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The Medicaid Mess: Where Do States Stand on ObamaCare Expansion?

Surprise! The road to reform is just beginning.

“Everyone thought the [Supreme Court] ruling on PPACA was the climax,” Reason‘s Peter Suderman marveled this week. Turns out it was just “the inciting incident!”

It’s been two weeks since the court upheld the Affordable Care Act and wonks continue to pick through the fallout. And what was first seen as a clear victory for the White House is starting to look a bit more shaded.

In the long term, Chief Justice John Roberts’ narrow interpretation of the Commerce Clause may present challenges for Congress’ ability to implement national policy and craft future health care reforms. As the New Yorker‘s Jeffrey Toobin notes, “This new rule may limit the ability of Congress to expand the size of the government, and … may invite challenges to some government programs that are currently on the books,” such as federal consumer safety laws.

But in the short run, the court’s decision to allow states to opt in or out of the Affordable Care Act’s Medicaid expansion without any effect on current funding has dominated the headlines. That ruling leaves each state’s decision to participate in the hands of the nation’s governors and state leaders –and as of press time on Wednesday, five governors already have announced they plan to opt out. (A map prepared by American Health Line, a sister publication of California Healthline, charts where each state stands.)

What’s striking isn’t that five governors are opposed to the ACA’s Medicaid expansion. All are Republican and many, like Texas Gov. Rick Perry, staked out their opposition to ObamaCare many months ago.

Instead, it’s fairly surprising that more than half the states suggest that they’re undecided.

Governors have had more than two years to model out the impact of the ACA; essentially everyone has issued their support for or offered critiques of the law. Sure, the game has changed — but the numbers are essentially the same, on the surface. So what’s leading to the hesitation? A combination of new policy and political concerns, according to analysts.

Financial concerns. Most media coverage has portrayed the ACA’s Medicaid expansion as essentially free funds for participating states to grow their health care services.

Under the provision, as originally written in the law, the federal government will offer a nearly 100% matching rate for states to cover Americans whose annual incomes fall between 100% and 138% of the federal poverty level, beginning in 2014. When the ACA was first drawn up, the Congressional Budget Office projected that the provision would allow Medicaid to cover about 17 million currently uninsured Americans.

But Ben Domenech argues at that the deal isn’t as sweet as it might first appear. Although the federal funds are “indeed generous for the newly eligible [emphasis added] population, it is less so for the rest,” he contends. Domenech says that states must rely on the standard federal Medicaid matching rate, which ranges between about 50% and 75%, to simply bring their coverage levels up to par with the national baseline.

That means states like Texas that have income eligibility limits below 100% of FPL will have to spend considerable amounts even before being able to tap the new federal funds. Domenech cites a House Energy & Commerce Committee report that includes estimates “that Texas alone will be forced to spend $27 billion — more than the program’s entire annual budget today.”

Political concerns. Some analysts also suggest that governors may simply be waiting until November’s elections to make their decisions — or rather, have their decision be made for them, if Republicans retake the Senate and the White House and overturn the entire law.

Republican governors who know they plan to opt out of the expansion might have another savvy reason to delay their announcements: Health care is typically a mobilizing issue for get-out-the-vote campaigns, and GOP politicos don’t want to give their Democratic opponents another issue to run on.

What’s Next

The state of the states on the Medicaid expansion isn’t the only issue raised by the court’s ruling. Questions continue to swirl over whether the decision invalidated another part of the ACA, which prevents states from tightening eligibility programs. As Matthew Herper points out in Forbes, some state officials believe that gives them the ability to actually shrink their Medicaid programs below current levels; the White House on Tuesday explicitly warned against that scenario.

Still, the main event remains whether the states will opt in to the ACA’s expansion, and how soon it will happen. As the Washington Post‘s Sarah Kliff writes, some states dawdled for years before deciding to join the original Medicaid program. The Golden State wasn’t one of them and has again made a firm commitment to expand Medicaid, regardless of the Supreme Court’s ruling.

“Road to Reform” will continue to track whether other states will join California this time around, too.

Here’s what else is happening around the nation.

In the States

  • In a letter to HHS Secretary Kathleen Sebelius on Monday, Texas Gov. Rick Perry (R) said his state will not participate in the federal health reform law’s Medicaid expansion and will not establish a health insurance exchange (Baker, “Healthwatch,” The Hill, 7/9). Since the U.S. Supreme Court upheld the law, at least four other Republican governors have publicly rejected the expansion (Muskal, Los Angeles Times, 7/9). Perry is the first governor to formally decline to establish an exchange (Fernandez, New York Times, 7/9).
  • Officials in some states facing financial constraints say the U.S. Supreme Court‘s decision on the Affordable Care Act’s Medicaid expansion allows them to revise eligibility rules and make cuts within their states’ Medicaid programs. Under the law, states were prohibited from changing Medicaid eligibility or benefits until 2014. An HHS official said the department still is examining the implications of the ruling on the eligibility rules (Weaver/Radnofsky, Wall Street Journal, 7/6).

Administration Actions

  • In an announcement on June 29, HHS detailed 10 new opportunities for states to receive funding for their health insurance exchanges under the federal health reform law (Baker, “Healthwatch,” The Hill, 6/29). Through the end of 2014, states can apply for the new funding. HHS did not give an estimate on the total amount of the grants (Zigmond, Modern Healthcare, 6/29). HHS also issued further guidance to states on how to use the funds for exchange-building activities (HHS release, 6/29).
  • In a recent interview with “Fox News Sunday,” White House Chief of Staff Jacob Lew said Republicans should “move on” and abandon their efforts to repeal the federal health reform law because the U.S. Supreme Court‘s decision to uphold the law (Mali/Parnes, “Healthwatch,” The Hill, 7/1). “When the Supreme Court rules, we have a final answer the law is constitutional; it stands,” he said (Gerstein, “Politico Now,” Politico, 7/1). Lew noted that the Obama administration is willing to work with the GOP to improve the law (“Healthwatch,” The Hill, 7/1).

Effects of the Supreme Court Ruling

  • The U.S. Supreme Court‘s decision to effectively allow states to opt out of the federal health reform law’s Medicaid expansion without being penalized could raise health care costs by at least $100 billion annually, according to an analysis by the American Action Forum (Viebeck, “Healthwatch,” The Hill, 6/29). The analysis was provided by AAF President Douglas Holtz-Eakin, a former Congressional Budget Office director (Montgomery, Washington Post, 6/29).

Public Opinion About the Ruling

  • At least 46% of U.S. residents believe that the federal health reform law will have an adverse effect on the nation’s economy, while about 37% do not think the law will have a similar effect, according to a Gallup poll released last week (Nicholas, “Washington Wire,” Wall Street Journal, 7/5). The poll also found a distinct partisan divide on the potential effects of the overhaul, with 78% of Republicans saying the law’s effects will be negative and 62% of Democrats saying that it would be positive (Viebeck, “Healthwatch,” The Hill, 7/5).
  • A USA Today/Gallup poll released the day after the U.S. Supreme Court‘s ruling found that U.S. residents were evenly split over the decision (Sink, “Blog Briefing Room,” The Hill, 6/29). The poll surveyed 1,012 individuals within hours of the ruling (Wolf, USA Today, 6/29). Just 12% of respondents said health care reform is not a major issue that will influence their vote for president in November (Weinger, Politico, 6/29).
  • Voter support for the federal health reform law increased after the U.S. Supreme Court‘s ruling, according to a Reuters/Ipsos poll. The poll found that support for the overhaul increased from 43%, according to a similar poll conducted in mid-June, to 48% after the decision was announced. Opposition to the overhaul also dropped from 57% to 52%. Meanwhile, Republican opposition to the law also softened slightly from 86% in the older server to 81% in the recent survey (Zengerle, Reuters, 7/1).

On the Campaign Trail

  • Although presumptive Republican presidential nominee Mitt Romney frequently has said that he would issue an executive order to repeal the federal health reform law if he is elected, he has other strategies at his disposal if his “Day One strategy” does not pan out. Conservatives acknowledge that the executive order tactic could fail, and if Romney is unable to rely on Congress to pass a repeal bill, some experts on the Affordable Care Act note that he could undertake one of at least five administrative actions to achieve the same goal (Feder, Politico, 7/7).
  • In an interview with CBS News last week, presumptive Republican presidential nominee Mitt Romney said the federal health reform law’s individual mandate constitutes a tax (Rucker, Washington Post, 7/4). His comments contradicted a campaign aide’s earlier remarks that the mandate is a penalty, echoing the Obama administration’s stance on the issue (Shear, New York Times, 7/4). Romney said he disagrees with the U.S. Supreme Court‘s decision to allow the mandate to stand as a tax; however, he said the court “has the final word, and their final word is that ObamaCare is a tax” (Landsberg, Los Angeles Times, 7/4).

On the Hill

  • Last week, House Minority Leader Nancy Pelosi‘s (D-Calif.) office issued a mock memo to the Republican Women’s Policy Committee highlighting how the U.S. Supreme Court‘s decision to uphold the federal health reform law will benefit women in their districts. The memo cites reform law provisions that prevent insurers from denying coverage based on pre-existing conditions and dropping coverage when women become pregnant (Lillis, The Hill, 7/2).

Covering the Uninsured

  • Nearly 13 million uninsured U.S. residents who would be eligible for Medicaid under the federal health reform law’s expansion provision live in the 27 states that sought to overturn the law, according to new enrollment estimates by the Urban Institute. More than 10 million of those individuals also will not qualify to receive federal subsidies to purchase insurance from the state exchanges because they earn less than 100% of the federal poverty level (Daly, Modern Healthcare, 6/29).

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