Why Haven’t More States Expanded Medicaid Yet?

“The Court today limits the financial pressure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical matter, that means States may now choose to reject the expansion; that is the whole point. But that does not mean all or even any will. Some States may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administrative resources necessary to support the expansion. Other States, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the Act offers at the outset.” — Supreme Court Chief Justice John Roberts, NFIB v. Sebelius, June 28, 2012

Two years after Roberts issued the majority opinion upholding the Affordable Care Act, the decision to expand Medicaid is far from settled. Despite predictions that all states will eventually embrace Medicaid expansion, a significant number continue to hold out.

At last count, 26 states and the District of Columbia intend to expand Medicaid, while four are actively considering it and 20 have no plans to expand the program at this time.

Medicaid Wasn’t Expected To Be the Crux of the Case

The Medicaid expansion was considered the sleeper issue in the legal case against the ACA that ultimately made its way up to the Supreme Court. Stakeholders were closely watching issues like the constitutionality of the individual mandate, not thinking Medicaid would be significant. And yet, in a surprise decision, the Supreme Court effectively took the teeth out of one of the law’s major efforts to expand health insurance, by making it illegal to penalize states for not participating in the Medicaid expansion.

The ACA raises Medicaid eligibility to 138% of the federal poverty level and eliminates categorical eligibility; the Supreme Court ruling makes it optional for states to participate in the expansion. The federal government is funding the majority of the expansion.

Because of the additional federal dollars that come with expansion, the expansion is “simply too good a deal to pass up” for most states, Ezekiel Emanuel wrote in a Dallas Morning News opinion piece published shortly after the Supreme Court decision. At the same time, Emanuel, who helped craft the ACA, conceded, “For ideological reasons, some states, such as Texas or Florida, may decide not to expand their Medicaid programs.”

The expansion prognosticating continued into this year. Then-HHS Secretary Kathleen Sebelius and Vice President Biden both predicted that all states would expand Medicaid … eventually.

So far in 2014, only one state — New Hampshire — has made any definitive move to expand Medicaid. Compare that with 2013, when at least 19 states made progress toward expanding Medicaid, either at the legislative or gubernatorial level. Have we hit stasis?

What’s Keeping More States From Expanding

The cost burden on states — and whether the federal government will uphold its end of the financial deal — remains a major policy argument against participation. For states expanding their Medicaid programs, the federal government will fund 100% of the expansion for three years and 90% thereafter.

Even a 10% contribution might be too big for some states, as a recent Journal of the American Medical Association Viewpoint noted. In the piece, researchers from the University of Michigan recounted how interviews they conducted with state officials showed that “many Republicans do not trust the federal government to sustain its increased share of funding for the Medicaid expansion. They argue that paying 10% for a program they do not like and that already accounts for a large portion of their budget is still too much. They recognize that once Medicaid is expanded, it will be difficult politically to retract the program.”

On the other hand, some policy experts had anticipated that the promise additional federal funding would be compelling enough for more states to expand Medicaid.

“That influx of federal funding is really significant for most states,” Caroline Pearson, a vice president at Avalere Health who tracks Medicaid issues and ACA implementation, told California Healthline. “I expected the money to talk in this case, and I underestimated how strong the politics around this really are.”

Ideology, rather than policy, seems to be at the heart of some states’ arguments against expansion, Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, noted. He told California Healthline that the cost argument seems to be losing some steam, particularly as the Congressional Budget Office recently scaled back its estimate of how much it would cost states to expand Medicaid.

What Could Spur More States To Expand

While most experts agree that action on expansion has quieted down for the year, there are a few issues that could affect uptake in the months and years to come.

2014 elections: The November elections bring the possibility of leadership changes. A switch at a state’s executive branch could ignite action toward expansion. However, as the expansion battle in Virginia shows, nothing is guaranteed. The support of the Legislature is critical, experts said.

Federal flexibility: Arkansas’ alternative Medicaid expansion, which relies on the extension of private coverage to low-income residents, opened up the possibility for states to explore more custom options. Both Park and Pearson said that as CMS signals flexibility in its consideration of alternative expansion plans, more states could file for waivers.

Success in expanding states: States that have opted against the Medicaid expansion will be paying close attention to states that did expand their programs, particularly to see the effect on their budgets and the economy, Robin Rudowitz, an associate director at the Kaiser Commission on Medicaid and the Uninsured, said. They’ll also be considering what effect their decision has on health care providers and the safety net, she added.

What’s Next

Not all states immediately embraced Medicaid when the program rolled out in 1965, Park pointed out. Arizona, for one, held out until 1982.

The big movement toward expansion might be over, and from now on there might be fewer states moving to expand each year. Pearson said she expects perhaps anywhere from two to five states a year to announce expansion plans, until they eventually all participate.

“As the … anti-ACA politics die down generally, specifically the anti-Obamacare Republican politics, the pressure will come off. It will become more of a debate about coverage and finances and budget impact, and less of a debate about Obamacare and whether you’re supportive of it. I think that will make it easier for some of these Republican states to actually expand,” she said.

Around the nation

Here’s what else is making news on the road to reform.

Another cost conundrum: Federal funding that aimed to get state-operated health insurance exchanges up and running expires at the end of this year. Over at Vox, Sarah Kliff takes a look at how states are planning to cover the funding gap.

Questioning care models: At the New York Times‘ “Upshot,” economist Austin Frakt explores the up- and downsides of larger health care companies and their effect on prices and the market. 

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