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Why (even red) states are expanding Medicaid and what that means for health systems

Major health reform may be all but dead at the federal level, but many states still have big decisions to make.

When a social welfare program previously vilified by Republicans nearly across the board gets approval from the state legislature in deep red Kansas, you know something is up.

Although Kansas Gov. Sam Brownback (R) ultimately vetoed the legislature's decision to expand the population it covers with Medicaid, it isn't the only red state to seriously consider the idea.

Major health reform may be all but dead at the federal level, but many states still have big decisions to make as the Affordable Care Act (ACA) — and the ability for states to opt in or out of expanding the number of residents covered by Medicaid — remains the law of the land.

Lawmakers throughout the country on both sides of the aisle are taking a hard look at expanding state Medicaid eligibility to include most low-income adults up to 138% of the federal poverty level. This comes as the ACA, which first introduced Medicaid expansion as a key way to increase insurance coverage, enjoys its highest level of public popularity since its inception.

The data show multiple successes in expanding Medicaid coverage — and the timing is attractive as federal matching funds will decrease starting next year.

“That money is a huge attraction and the politics have changed significantly as more people are aware what an effective and important a program Medicaid is,” Adam Searing, research professor at the Georgetown University Center for Children and Families (CCF), told Healthcare Dive.

The results are compelling: Expansion states have dramatically decreased their uninsured population, as would be expected. But expansion states also report overall improved access to care, better integration and patient relationships and solid gains in the bottom line for states and their health systems.

Some states are actively considering at least a form of expansion, including a few with roots that run pretty deeply red. But other states remain staunchly opposed — and governors who will not go along with expansion usually require a majority in the state legislature to be overruled.

In particular, Kentucky and Indiana have proposed more conservative expansion models currently being evaluated by the CMS. Members of the healthcare sector are closely watching these decisions, which could signal whether Republicans will ultimately accept Medicaid expansion as being here to stay — or continue to fight it.

 

The drivers of Medicaid expansion

Medicaid expansion was initially a major part of the ACA, but the U.S. Supreme Court decision that found the law constitutional threw President Obama’s administration a curveball by finding that states could not be required to expand their Medicaid populations.

This led to about half of states deciding to expand. A few states have changed from their original stance with new administrations but even Republican governors have said expansion has benefited their residents. Medicaid expansion under the ACA has occurred in all but 19 states and brought coverage to 12 million people. 


“I think what states saw and what everybody saw was that expansion had strong bipartisan support. That played a huge role in the demise of AHCA."

Adam Searing

Research professor at the Georgetown University Center for Children and Families


The popularity of Medicaid and the expansion opportunities played a key part in the failure of the Republican Party to get enough support for legislation to repeal the ACA, which the GOP called the American Health Care Act (AHCA). A handful of GOP governors even went as far as to oppose recent efforts to repeal the ACA because it would eventually eliminate the expansion model.

“I think what states saw and what everybody saw was that expansion had strong bipartisan support,” Searing said. “That played a huge role in the demise of AHCA."

Nineteen states have not adopted any form of Medicaid expansion. A handful of states — including Kansas, Kentucky and Indiana — have started flirting with the idea this year, but the GOP's failure to go through with its oft-stated promise to repeal the ACA will likely lead to only more interest in the concept.

The benefits for states

A major concern with expansion has been states’ ability to handle pent up demand for services from so many people receiving coverage. But that worry hasn’t panned out, according to Dee Mahan, director of Medicaid initiatives at Families USA. 


“I was actually really surprised how much access even people in very rural areas had. It is a concern, but not expanding isn’t something that really helps that.”

Dee Mahan

Director of Medicaid initiatives at Families USA


With more people insured, providers have received more reliable reimbursement. The increase in people seeking services actually led to more revenue that health systems and clinics could invest in hiring staff and better equipment, she told Healthcare Dive.

“I was actually really surprised how much access even people in very rural areas had,” she said. “It is a concern, but not expanding isn’t something that really helps that.”

In addition to new equipment and more staff, health systems in expansion states have opened new clinics to meet the increased demand. Health executives in expansion states are more likely to report increased attention to care integration and improved delivery systems. Health centers in expansion states were also more likely to report expanding capacity for dental and mental health services.

A study of Michigan’s Medicaid expansion found that after one year, appointment availability actually increased by 6 percentage points for new Medicaid patients and median wait times for all enrollees were within two weeks.

Up until this year, the federal government has paid the full cost of expansion for states. Now states must pay 5% of the costs for 2017 — and that portion will increase until it hits 10% in 2020. The increasing budget pressure for states will be a major test for expansion. Critics of the ACA often said states would not be able to afford expansion by themselves and the federal guarantee of 90% payment would not hold.

Searing said that simply isn’t the case.

“Honestly, the deal is so good even with the states having to put in a little more money, it’s not going to be a financial struggle,” he said.

States that have expanded Medicaid have seen significant reduction in rates of uninsured, including among those with low incomes and other vulnerable populations like children, mothers and early retirees. They have also had improved access to care, more use of services and more affordable care, according to a Kaiser Family Foundation review of more than 100 studies since January 2014.

For states that have expanded, broader economic effects can also be seen. Uncompensated care costs for hospitals have gone down and some states have reported growth in the job market. States that have expanded have also seen fewer rural hospital closures than non-expansion states, according to Families USA.

“As the Trump administration and Congress debate ACA repeal and replacement, gains in coverage and access as well as economic benefits to states and providers are at stake if the Medicaid expansion in repealed,” the authors wrote.

As one hospital executive told researchers at the CCF: “We have by far had the two best financial years in our history, and this has been driven entirely by Medicaid expansion.”

Waivers will play a bigger role

One key aspect of Medicaid expansion that is set to receive a lot more attention is the ability for states to expand with a program that doesn’t include certain Medicaid requirements. This is accomplished through a Section 1115 demonstration waiver, which must be approved by the CMS.

The Obama administration approved seven state waivers. Common themes in those waivers included charging premiums above federal limits and eliminating non-emergency medical transportation. They also offered healthy behavior incentives in an attempt to reduce premiums and co-pays.

One idea states are considering for a more conservative approach to expansion is requiring able-bodied adults who receive coverage to show proof of work. Those who push for such policies say they eliminate any disincentive to work that the program may create, but opponents say people need health services first and foremost before being able to work reliably.

Nearly eight in 10 adults on Medicaid are already in working families and a work requirement would add more administrative burden to states, Mahan said. It gets expensive for states to track and monitor work requirement data.

“It’s a lot of money to try to follow a small number of people,” she said.

But the Trump administration has signaled it is open to waivers with work requirements. New HHS Secretary Tom Price has said state flexibility with such issues is key to Medicaid’s success.

Searing said, however, that the waiver statute is clear in stating that provisions can only be waived with the intent of providing better and more efficient care.

“This isn’t so a conservative state can make it harder for people to get Medicaid,” he said.

Policy experts are closely watching a pending waiver request from Indiana that includes work requirements. Trump’s CMS has yet to rule on it.

Kentucky also has a pending request to change its Medicaid expansion program. Kentucky Governor Matt Bevin (R) has insisted on changes to the program first enacted under former Governor Steve Beshear, a Democrat. The plan would create a far more conservative program that includes work requirements and premium payments by even the poorest beneficiaries.

New CMS Administrator Seema Verma has said she will sit out the decision on Kentucky’s waiver because her consulting firm helped craft the state’s plan before she began work at the CMS.

Medicaid expansion has revealed an interesting split in Republicans at the state level. Several Republicans are currently governing states that expanded and most of them have gone along with the decision. With the data clearly showing benefits for residents of expansion states, most of these governors came out against repealing the ACA, which was otherwise a major and unquestioned plank in the GOP party platform.

But not all red state governors are convinced. Last month, Kansas Governor Sam Brownback, a staunch conservative, vetoed a decision by the Republican-controlled Kansas Legislature to expand Medicaid. Lawmakers were shy of overruling Brownback's veto by three votes.

“Medicaid expansion does not help vulnerable Kansas,” Brownback wrote on Twitter. “Instead, it prioritizes able-bodied adults above the truly needy.”

The situation is reversed in Tennessee, Utah, Virginia and Wyoming, where Republican governors have supported and in some cases tried to push through expansion measures only to be thwarted by state legislatures.

Searing said that expansion is a good move for states, even if they put restrictions on coverage that he and other policy analysts don’t approve of. With the AHCA seemingly dead in its tracks, there “will be a lot of incentive to compromise on all sides,” he said.

“I do think that we have had a big change in the last couple of months in how the public talks about and thinks about health coverage,” he said. “People got a lot of information through the debate."


“I do think that we have had a big change in the last couple of months in how the public talks about and thinks about health coverage. People got a lot of information through the debate."

Adam Searing

Research professor at the Georgetown University Center for Children and Families


 

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Filed Under: Health Law Hospital Administration Policy & Regulation
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