Opponents Left With Little but Political Purchase

The only part of last week’s Supreme Court ruling that amounts to a substantive change in the Affordable Care Act could eventually have some fiscal effects but probably won’t amount to much, according to analysts.

The court ruled that the federal government cannot force states to agree to the law’s Medicaid expansion by threatening to withhold current Medicaid funding.

That ruling gives rise to the question: If enough states opt out of the Medicaid expansion, could it mean the cost of the health care law will increase, as people who would have been covered by Medicaid shift to private insurance and then collect federal subsidies? Subsidies for private insurance could be more expensive than Medicaid coverage. Some speculate that the Congressional Budget Office might be forced to increase the cost estimate of the law.

Is there any credence to that possibility?

“A little yes, but mostly no,” said Alan Weil, executive director of the National Academy for State Health Policy.

“First of all, there’s a big question about how many of those people would be eligible under the 133% threshold,” Weil said, referring to the law’s cut-off point for subsidized care. People with annual incomes of between 100% and 133% of the federal poverty level will be eligible for a subsidy.

“If states choose not to participate, there probably would be people who would qualify, but it’s quite unclear how many people would actually avail themselves of that opportunity,” Weil said.

“As to whether the CBO will have to change its estimates, my reading is that the per-person amount might be a little higher, but overall, it’s hard for me to imagine how this will have a significant impact,” Weil said.

There may be other fiscal ramifications of the court limiting the federal government’s leverage to force states to expand Medicaid coverage, but it will be a while before they’re fleshed out.

The CBO declined comment but issued this statement:

“CBO is in the process of reviewing the Supreme Court’s decision related to the Affordable Care Act to assess the effect on CBO’s projections of federal spending and revenue under current law. We expect that this assessment will probably take some time.”

Political Potential for Republicans

If the ruling didn’t leave opponents much foot room legally or fiscally, it provided plenty of political purchase, according to some analysts.

“If you’re a Republican in Congress, the drive to repeal this law gives you the best of both worlds,” said Dan Schnur, director of the Unruh Institute of Politics at University of Southern California.

“You can stand up for principle without having to risk the political fallout. An all-out repeal is a terrific campaign slogan but actually very unlikely,” said Schnur, former chair of the California Fair Political Practices Commission and John McCain’s communications director during the 2000 primary campaign.

Although the court’s ruling is widely considered a victory for Democrats, Schnur said the ruling could be a blessing for Republicans.

“When the possibility existed that the court might throw out the whole law or large parts of it, the Republicans were on the verge of a bad political blunder,” Schnur said. “They said that if the law is struck down, they would not move immediately to put anything in its place, including some of the popular provisions of the law like (forbidding insurers from denying coverage because of) pre-existing conditions or extended coverage for children.

“That could have been a catastrophic mistake,” Schnur said. “The court may have done them a favor by not allowing them the chance to do that.”

Boon to Insurance Industry

California health insurers welcomed the ruling, which will help the reform law live up to its promise as a boon to their industry.

“I like it,” said John Molina, chief financial officer of Molina Healthcare, a growing Medicaid and Medicare managed care plan based in Long Beach.

“I believe more people will get affordable coverage as a result of the justices’ decisions. I didn’t think they would get to where they got the way they got there, but I’m glad they did,” Molina said.

Shares in Molina Healthcare, named to the Fortune 500 two months ago, jumped by 8.6% Thursday after the Supreme Court ruling was announced. The stock closed at $23.46 on the New York Stock Exchange Friday.

Molina, which deals only in government-subsidized coverage, has almost doubled its annual revenue over the past five years to about $4.8 billion. Founded in 1980, Molina’s managed care plans have about 4.3 million members in California and 15 other states.

For most California insurers, the week ended with double-barreled good news. The Supreme Court ruling was followed by the announcement that the campaign to get a health insurance rate regulation initiative on the November ballot failed.

Although they’re happy with last week’s news, health insurers know they’re not out of the woods yet.

“We’ll see how solid we are after November’s elections,” Molina said. “If Democrats can keep Republicans from repealing the law, over the next few years it will get so ingrained that it won’t be able to be reversed.”

While the rate regulation initiative won’t be on the November ballot, the measure’s backers say they’ll try again for the next statewide ballot.

Patchwork of Coverage Possible

Among states supporting the reform law, California led the way by passing legislation early to create the first reform-driven insurance exchange. California is also a leader in a consortium of 11 states, the federal government and charitable organizations that designed an online system for exchanges to handle application, eligibility determination, enrollment and health plan selection.

“We’re creating a resource of information for other states and we’re eager to share what we’ve learned,” said Diana Dooley, secretary of California’s Health and Human Services Agency. But, she added that there’s still plenty to do on the home front.

“There’s a big, steep hill ahead of us to be ready for 2014,” Dooley said.

While California is leading the charge, as many as 26 other states are still deciding whether they want to avoid the hill altogether. Now, in light of the Supreme Court’s ruling on the reform law’s Medicaid expansion, the option to avoid the hill may seem more attractive and could lead to a patchwork of coverage across the country. Twenty-six states signed on to the Supreme Court challenge of the law. If even half of them opt out of reform, it could create significant differences in health care coverage from state to state.

Governors and legislators in many states have said they prefer not to participate, even though the federal government would pay 100% of the expansion costs for the first three years and 90% thereafter.

Weil — whose organization is dedicated to helping states design and carry out health care policy — won’t predict how many or which states might opt out of the Medicaid expansion, but he urges all state officials to consider the question carefully.

“The reasons for states to go ahead with this are really strong,” Weil said. “The fiscal analysis indicates it would be in most states’ interest.

“The political issues are another matter,” Weil said.

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