Expanding Medicaid is the financially preferable option for states in general, according to a study by the RAND Corporation published in the journal Health Affairs.
History
The Patient Protection and Affordable Care Act of 2010 was intended to require all states to expand Medicaid eligibility to all adults earning up to 138 percent of the federal poverty level. CMS will pay for 100 percent of the cost of the newly eligible for three years, tapering off to 90 percent by 2020 with states paying the difference.
The Supreme Court shot down that mandate last year, relegating it as an optional provision of the law. HHS ruled the PPACA did not allow states to use federal funds for "partial expansions" of Medicaid through which states could raise eligibility to some adult populations below 138 percent of the poverty line.
That gave states an all-or-nothing choice: They could choose to expand and accept the federal money with the caveat of a potentially larger Medicaid bill in the long term, or they could leave the federal money on the table and either maintain current levels of Medicaid assistance or fund other low-income coverage initiatives at their own expense.
Outcomes
Fourteen states have since opted out of loosening their Medicaid enrollment restrictions.
The study's authors found this translates to $8.4 billion in forgone federal payments to states, and 3.6 million people who would have been eligible for expanded Medicaid will remain uninsured.
Individuals who are not enrolled in Medicaid at 100 to 138 percent of the FPL will qualify for federal subsidies to purchase insurance through the health insurance marketplaces that launch next year. However, a loophole in the law does not grant Americans earning less than 100 percent of the FPL with those same subsidies to afford health insurance. In states with Medicaid income thresholds below the FPL, many low-income people earning below 100 percent of the FPL and without employer-sponsored health benefits will be caught in a vacuum of affordable health insurance, as they won't be eligible for Medicaid or financial assistance via the exchanges — unless they are recent immigrants.
The cost to states and providers
By not allowing Medicaid enrollment to swell to higher income levels, states avoid taking on a higher liability for the program's cost in the long term, the report noted. "Considering constrained state budgets, even the small increase in payments that states will make beginning after 2016 [when the feds' share starts to shrink] could be hard for them to bear," according to the report.
However, states that don't expand face additional costs outside Medicaid. While expanding Medicaid is optional, new fees, taxes and cuts to Medicare reimbursements and disproportionate share hospital payments included in the law are not. States that reject the federal funding for a larger Medicaid program will take a further financial hit through less compensatory funds for hospitals that care for the elderly or indigent.
In addition, state and federal payments for uncompensated care will also grow as a result of rejections to Medicaid expansion, according to the study. Governments paid $56 billion to providers for uncompensated care in 2008, 30 percent of which was paid by state and local governments. If all states and the District of Columbia expanded Medicaid, the report projected overall uncompensated care spending would fall $26.9 billion, saving states a net $17.1 billion.
With the 14 non-expansion states, the study projects federal spending on Medicaid —offset by less uncompensated care funding — will grow by $94.2 billion in 2016, while state spending will drop a net $16.1 billion.
Alternatives
Researchers analyzed alternative options proposed by governors and others skeptical of the PPACA's method of increasing the size and scope of Medicaid. The first would extend federal subsidies to less than 100 percent of the FPL for states that decide against expanding Medicaid. That method would insure 1.1 billion more people and save states $16.2 billion in 2016, nearly the same amount of savings as projections forecast under the current model, while federal spending would jump $5.3 billion, according to the study.
The other alternative, a "partial expansion," which would apply the 100 percent federal funding for newly eligible Americans in states that raised the Medicaid income cap to just 100 percent of the FPL, would save states $15.8 billion and lower the feds' spending increase to $90.1 billion in 2016, yielding no change in the uninsured rate currently projected for 2016, according to the study.
3 Statistics on Physicians' Willingness to Take on the Newly Insured Under PPACA
California Wants Fines for Employers With Workers on Medicaid
History
The Patient Protection and Affordable Care Act of 2010 was intended to require all states to expand Medicaid eligibility to all adults earning up to 138 percent of the federal poverty level. CMS will pay for 100 percent of the cost of the newly eligible for three years, tapering off to 90 percent by 2020 with states paying the difference.
The Supreme Court shot down that mandate last year, relegating it as an optional provision of the law. HHS ruled the PPACA did not allow states to use federal funds for "partial expansions" of Medicaid through which states could raise eligibility to some adult populations below 138 percent of the poverty line.
That gave states an all-or-nothing choice: They could choose to expand and accept the federal money with the caveat of a potentially larger Medicaid bill in the long term, or they could leave the federal money on the table and either maintain current levels of Medicaid assistance or fund other low-income coverage initiatives at their own expense.
Outcomes
Fourteen states have since opted out of loosening their Medicaid enrollment restrictions.
The study's authors found this translates to $8.4 billion in forgone federal payments to states, and 3.6 million people who would have been eligible for expanded Medicaid will remain uninsured.
Individuals who are not enrolled in Medicaid at 100 to 138 percent of the FPL will qualify for federal subsidies to purchase insurance through the health insurance marketplaces that launch next year. However, a loophole in the law does not grant Americans earning less than 100 percent of the FPL with those same subsidies to afford health insurance. In states with Medicaid income thresholds below the FPL, many low-income people earning below 100 percent of the FPL and without employer-sponsored health benefits will be caught in a vacuum of affordable health insurance, as they won't be eligible for Medicaid or financial assistance via the exchanges — unless they are recent immigrants.
The cost to states and providers
By not allowing Medicaid enrollment to swell to higher income levels, states avoid taking on a higher liability for the program's cost in the long term, the report noted. "Considering constrained state budgets, even the small increase in payments that states will make beginning after 2016 [when the feds' share starts to shrink] could be hard for them to bear," according to the report.
However, states that don't expand face additional costs outside Medicaid. While expanding Medicaid is optional, new fees, taxes and cuts to Medicare reimbursements and disproportionate share hospital payments included in the law are not. States that reject the federal funding for a larger Medicaid program will take a further financial hit through less compensatory funds for hospitals that care for the elderly or indigent.
In addition, state and federal payments for uncompensated care will also grow as a result of rejections to Medicaid expansion, according to the study. Governments paid $56 billion to providers for uncompensated care in 2008, 30 percent of which was paid by state and local governments. If all states and the District of Columbia expanded Medicaid, the report projected overall uncompensated care spending would fall $26.9 billion, saving states a net $17.1 billion.
With the 14 non-expansion states, the study projects federal spending on Medicaid —offset by less uncompensated care funding — will grow by $94.2 billion in 2016, while state spending will drop a net $16.1 billion.
Alternatives
Researchers analyzed alternative options proposed by governors and others skeptical of the PPACA's method of increasing the size and scope of Medicaid. The first would extend federal subsidies to less than 100 percent of the FPL for states that decide against expanding Medicaid. That method would insure 1.1 billion more people and save states $16.2 billion in 2016, nearly the same amount of savings as projections forecast under the current model, while federal spending would jump $5.3 billion, according to the study.
The other alternative, a "partial expansion," which would apply the 100 percent federal funding for newly eligible Americans in states that raised the Medicaid income cap to just 100 percent of the FPL, would save states $15.8 billion and lower the feds' spending increase to $90.1 billion in 2016, yielding no change in the uninsured rate currently projected for 2016, according to the study.
More Articles on Medicaid Expansion:
Study: Expanding Medicaid Reduces Long-Term Costs to States3 Statistics on Physicians' Willingness to Take on the Newly Insured Under PPACA
California Wants Fines for Employers With Workers on Medicaid