Ruling Puts Pressure On States To Act

Updated at 7:50 p.m. on June 28

The Supreme Court has given states a way out of expanding their Medicaid programs under the health law, and top Republican officials in several states were quick to say they want to take that step.

But governors will be under strong pressure to take the federal money that would pay for coverage for millions of low-income people.

The court’s landmark ruling upheld the most controversial provision, an individual requirement to have insurance, but gave states the option of not increasing Medicaid eligibility. Yet that is crucial to the main objective of the Affordable Care Act, which beginning in 2014 is projected to increase the number of insured Americans by 30 million — 17 million via Medicaid, which serves the poor and disabled.

Medicaid would cover everyone with incomes under 133 percent of the federal poverty level, about $31,000 for a family of four. Today, the Medicaid program covers fewer than half of people with incomes under poverty.

States that don’t expand Medicaid will leave most of the people who would have qualified without coverage. That’s because people making under the federal poverty level are not eligible for federal subsidies provided by the law. Subsidies are available on a sliding income scale for people between 100 percent of the poverty level, about $23,000 for a family of four, and 400 percent, about $92,000.

While the ruling gives the 26 states that opposed the health law in court a way to avoid implementing a central provision, advocates for the poor and the health industry are likely to lobby hard for the expansion.  About 9 million people expected to gain coverage through Medicaid under the health law are in those 26 states, according to data compiled by the nonprofit Urban Institute.

Hospitals forced to care for patients without insurance are counting on Medicaid and the law’s provision for subsidies for moderate-income families. Insurance companies are banking on the growing business of managed care for Medicaid recipients under state contracts.

Donna Shalala, former Health and Human Services secretary under President Bill Clinton and now president of the University of Miami, said health care providers are “not going to let the governors leave the money on the table.”

States also have a big financial incentive: Under the law the federal government will pick up all of the costs for those newly eligible for Medicaid, and then states gradually would have to cover some of the expense, maxing out at 10 percent after 2019.

But some states worry about the future costs to them, and Mississippi officials were quick to complain.  They said the expansion would add almost 400,000 new enrollees and cost the state an estimated $1.7 billion over the next 10 years. “Mississippi taxpayers simply cannot afford that cost, so our state is not inclined to drastically expand Medicaid,” said Tate Reeves, Mississippi’s lieutenant governor.

Mississippi Gov. Phil Bryant, also a Republican, said: “Before I will make deep, draconian cuts in education and in transportation and workforce development, we will certainly seek opportunities that the state will have to reduce the welfare cost to Mississippians.”

Nebraska Gov. Dave Heineman he would forego the money.

In Missouri, House Budget Chairman Ryan Silvey predicted  the state won’t take the federal money for expanding Medicaid. “I don’t see any chance of that happening,” he said in an interview.

He said the state can’t afford to pay more than $100 million a year starting in 2017 to pay its portion of the coverage expansion. “It’s just not a sustainable option.”

Silvey said he expects most states will opt out of the expansion. He said the Medicaid expansion would result in cuts in state spending on education and public safety.

The Republican chairwoman of Idaho’s House Appropriations Committee also said her state would likely not expand Medicaid.

Rep. Henry Waxman, D-Calif., who spearheaded major expansions of Medicaid in the 1990s, said that he will seek congressional action if any state opts out. “We’re not going to let that happen if we can avoid it,” he said. “It’s not what Congress intended and people would be outraged.”

Medicaid isn’t the only challenge the states face now that the court has paved the way to move forward. Most important is the tight timeline for creating the online insurance marketplaces where individual insurance buyers and small businesses will obtain coverage. The exchanges, as they’re called, also will determine eligibility for Medicaid and subsidies.

Only 14 states and the District of Columbia have authorized creation of exchanges, while others have delayed action pending the court’s decision. “Many states won’t be ready in time,” said Paul Ginsburg, president of the Center for Studying Health System Change.

The federal government is crafting a federal exchange that states can use either temporarily or permanently, but that may require more time.  “Given the broad budget crunch in the country, and the fact that many states are not ready, I can envision the implementation of the law being pushed off,” he said.

Republicans have vowed to repeal the health law, and some Republican-led states have signaled they will not do more to implement it until after the elections.

“I continue to oppose Obamacare,” Wisconsin Gov. Scott Walker, a Republican, said in a statement. “Wisconsin will not take any action to implement Obamacare. I am hopeful that political changes in Washington D.C. later this year ultimately end the implementation of this law at the federal level.”

Cullen Werwie, spokesman for Walker, said in an email that the governor had not decided on the Medicaid expansion.

While states won’t have to decide on the Medicaid expansion until next summer, they will have to start preparing soon. The states that opposed the health law include some that would have the biggest Medicaid expansion: Texas would add 1.8 million to Medicaid and Florida would add nearly one million.

Texas Attorney General Greg Abbott saw the Medicaid ruling as a key victory in the state’s opposition to the law. While the court didn’t strike the expansion, it effectively agreed with opponents who viewed the Medicaid provision as coercive.

“Our challenge to Obamacare was never about health care or insurance – it was about the rule of law and a fight against a federal government that continues to expand. In this respect, today’s decision was a total victory,” Abbott said.

Texas Health and Human Services Executive Commissioner Tom Suehs said in a statement: “I remain concerned that expanding Medicaid without reforming it only multiplies the tremendous budget pressure the program puts on states. Medicaid already consumes a quarter of the state budget in Texas, and enrollment and costs would mushroom under the Affordable Care Act.”

Florida House Speaker Dean Cannon, a Republican, said the state would have to consider whether it can afford the Medicaid expansion.  “Florida now has a choice, and the legislature will carefully consider expansion in light of Florida’s other priorities and within the confines of a balanced budget,” he said in a statement.

Indiana also expressed some reservations about expanding Medicaid. “The court’s ruling … must be respected. But many actions that are constitutional are still unwise,” said Indiana Governor Mitch Daniels, a Republican. “Any decision to expand Medicaid in 2014 is entirely the province of the next General Assembly and governor.” 

Historically, not all states have immediately adopted optional Medicaid expansions, though most have. Arizona did not even begin its Medicaid program until the 1980s. Medicaid was created by Congress in 1965.

Sara Rosenbaum, health policy professor at George Washington University, said she expects “the overwhelming number of states” to adopt the Medicaid expansion. But she suggested it could take several years to do that.

“The pressure to participate will be enormous from health care providers and communities,” she said. “The majority of states will not want to have its poorest residents without coverage.”

Gail Wilensky, former head of the Medicaid and Medicare under President George H.W. Bush, said: “Many states have not availed themselves of all the Medicaid money they could have in the past. However, we also see that when the amount of money or share of expenses gets high enough, states seem to increase their interest.”

“Republican governors now have political cover to take the money,” she added. “They can say, ‘we have established our right to make our own decisions, so we can expand coverage and get the money or not.'”

Contributing to this story were Kaiser Health News reporters Christian Torres, David Schultz, Sarah Barr and Matthew Fleming, Carrie Feibel at KUHF in Houston and Jeffrey Hess of Mississippi Public Broadcasting.