 in the U.S. edition of The Wall Street Journal, with the headline: States Seek a Middle Ground on Medicaid.

 

http://online.wsj.com/article/SB10000872396390443720204578002583908495660.html