Federal move to expand Medicaid could burden states

Washington -- Legislative proposals in Congress to expand Medicaid to cover all lower-income Americans have some worried that states may not be able to foot their part of the bill.

The concept of expanding Medicaid hasn't attracted nearly as much criticism as have congressional proposals to create a public health insurance plan option, for example. Many consumer advocates, lawmakers and medical societies -- including the American Medical Association -- support wider Medicaid coverage.

The House Democrats' American Health Choices Act, for example, would pay for the cost of expanding Medicaid to cover everyone earning up to 133% of the federal poverty level, adding to existing coverage of children and pregnant women. This kind of expansion makes sense, said Joan Alker, co-executive director of the Center for Children and Families at Georgetown University. "This would bring the whole family together across the board."

The Senate Finance Committee is negotiating a bipartisan health reform bill that's expected to include a Medicaid expansion as well.

A larger Medicaid program would reach a key part of the uninsured population. About one-third of the 46 million uninsured are childless adults earning less than 200% of poverty. Twenty-one states offer some level of coverage to nondisabled childless adults, according to the Kaiser Commission on Medicaid and the Uninsured. But Medicaid does not provide matching dollars for this coverage as it does for covering children and pregnant women.

A match with a catch?

But governors are concerned that Congress might ask states to shoulder too much of the burden of expanding Medicaid, said Matt Salo, director of the National Governors Assn.'s Health and Human Services Committee. "There is no capacity for states to realistically increase their expenditures on Medicaid."

Some lawmakers, such as Sen. Orrin Hatch (R, Utah), are worried that the federal government is making promises it can't keep. In late July, Hatch withdrew from Senate Finance Committee discussions about a bipartisan health reform bill. Six other committee members, including Chair Max Baucus (D, Mont.), continued to talk.

Hatch said he withdrew from the negotiations in part because the bill would expand the federal government's role in the health system at a time when Medicare and Medicaid already are projected to consume a larger share of the federal budget in coming decades. "And yet they're adding even more of a burden to those costs," Hatch said.

State Medicaid directors are excited about the prospect of having standardized Medicaid eligibility. But some are worried that Medicaid enrollment could increase even more quickly than the federal government projects, said Oklahoma Medicaid Director Lynn Mitchell, MD, MPH. Medicaid covers about 45 million people in the U.S., but millions of uninsured are eligible for Medicaid but not enrolled. About 60,000 people in Oklahoma fit that bill, according to Jo Kilgore, spokeswoman for the Oklahoma Health Care Authority.

Medicaid pay is another concern. Fees for physicians, hospitals and other health professionals are a large expense for state Medicaid programs, Salo said. The House reform bill would cover the cost of increasing fees for Medicaid primary care services to match Medicare rates as early as 2012, but not for specialty care services. This raises the possibility of continued access problems for Medicaid enrollees in certain states.

"Medicaid is relatively cost-effective, because we pay providers across the board so low," Salo said. Many Medicaid programs pay physicians at rates below Medicare.

AMA policy supports expanding Medicaid to cover all Americans earning less than 100% of the federal poverty level. The Association -- which endorsed the House Democratic reform bill -- would prefer that Congress increase Medicaid pay for all physicians and allow enrollees to use federal funds to buy private insurance.

Potential state battles

States might fare even more poorly under the Finance Committee bill under discussion.

A May 11 committee policy options paper -- one of three that formed the basis for the panel's bill -- called for the federal government to pay for the first five years of a Medicaid expansion to 150% of poverty, then return to a federal/state share. The federal government pays an average of 57% of Medicaid spending, ranging from a minimum of 50% to a maximum of 83%. The governors group opposes this kind of unfunded mandate, Salo said.

Expanding Medicaid also could bring up fiscal contention among the states. New York Gov. David Paterson, for example, wrote in a July 21 letter to the New York congressional delegation that the House bill should not reward states that have offered only more basic Medicaid coverage with a 100% matching rate during the Medicaid expansion.

But Medicaid needs its foundation solidified before it's expanded, said Mark V. Pauly, PhD, a professor in the Health Care Management Dept. at the University of Pennsylvania Wharton School. Low-income states generally offer the least comprehensive and most difficult-to-access Medicaid coverage and need the most federal support, he said. On the other hand, wealthier states might not even need the 50% minimum match they receive to provide essential Medicaid coverage.

"In the high-spending states, they may not be spending on things of such high value," he said.

Giving states a 100% matching rate for an expansion could lead to more waste, said Pauly, who wrote a Medicaid reform policy paper in July published by the American Enterprise Institute, a conservative think tank.