Rejecting Medicaid expansion adds new dimension to poverty line
■ What the insurance landscape looks like for those just above 100% of poverty and those below depends on location.
Pennsylvania provides a good example of how the future coverage of certain low-income uninsured populations is teetering on a ledge.
The state's apparent decision to delay Medicaid expansion under the Affordable Care Act means “there is potentially a large cohort of people who will not have access to affordable insurance coverage” as authorized by the ACA starting in 2014, said Dennis Olmstead, vice president of practice economics and payer relations with the Pennsylvania Medical Society. Those at the poverty line or above might be able to obtain subsidized coverage through the health insurance exchange that the federal government will operate in the state. But for the poorest new eligibles who are shut out of Medicaid, there may be no subsidized coverage option available.
As a result, these individuals will do what they've always done before health system reform: seek care at hospital emergency departments, rural clinics or federally qualified health centers, or look for charity care from physicians who offer it, Olmstead said.
With states facing no hard deadline to make decisions on expanding their Medicaid programs under the ACA in 2014, two populations — those just above 100% of poverty and those below — continue to face vastly different potential coverage scenarios in many states. What the insurance landscape looks like for these two groups of people next year depends on decisions made by their states.
Two classes of uninsured?
The health system reform law gives states the option to expand their Medicaid programs to everyone up to 133% of poverty (an effective rate of 138% when certain income is discounted from consideration) starting in 2014. Anyone from 100% to 400% of poverty would be eligible to apply for federal premium tax credits to participate in the health insurance exchange that operates in the state, provided they don't have access to public insurance like Medicaid or affordable employer-based coverage.
Gary Alexander, Pennsylvania's secretary of public welfare, recently told a congressional panel that his state would hold off expanding Medicaid until it received more flexibility from Congress to improve its program. So in states like Pennsylvania that either will delay or reject the expansion, the exchange subsidies would become available to many of those in the 100%-to-138% range.
Those at lower than 100% of poverty in these states, however, face the prospect of no subsidized coverage at all, said Paul Hencoski, a partner with the audit, tax and advisory services firm KPMG LLP, who heads its national government health and human services practice.
The U.S. Supreme Court's June 2012 ruling that states can't be penalized for not expanding their Medicaid programs essentially created a void in guaranteed coverage for these uninsured populations, Hencoski said. They don't make enough money to qualify for federal subsidies on the exchange, and if their states don't expand Medicaid, they won't be covered under that program, either. As a result, they will fall into a hole between the people at lower than 100% of poverty who already had qualified for Medicaid and those at or above 100% who can seek out subsidized coverage on the exchanges.
In Texas, a state where Republican Gov. Rick Perry decisively has opposed expansion, “physicians are presently taking care of as many uninsured and low-income insured as they possibly can and still stay in business,” said Michael Speer, MD, president of the Texas Medical Assn. For those under 100% of poverty, “the word on the street will get around very quickly that there is no place other than the ER or the charity clinics” for these patients to get care in 2014, which are the same last-ditch options they have now, Dr. Speer said.
Perry has said the program is unsustainable and needs to be reformed, not expanded. The Texas Legislature will be looking at a number of issues in its upcoming session, “including innovative new ways to deliver health care services, improve the quality of care and contain costs,” said Josh Havens, Perry's press secretary.
Many states have yet to decide whether to expand Medicaid, and some health care observers predict that even those that have rejected the expansion could switch positions. Although coverage expansions under the ACA are only a year away, states are under no specific timeline to announce their Medicaid expansion intentions. Guidance issued Dec. 10, 2012, by the Dept. of Health and Human Services clarified this, along with the fact that a state won't be able to pursue just a partial expansion if it expects to receive full federal funding to pay for the first three years of the expansion.
DID YOU KNOW:
The ACA defines an affordable health plan as one that costs less than 9.5% of a worker's household income.
The all-or-nothing proposition laid out in that guidance effectively took off the table any state partial expansion plans, such as New Mexico's request to expand eligibility just up to 100% of the poverty line. If it had been allowed, this move would have covered the state's poorest new eligibles, but placed the remainder — those at 101% to 138% — on the exchange. New Mexico Gov. Susana Martinez, a Republican, said in a Jan. 9 speech that her state instead would opt for full expansion of its program.
States mull: Pay now or pay later
From a strict standpoint of premium assistance, it's a much less expensive proposition for states to send those from 100% to 138% of poverty to an exchange than to cover them through Medicaid, Hencoski said. Although the federal government initially covers 100% of the Medicaid expansion costs, that percentage starts to ratchet down in 2017.
“By the time we reach 2020, the feds are covering just 90%” of the costs to cover the new Medicaid-eligibles, he said. Individuals on subsidized plans in the exchanges, meanwhile, will receive 100% of their insurance help from the federal government through advanced premium tax credits.
Supporters of Medicaid expansion repeatedly have asserted, however, that states rejecting the eligibility change also are turning down the potential net savings that come from reducing the amount of uncompensated care in their states — a cost that strains state budgets as well as the federal budget.
For those shut out of Medicaid, affording coverage on the exchanges may not be so easy, even with the prospect of federal assistance, Hencoski said. Because federal subsidies are set on a sliding scale according to income, those who make more will be expected to contribute more to their insurance premiums — in some cases, several thousand dollars per year. Even those just at or above the federal poverty level will be required to share some of the cost with the federal government, he said.
In some circumstances, individuals between 100% and 138% of poverty may not qualify for federal exchange subsidies at all, even if Medicaid is off-limits to them, said Judith Solomon, vice president for health policy with the Washington-based Center on Budget and Policy Priorities. That's because these people would not be eligible for premium tax credits if they have offers of employer-based coverage deemed affordable. An affordable plan is defined under the ACA as one that costs less than 9.5% of the worker's household income, Solomon said.
This restriction could create a problem for a person who lives in a nonexpansion state and finds that his or her employer coverage is too expensive to accept, Solomon said.
Challenges of the newly insured
After the federal guidance effectively took away the prospect of partial Medicaid expansion as a state option, New Mexico and at least one other state decided they would not create two classes of uninsured — those below the poverty line with no subsidized coverage and those at or just above it who would have at least the possibility of federal help.
Now that Nevada Gov. Brian Sandoval, a Republican, has decided to expand Medicaid fully in 2014, those in the 100%-to-138% bracket who were facing the prospect of getting coverage only on the exchange now will get their coverage through Medicaid, along with everyone lower than the poverty line. It's a better option for this population, said Larry Matheis, executive director of the Nevada State Medical Assn.
The process of choosing insurance to buy with a federal subsidy on the exchange, even with the level of support envisioned for the insurance marketplace's website, might have proven to be particularly difficult for enrollees. “In many cases, these people have never had insurance,” Matheis said.
Patient unfamiliarity with covered health care may be the biggest challenge physicians and other health care professionals face in caring for these groups of low-income individuals, Hencoski said. Whether they're getting coverage on Medicaid or through private exchange plans, these populations “might be showing up on a physician's doorstep after perhaps years of not receiving basic preventive and maintenance health services.”
At its Interim Meeting in November 2012, the American Medical Association House of Delegates voted to work with state and medical specialty societies to advocate for full state expansions of Medicaid.
The program “provides a safety net for our most vulnerable patients and allows them to access the health care they need,” Carl A. Sirio, MD, a member of the AMA Board of Trustees, said during the meeting. “By expanding Medicaid eligibility at the state level, we can reduce the number of uninsured Americans who live sicker and die younger.”