Early Expansion of Medi-Cal Probably Not in the Cards

The health reform overhaul calls for a raft of regulatory changes to take effect on Jan. 1, 2014, from the launch of state-based health insurance exchanges to the expansion of Medicaid to all eligible  U.S. residents with annual incomes up to 133% of the federal poverty level.

Many observers have noted that the timeline may prove aggressive, as most states still need to lay the structural groundwork for reform.  At a hearing in Sacramento last week, Jon Kingsdale — who heads the Massachusetts Health Connector, which oversaw that state’s health care overhaul — urged California lawmakers to begin work now on elements like the insurance exchange. According to Kingsdale, Massachusetts needed four years to carry out its overhaul, and that was with a number of insurance reforms already in place and a considerably lower percentage of uninsured residents.

Amid the many operational questions, states face a sweeping decision that could affect millions: Do they begin early expansion of their Medicaid programs?

Under the health reform law, California would not have to wait until 2014 to enroll roughly two million newly eligible residents into Medi-Cal. According to Cindy Mann, director of CMS’ Center for Medicaid and State Operations, California and other states immediately could set the income eligibility standard at 133% of the federal poverty level and begin to receive new federal payments to partially cover new enrollees until a higher federal matching rate is instituted in 2014.

State officials around the nation continue to do the math and weigh the politics over whether they can afford to boost Medicaid enrollment in light of budget shortfalls. Families USA has encouraged the move but notes that early expansion is “probably most advantageous” for the handful of states that already provide state-funded coverage to low-income individuals. An early expansion would allow participating states to draw down additional federal dollars for such populations.

California faces numerous challenges, from electoral politics to budget gridlock, that may hinder early changes to Medi-Cal.

Although Gov. Schwarzenegger (R) sounded his support for reform last month, he notably did not include a potential expansion to Medi-Cal among his immediate list of priorities. Moreover, Steve Poizner and Meg Whitman, the state’s leading Republican candidates for governor, have suggested they would dispute the reform law on constitutionality grounds if elected this fall, casting doubt on implementation progress down the road.

The state’s budget shortfall also means that many programs are currently being frozen or stripped back, and Schwarzenegger last week proposed substantial cuts to Medi-Cal. Given the economic climate, the Legislative Analyst’s Office warned that an early expansion of Medi-Cal “would be costly and difficult,” citing the budget crisis and an extremely low federal matching rate for Medicaid payments to California. 

However, the LAO noted that California may be able to expedite “some or all” of its Medi-Cal expansion by receiving new federal funding through a waiver program currently under development. The waiver has been championed by advocates like Health Access, which has suggested that it would allow California to enroll targeted populations in Medi-Cal between 2010 and 2013 as a “bridge” to implementing national reform in 2014.

Should California officials opt out of an early expansion to Medi-Cal, the state would hardly be alone. To date, just two jurisdictions have signaled that they may grow their Medicaid programs before 2014. Washington, D.C., officials last week asked CMS for permission to switch 35,000 low-income adults from the city-funded Healthcare Alliance insurance program to the district’s Medicaid program. Connecticut officials also submitted a similar proposal that would add 45,000 state residents to its Medicaid program, for a savings of $53 million over 15 months, according to Gov. Jodi Rell (R).  Both efforts are being closely watched by the Obama administration, which is eager to trumpet early signs of the reform law’s success.

Politics and Perception

• The White House is stepping up efforts to promote the immediate benefits of the new health reform law after public opinion of the legislation did not “bounce” higher after passage, The Hill reports. Public perception of the bill “has hardly budged,” with polls continuing to indicate that a slight majority of U.S. residents oppose the law. According to The Hill, the White House push is considered crucial to help vulnerable Democrats secure re-election in the November midterms  (Pecquet, The Hill, 5/18).
• Democrats last week said that Republicans were seeking to reignite the debate over health reform by alleging that Donald Berwick, President Obama’s nominee for CMS administrator, would “ration” care in the role, the Boston Globe reports. Sen. John Kerry (D-Mass.) called Republicans’ criticism of Berwick “phony assertions” and said the nominee is a “public servant who is beyond debate a dedicated pediatrician and nationally recognized expert on health care quality.” Kerry also urged critics of Berwick to “permanently retire these ridiculous accusations” and engage in a thoughtful debate over the nominee’s credentials to ensure that “first-rate experts” will not be turned away from public service (Boston Globe, 5/14).
• Key Senate Republicans convened on May 13 to begin planning a stronger, more coordinated campaign against the new health reform law, Roll Call reports (Drucker, Roll Call, 5/13). According to CongressDaily, the lawmakers’ strategy is to keep a spotlight on the new reform law because they believe that their opposition “has buoyed their political prospects” for the midterm elections this fall (Friedman, CongressDaily, 5/14).

Implementation Updates

• The White House on Monday issued guidelines on the eligibility requirements and benefits of a small-business tax credit under the new health reform law, CongressDaily reports. Beginning this year, small businesses that employ fewer than 25 full-time workers with average annual wages of $50,000 or less and cover at least 50% of the cost of coverage will be eligible for a 35% federal credit on premiums (McCarthy, CongressDaily, 5/17).
• The House on May 12 approved legislation (HR 5014) to ensure that a Department of Veterans Affairs program providing comprehensive health care to children with spina bifida born to certain veterans meets minimum essential coverage requirements set out in the new health reform law, CQ Today reports. The legislation passed the House in a 417-0 vote, while the Senate passed a similar bill (S 3162) on March 26 by voice vote. The new reform law requires people who lack some form of health insurance  to pay penalty taxes, beginning in 2014 (Shuppy, CQ Today, 5/12).

In the Courts

• A Supreme Court ruling on Monday could offer a “blueprint” for upholding the new national health reform law against legal challenges to its constitutionality, the Baltimore Sun reports. The case — U.S. v. Comstock — concerned the federal government’s power to hold sex offenders after they have served their prison terms. In a 7-2 ruling, the court sided with the White House argument that Congress has broad power to continue holding sex offenders after their prison terms. The court noted that the Constitution provides Congress with the ability to regulate interstate commerce and the power to create laws that are “necessary and proper” to carry out its authority. The fight over U.S. v. Comstock has taken on broader meaning in light of more than a dozen lawsuits challenging the constitutionality of the new federal health reform law. The suits, which were mostly launched by state attorneys general, take issue with reform’s individual insurance mandate requiring U.S. residents to purchase insurance coverage or pay a financial penalty (Savage, Baltimore Sun, 5/18).
• The National Federation of Independent Business last week announced that it is joining a multistate lawsuit challenging the constitutionality of the individual mandate in the new health reform law, the AP/San Francisco Chronicle reports. According to the AP/Chronicle, the involvement of NFIB — which is widely regarded as the nation’s most influential small-business lobby — could mean that the states’ constitutional arguments “will be extensively aired” before November’s midterm elections because the group has 350,000 members and activists (Alonso-Zaldivar, AP/San Francisco Chronicle, 5/14).

On the Hill

• The American Hospital Association, in a letter to HHS Secretary Kathleen Sebelius on Friday, said that federal regulations on medical-loss ratios under the new health reform law should clearly define what activities qualify as improving care quality and limit insurers’ ability to subjectively make such determinations, CQ HealthBeat reports. Under the overhaul, large health plans beginning on Jan. 1, 2011, will be required to spend at least 85% of every premium dollar on medical services and quality improvement, rather than administrative costs or profits. Individual and small-group health plans’ MLR must be at least 80%. The new law would require insurers to pay a rebate to customers if their MLRs fall below the new limits. Sebelius and the National Association of Insurance Commissioners currently are working together to develop the rules for implementing the provision (Norman, CQ HealthBeat, 5/14).
• A handful of advocacy groups are petitioning for additional funding for programs authorized through the new health reform law, CongressDaily reports. For example, the American Diabetes Association requested $80 million for the National Diabetes Prevention Program, while the American Academy of Family Physicians requested $170 million for a primary care training program and $414 million for the National Health Service Corps, which repays medical professionals working in underserved regions. The overhaul allocated $290 million for the NHSC (McCarthy, CongressDaily, 5/13).

In the States

• Dartmouth College will establish the Dartmouth Center for Health Care Delivery Science, which might help New Hampshire become “a model for innovative health care delivery” as health reform provisions take effect, the AP/San Francisco Chronicle reports. According to Dartmouth’s president, the center’s mission could align with the health law’s focus on pilot projects, allowing New Hampshire to be designated a “pilot state” to study the performance of a state with multiple care systems (Ramer, AP/San Francisco Chronicle, 5/16).