6 million projected to be shut out by states rejecting Medicaid expansion

The opt-out offered to states by the Supreme Court’s health reform ruling helps reduce the law’s cost by $84 billion.

By — Posted Aug. 6, 2012

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A new cost estimate of the Affordable Care Act coverage provisions by federal actuaries has deepened concerns among health care professionals that too many uninsured patients will continue straining the system as some states decline to take up the law’s Medicaid expansion.

The U.S. Supreme Court ruled June 28 that states can’t be penalized by losing all their Medicaid funding for opting out of the law’s Medicaid expansion that starts in 2014. Anticipating that some states as a result will choose not to expand their programs at all or at least not to the extent authorized by the statute, the Congressional Budget Office and Joint Committee on Taxation projected in a July 24 report that the law’s coverage provisions would cost $84 billion less over a decade than what was estimated in March. The downward revision is because “the reductions in spending from lower Medicaid enrollment are expected to more than offset the increase in costs from greater participation” in the law’s private health insurance exchanges, according to the report.

The net result is that 6 million fewer people will have access to Medicaid coverage in 2022 than projected in March, before the Supreme Court ruling.

The latest CBO estimate “confirms the bleak outlook” for those who don’t have access to affordable health care now, said Bruce Siegel, MD, president and chief executive officer of the National Assn. of Public Hospitals and Health Systems, in a statement. “They might not be able to count on the promise of health care reform to help them, and the safety net on which they rely will struggle to meet their needs.”

Not all of the 6 million people shut out of the Medicaid expansion are expected to remain without coverage. An estimated 3 million of them will have access to subsidized coverage through the health insurance exchanges that also will launch in 2014. The other 3 million people in this equation would remain uninsured.

Those left out of the Medicaid expansion but who might be eligible for subsidized exchange coverage are people with incomes between 100% and 133% of the federal poverty level (an effective rate of 138% once certain income is discounted). Subsidies for these additional enrollees, however, may be higher than average, given that this population is likely to have lower incomes and poorer health and to spend more on health care, according to the report. This is going to have the effect of driving up premiums in both the health insurance exchanges and the individual markets by about 2% more than earlier CBO estimates.

Some believe that the projected uninsured situation is even worse. The CBO report shows a jump of 3 million since the March 2012 report in the number of people expected to remain uninsured, “but if you actually look at the [CBO] report from March 2010, which was the projections the Affordable Care Act was based on, the jump is actually 10 million,” Dr. Siegel said.

This poses a problem for hospitals, because the law included major reductions in disproportionate share hospital funding and Medicare rates, while imposing penalties for too many readmissions. “All of these cuts were done with the assumption there would be a huge coverage expansion. And now we know the expansion will be a lot smaller than we thought it would be,” he said. As a result, he said hospitals are going to have to cut back on such services as outpatient clinics, because they’ll be losing too much money, while others may close altogether.

At safety-net facilities such as Grady Health System in Atlanta, patients will continue to receive care regardless of their ability to pay, said Leon Haley Jr., Grady’s chief of emergency medicine and deputy senior vice president of medical affairs. But “the combined impact of more uninsured and significantly reduced support for uncompensated care will continue to strain the capacity of these institutions,” he said.

Physician practices are going to feel the impact of state opt-outs as well, said Dan Mendelson, CEO and founder of Washington consultant firm Avalere Health LLC. Physicians “need a healthy provider network to exist in order to practice without disruption,” which is why many would benefit from a full Medicaid expansion. Medicaid does not pay exceptionally well, but it’s more about having continuity of care for these patients and being able to practice medicine the way they would like for those patients, he said.

Mendelson, who served as the associate director for health at the White House Office of Management and Budget during the Clinton administration, expects the political rhetoric over the Medicaid expansion eventually will come into conflict with the fiscal issues hospitals face. “CBO is assuming that a good portion of the states will not adopt the expansion, and I think that when push comes to shove, states will feel a need to move down that path” and adopt the expansion, he said. “The provider community will rally for this and say that we need this.”

How each state will handle the Medicaid expansion is still unknown, said American Medical Association President Jeremy A. Lazarus, MD. In the meantime, the AMA “remains committed to ensuring our nation’s patients have both health insurance coverage and access to quality, affordable care.” Congress and the administration should focus on improving the law while “tackling critical issues not addressed by the law to advance our health care system and ensure the best possible outcomes for patients and physicians,” Dr. Lazarus said.

A July 25 study in The New England Journal of Medicine provides more ammunition for health reform supporters who are pushing states to accept the Medicaid expansion. The study showed more than a 6% decline in mortality rates in three states — Arizona, Maine and New York — that had expanded coverage significantly to Medicaid-eligible adults since 2000, compared with nearby states that had not expanded their programs.

The ACA remains an overall cost-saver when it comes to the federal budget. In a separate estimate, CBO concluded that a House Republican bill to repeal the law would increase federal budget deficits by $109 billion over 10 years.

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The fates of Medicaid’s “newly eligible”

In its latest estimates on Affordable Care Act coverage provisions, the Congressional Budget Office and the Joint Committee on Taxation did not rely on specific state-by-state predictions about participation the Medicaid expansion. But it projected that two-thirds of Medicaid’s potential “newly eligible” under the statute would live in states that either only partially expand their programs or decline to expand at all. The report projects:

  • By 2022, one-third of the newly eligible will live in states that adopt the full Medicaid expansion to 138% of poverty.
  • By 2022, one-half of the newly eligible will live in states that only partially expand Medicaid.
  • By 2022, one-sixth of the newly eligible will live in states that opt out of the Medicaid expansion.
  • Among the newly eligible in states that decide to expand, one-third will live in states that do so in 2014, one-third will live in states that delay expansion until 2015, and one-third will live in states that delay expansion by more than a year.

Source: Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision, Congressional Budget Office, July 24 (link)

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External links

“Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” Congressional Budget Office, July 24 (link)

Letter to House Speaker John Boehner providing an estimate for HR 6079, the Repeal of Obamacare Act, CBO, July 24 (link)

“Mortality and Access to Care Among Adults After State Medicaid Expansions,” New England Journal of Medicine, July 25 (link)

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