Medicaid nonexpansion states could leave millions uninsured

In Mississippi, a holdout state, more than 166,000 people below the poverty line would be “basically left with nothing.”

By — Posted March 11, 2013

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More than 5 million of the poorest individuals may not be able to obtain health insurance under the Affordable Care Act, resulting in higher uncompensated care costs for health care systems, an analysis has concluded.

Starting in 2014, states have the option of expanding eligibility for their Medicaid programs to 133% of poverty (an effective rate of 138% when certain income is discounted from consideration). In states that don't expand Medicaid, most individuals from 100% to 400% of poverty would be eligible to apply for federal premium tax credits to buy coverage from the health insurance exchange that will operate in their states. But for those below the poverty line, no subsidized insurance options may exist in nonexpansion states.

“In states that choose not to expand, there are some 5.3 million individuals who fall above their state's Medicaid eligibility level but below 100% of the federal poverty level and thus aren't eligible” for the federal exchange subsidies, according to the analysis by audit, tax and advisory services firm KPMG LLP.

There's a fine line between the haves and have-nots in these categories: Those whose incomes fall just above the poverty line may qualify for help in purchasing private insurance, whereas someone with slightly less income at 99% of poverty does not qualify for any help, said Paul Hencoski, a partner with KPMG who heads its national government health and human services practice. In addition to the issue of coverage inequities, states that don't expand their Medicaid programs face other operational and policy considerations, such as accounting for the impact of continuing uncompensated care for the uninsured, the analysis stated.

The ACA's Medicaid expansion originally was supposed to help offset the expansion costs through billions of dollars in reductions to federal payments to hospitals, including grants that facilities receive to help pay the bills for patients who can't afford them. Hospitals agreed to the reductions in return for the expectation that they would be treating higher numbers of insured patients.

The U.S. Supreme Court affected this trade-off, however, when it ruled in 2012 that the expansion was optional for states. As a result, hospitals will continue to treat uninsured patients who otherwise would have been covered by Medicaid, while receiving fewer federal dollars to support their uncompensated care. “By not achieving the projected reduction in the uninsured population, the health care system will continue to bear the burden of caring for these individuals when their needs become critical, and, as a result, more costly,” the KPMG report said.

Many will fall into “dynamic void”

The KPMG findings reflected the most current decisions by some Republican governors to expand Medicaid in 2014 despite their opposition to the health system reform law. Some holdouts remained among GOP-led states, including Mississippi, where it's estimated that more than 166,000 poor people will “fall into this area we call the 'dynamic void,' where they're not eligible under the state's current Medicaid rules, but they also wouldn't be eligible to purchase [subsidized] private insurance through a federal exchange,” Hencoski said. “So they're basically left with nothing. They will be uninsured.”

Hencoski said he expects that more state executives leaning toward nonexpansion will change their minds. In recently adopted policy, the American Medical Association said it would work with state and specialty medical societies to advocate for full Medicaid expansion at the state level. “I think we're not done seeing a few of these states that previously declared they were not participating flip to the other side, at least in the near term,” Hencoski said.

It remains unclear if Mississippi will be one of those states. State physicians fall on both sides of the Medicaid expansion debate, said Claude D. Brunson, MD, professor of anesthesiology and senior adviser to the vice chancellor for external affairs at the University of Mississippi Medical Center. “Our physicians continue to advocate to our state's leaders that Mississippians need coverage, but many are reluctant to hang their hat on Medicaid expansion as the appropriate tool.” He said many believe the current Medicaid system is flawed and doesn't pay enough to keep practices open, but others who treat large volumes of uninsured patients support expansion.

States that do expand their Medicaid programs receive full federal assistance for the first three years of expansion, eventually taking on only up to 10% of the expansion costs thereafter. Still, some Republican governors, such as Mississippi's Phil Bryant, maintain that the cost of expansion would be too high for states.

In a March 3 editorial that he posted on his website, Bryant wrote that expansion would add $1 billion more to the already substantial Medicaid budget. In 2013 alone, Mississippi might spend up to $900 million on Medicaid, “more than 38 times what we spend on economic development and job creation,” Bryant stated.

Even without expansion, the ACA's provisions would contribute $32 million to the state's Medicaid expenditures, Bryant wrote. Democratic lawmakers and lobbyists “want to force this new burden on you, the taxpayers, before we even have all of the necessary information about the costs and ramifications from the federal government.”

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