Thursday, June 28, 2012

The Supreme Court Ruling on Health Care, Its Impact on Medicaid, and 29 Republican Governors--Be Careful You Might Get What You Wish For

Conservatives wanted the Supreme Court to do the work of killing the Affordable Care Act (ACA) for them. They didn’t get their wish but the Court may have put conservatives into a political corner they will find very uncomfortable.

Under the new health law, the Medicaid program will be substantially expanded. Those making up to 133% of the federal poverty level (about $30,000 in annual income for a family of four) will be eligible for Medicaid benefits. Many conservative governors—there are 29 Republican governors—were angry that the federal government would force even more Medicaid spending on them at a time their current Medicaid programs have become a major burden on their state budgets. Originally, under the ACA, if the state didn’t agree to expand their Medicaid program, they would lose all Medicaid funding.

The Supreme Court has now said that if a state doesn’t want to expand their Medicaid programs they don’t have to and they will not lose their current Medicaid funding from the federal government.

Now, conservative governors who said they wanted no part of a Medicaid expansion shoved down their throats from Washington have the ability to opt out of it without a penalty. That puts those conservative governors and their legislatures on one big hot seat. Whether or not their state gets a Medicaid expansion is now entirely up to them. It’s put up or shut up time for conservative governors and state legislators who said the ACA was an onerous expansion of federal powers over their states.

If some states do reject the Medicaid expansion, consumers between 100% of poverty and 133% of poverty would become eligible for the private federally subsidized insurance in the exchanges since the subsidies start at 100% of poverty. That would mean more business for those offering private insurance in the exchanges.

It also means that the federal government’s cost of covering these people would increase—covering them under Medicaid would be cheaper than under the private plans in the exchanges.

For those between 100% of poverty and 133% of poverty, it would be a mixed bag. Instead of a Medicaid plan, they would get a mainstream private insurance plan from the exchange that could gain them access to the health care system beyond only the providers who accept Medicaid patients. But they would have to pay 2% of their income in premiums—$600 a year if they make $30,000 a year. And, unlike Medicaid, they would be subject to standard deductibles and copays—perhaps an upfront $1,000 deductible per person. The cheapest plan, the bronze plan, is intended to only cover about 60% of health care costs.

Governors even end up having an incentive to dump Medicaid people onto the exchange—the state has to pay 10% of any Medicaid extension starting in 2017 but none of the cost of subsidies in the private exchanges.

And, some states don't now provide Medicaid coverage for some poor people making less than 100% of the poverty level--leaving them caught in a gap before federal coverage starts at 100%.

So, it’s not an open and shut case for the states on what they should do.

And, can you even imagine the pressure these governors and legislators are going to come under from providers? Hospitals, for example, will suffer cuts under the new health care law--cuts they agreed to in order to increase the number of people coming to them with Medicaid cards in hand. If the states don't take the Medicaid money, the hospitals will be left with the cuts but not get the benefit of more patients gaining coverage.

Many of these conservative governors and state legislators will have lots of options--options they will have to vet openly in front of all of their voters. And no one is shoving anything down their throats--it's all up to them.
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