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The trials and tribulations of Medicaid expansion

When Medicaid officially went into effect in 1966, the eligibility categories were very limited: The elderly (over age 65), low-income children without parents and their caretaker relatives, the blind, and the disabled. However, the Affordable Care Act (ACA) expanded Medicaid’s coverage so it was based on enrollees’ income levels. Initially, Medicaid expansion was to be a nationwide measure, but a 2012 Supreme Court decision left it up to each state to decide whether or not to participate. Under the law, the federal government pays 100% of the costs of expansion the first three years for states expanding eligibility to those earning up to 138% of the federal poverty level (FPL), or about $16,242 for an individual in 2015.

Kentucky's Medicaid expansion in a post-Beshear state

Overall, the trend has been towards adopting Medicaid expansion, which currently includess 30 states plus the District of Columbia. A recent Kaiser Family Foundation (KFF) study showed states that expanded Medicaid did better financially in fiscal year 2015, which ended Sept. 30, versus states that didn’t expand the program. Medicaid spending growth in expansion states was 3.4% versus 6.9% for non-expansion states.

Diane Rowland, executive vice president of the KFF and executive director of Foundation’s Commission on Medicaid and the Uninsured, said in a press release, “States that opted to expand Medicaid saw significant gains in coverage, reductions in the uninsured, and access to additional federal funds. But many other changes are underway in Medicaid programs across the country as states engage in an array of delivery system reforms to help coordinate care and control costs.” Some of these measures include Medicaid managed care, accountable care organizations, more home- and community-based long-term care services, and refined pharmacy programs to help reduce expenditures for high-cost and specialty drugs.

Kentucky, which opted for expansion in 2014 initiated by outgoing Democratic Gov. Steve Beshear, has been called the “poster-child for the implementation of the ACA.”  More than 400,000 residents, representing more than 10% of the state population, enrolled in Medicaid – an 87% increase in average monthly enrollment from 2013. This was the largest percentage change in any state. In addition, the state’s uninsured rate fell from 14.3% to 8.5% in one year (2013 – 2014), according to U.S. Census data.

However, Medicaid expansion in Kentucky just got complicated. The newly elected governor, Republican Matt Bevin, said he would repeal the state’s Medicaid expansion during his campaign and eliminate the state insurance marketplace, Kynect. An estimated 100,000 residents gained coverage through the state exchange, according to Modern Healthcare. Gov. Bevin has since backed off and said instead he will freeze the program immediately and stop any new enrollment. However, this can only be accomplished via a waiver from the federal government, which many say will be blocked.

As reported in American Health Line, Bevin has mentioned changing Medicaid eligibility requirements via a waiver that would require some beneficiaries to pay premiums. Laura Synder, a senior policy analyst with the Kaiser Family Foundation, told Healthcare Dive if Gov. Bevin did move ahead with his campaign promises, “it would change the pattern of care for residents. A lot of those folks probably would end up uninsured and without a source of coverage.”

However, any changes Gov. Bevin plans will take some time. Judy Solomon, vice president for health policy at the Center for Budget and Policy Priorities, told The New York Times, “You can’t turn the switch so quickly.” The federal government needs a years notice from states seeking to shut down their insurance exchange. 

Negotiating waivers

Seven states have negotiated with CMS to waive certain Medicaid requirements, including several to help reduce costs, such as California. The state negotiated a waiver last week to change its Medicaid program, as previously reported in Healthcare Dive. The $6.2 billion “Medi-Cal 2020” agreement allocates $3.3 billion to improve safety and quality care at public hospitals, with $236 million for coverage of uninsured Californians for the first year of the deal. The new waiver will provide more flexibility to public hospitals and clinics, enabling them to focus more on outpatient and primary care.

Montana, the most recent state to expand the program, will do so with a waiver program starting Jan. 1 2016, with an estimated 70,000 enrollees. Beneficiaries with income levels 50% of the federal poverty level or higher must contribute premiums equal to 2% of their income. There will be co-pays for certain services, potential termination for those with incomes 100% to 138% of FPL who don’t pay their premiums and a voluntary workplace assessment survey to assist with job placement, according to American Health Line. Other states granted waivers to make changes to Medicaid guidelines include Arkansas, Indiana, Iowa, Michigan, New Hampshire, and Pennsylvania.

Overall, Synder told Healthcare Dive, “There’s a lot of variation from state-to-state including the delivery system they use, what rates they pay providers, benefits, and what restrictions they have. There’s a common refrain, ‘When you’ve seen one Medicaid program, you’ve seen one Medicaid program.'”  She added some trends include states moving towards managed care as well as increased rates and benefits - thanks to an improving economy.  

Some states, like New York, coordinate special Medicaid programs with CMS. A new model for providing Medicare-Medicaid enrollees with better-coordinated, people-centered care, called the “Fully Integrated Duals Advantage for Individuals with Intellectual and Developmental Disabilities (FIDA-IDD)," is scheduled to begin in April 2016. The NY State Department of Health and the Office for People with Developmental Disabilities will be running the program with a focus on long-term care needs. According to CMS, the program will provide more opportunities for enrollees “to direct their own services, be involved in care planning and live as independently in the community as possible.” A CMS spokesperson told Healthcare Dive approximately 20,000 Medicare-Medicaid IDD enrollees will have the opportunity to receive more coordinated care via voluntary enrollment starting April 1.

New York and CMS will be working with Partners Health Plan to offer the program in New York City, Long Island, Rockland, and Westchester Counties. The program will use the capitated model, where a state and CMS contract with health plans that receive a prospective, blended payment to provide enrollees with coordinated care. The program will run through Dec. 31, 2020 and will be evaluated under the Medicaid waiver of the Social Security Act, which includes improving the quality of care without increasing spending; reducing spending without reducing quality of care; or improving the quality and care and reducing spending, a CMS spokesperson said.

The Coverage Gap

A recent KFF report states Medicaid expansion was envisioned to fill historical gaps in Medicaid eligibility for adults, and as a way to extend coverage for those with low incomes, with premium tax credits for marketplace coverage for those with moderate incomes. There are twenty states that have not expanded Medicaid, and some have very limited eligibility. The median income for parents this year is 44% of the federal poverty level or an annual income of $8,840 for a family of three and childless adults remain ineligible. The report estimates within the non-expansion states, there are an estimated 3.1 million adults who fall into a coverage gap. They make too much money to qualify for Medicaid, but not enough to qualify for marketplace subsidies. “That’s always a factor that decision makers are looking at to decide whether to adopt expansion or not,” explained Synder.

Geographically, most individuals in the coverage gap reside in the South, with 25% in Texas, 18% in Florida, 10% in Georgia, 8% in North Carolina, and 39% in the remainder of the twenty states. This may be reflected in the fact that more than half of Southern states have opted out of Medicaid expansion. Also, more than half of adults that fall into the coverage gap are above age 35. The report states, “Adults of these ages are likely to have increasing health needs, and research has demonstrated that uninsured people in this age range may leave health needs untreated until they become eligible for Medicare at age 65.”

What’s ahead?

Whether additional states will expand Medicaid remains to be seen. Utah, Tennessee, and Wyoming are currently considering the option. Although, according to Synder, the Medicaid expansion program provides 100% federal matching funds for those newly eligible through Dec. 31; the rate will drop to 90% starting in 2016 and continue through 2020. “This is a much higher match rate than states see under the regular Medicaid program. So there are a lot of financial incentives to potentially participate in the program and a lot of federal dollars at stake,” she told Healthcare Dive. With an estimated 32 million Americans still uninsured, of which 8.6 million currently qualify for Medicaid, it’s difficult to image the repercussions should Kentucky roll back its coverage.

As President Obama remarked in a recent interview regarding Medicaid expansion being opposed by GOP governors and legislatures, “We can’t force them to do it. And it means a lot of people are falling through the cracks and we can’t change the design of the law to reach those folks.” He added he was hopeful the “people of Florida begin to recognize over the next year, two years, three years...that it makes no sense for the states essentially to refuse help from the federal government.” Synder agrees. “Maybe it’s just going to take some time for all the states to adopt expansion, but it’s difficult to say – it’s up to each individual state,” she said. 

Filed Under: Health Law Policy & Regulation
Top image credit: Alexandre Normand