Medicaid Expansion Now in States' Hands

Hospitals are facing a showdown with state officials over the U.S. Supreme Court's decision on the expansion of Medicaid under the Patient Protection and Affordable Care Act.

Last week the court ruled that states couldn't be coerced into agreeing to the expansion, which would have added an estimated 17 million to the Medicaid rolls. Instead, states may simply decide not to participate in the expansion, which is 100% financed with federal funds for the first three years and then 90% covered for the next seven.

Almost immediately after the release of the Supreme Court decision Republican-led states began announcing that they would not participate in the expansion. In Florida, which was behind the legal challenge to the Medicaid expansion and where four million people are uninsured, Gov. Rick Scott (R) at first suggested that he might be amenable to the expansion, but by Monday stood firmly opposed to it.

Officials at the Florida Hospital Association are now in the process of sorting out their options, Bruce Rueben, FHA president told HealthLeaders Media. "We want to see the coverage extended because that's the only way that the benefits of the law are going to be realized."

He noted that hospitals are contributing billions of dollars toward the coverage through cuts to hospital payments in Medicare and Medicaid. "We want to see people in Florida get the benefit of all that. Otherwise hospitals are simply going to have fewer resources to provide the same amount of uncompensated care that they have been providing."

Among the issues to be reviewed is how much power the Florida legislature will have to influence Gov. Scott's decision. "Nobody is going to change their mind before Nov. 6. Everyone is going to hold their position until we know the outcome of the elections. Then we'll sit down and begin to work with everybody."

For now, Reuben says the FHA will begin to build an economic and social case for extending Medicaid coverage. That means telling the story of Florida uninsured. According to the Urban Institute, about 1.6 million uninsured Floridian adults would be eligible for Medicaid if eligibility was expanded to 138% of the federal poverty level.

Because the premium tax credit schedule for health insurance exchanges begins at 100%, Florida's decision not to expand its Medicaid program will leave an estimated 995,000 eligibles, whose incomes are less than 100% FPL, with no access to either tax credits or subsidies.

Nationally 11.5 million adults will find themselves in the same boat because their income is less than 100% of the FPL.

Reuben's group will also keep a close eye on efforts by the Centers for Medicare & Medicaid Services to encourage states to increase Medicaid coverage. "What kind of give and take is there between the federal government and state governments that would make it more interesting for states to expand Medicaid coverage?"

He points to Florida's Medicaid program, which currently operates under a CMS waiver. The state has asked CMS for a waiver to treat all Medicaid recipients under a managed care program. "That's an opportunity for some give and take."

DSH payments may present another opportunity for give and take. Disproportionate share hospital programs for facilities that treat a large number of indigent patients are embedded in the ACA, which provides the Department of Health and Human Services with the discretion to allocate the cuts.

In a blog for the National Association of Public Hospitals and Health Systems, Bruce Siegel, MD, the group's president and CEO, noted that DSH cuts were "written into the law on the assumption that states would be required to expand Medicaid, leading to fewer uninsured patients landing in the safety net…Without the financial help of an expanded Medicaid program, safety net hospitals absolutely cannot bear further cuts to DSH payments. In an earlier press statement Siegel asked that "policymakers and regulators wade through the Court's decision and clarify the gray areas left in the law, we implore them to revisit the DSH cuts and other hospital-based reductions."

For states that are so far declining to participate in the Medicaid expansion, the reasons for the decision are primarily financial. Although the federal government is committed to picking up the lion's share of the costs for 10 years, states are still cautious.

Anthony Wright, executive director of Health Access, a California advocacy group, says he doesn't understand that stance. "This is a great opportunity for states. There are very few investments that a state might make that could provide a 9:1 return to bolster its health system and economy. There is no tax cut or infrastructure project that provides a 9:1 bang for the buck."