The SCOTUS & the PPACA: The Medicaid Expansion Decision

There were many surprises when the Supreme Court (SCOTUS) issued its long-awaited decision on the Patient Protection and Affordable Care Act (PPACA).  I have written elsewhere why I think Chief Justice John Roberts surprised us all by siding with the four Democratically appointed justices to rule the individual mandate constitutional. (http://www.thedoctorweighsin.com/why-did-chief-justice-roberts-do-it/)  These five justices also surprised us by basing that ruling not on the commerce clause, but on the federal government’s right to tax citizens.  The SCOTUS by a 9 to 7 vote also ruled that the Medicaid expansion was constitutional as long as states would not lose all their existing federal funding if they choose not to expand coverage as called for in the PPACA.  This blog will examine the ramifications of the Medicaid decision, which was also a surprise. 

Much of the debate around the PPACA had concentrated on the individual mandate and not the Medicaid expansion, which as originally approved by Congress would have added up to 17 million Americans to the Medicaid health insurance program.  Health care reform advocates welcomed this expansion because it extended care to poor people, but some state officials, especially Republicans, opposed it because the states have budget deficits and no easy way to pay for the perceived new costs associated with expansion.  Medicaid provides health insurance for low income Americans and is jointly funded by the federal and state governments.  Although states do not have to participate, all states at the present time do take part in the matching program and agree to abide by the rules. 

Prior to passage of the PPACA, Medicaid covered:  pregnant women and children under 6 who had family incomes at or below 133% the Federal Poverty Level, children 6 through 18 with family incomes at or below 100% the Federal Poverty Level, parents and caretaker relatives on the cash assistance program, and elderly and disabled people with Supplemental Security Income benefits.  Beginning in January 2014, The PPACA requires participating states to cover almost all people under 65 earning household incomes at or below 133% the Federal Poverty Level.  The 2012 levels are $14,856 per year per person and $30,657 per year per household of four.  From 2014 to 2016, the federal government will pay all of the costs of the expansion; after 2016 there is a gradual decrease in federal support to 90% in 2020 and thereafter. The single best summary of the entire SCOTUS ruling can be found at the Kaiser Family Foundation here http://www.kff.org/healthreform/8332.cfm.

The SCOTUS ruling on Medicaid expansion is complicated, but the take home message is that the expansion is constitutional as long as the HHS Secretary is not able to take away existing federal support to states that decide not to participate in the expansion.  All other provisions in the PPACA are left intact.

New Medicaid provisions in the PPACA include:

·    Increase in primary care provider payments

·    Options to expand home and community-based services

·    Reductions in disproportionate share hospital payments

·    States maintaining eligibility requirements in place as of March 23, 2010

Health care reform advocates were pleased that the Medicaid expansion was upheld, but they worry that the SCOTUS ruling would allow states to opt out of the expansion.  Mental Health America, an advocacy group, stated, “The expansion of Medicaid also requires those who are newly eligible to receive mental health and substance use services at parity with other benefits.  State participation in the Medicaid expansion is therefore critically important.” (http://www.sacbee.com/2012/06/28/4596221/statement-of-mental-health-america.html)  Other advocates noted that the SCOTUS ruling left the door open for states to make it harder for adults to qualify for Medicaid.  States could throw some low-income adults “into a black hole with nowhere to turn for coverage," said Deborah Bachrach, who was New York’s Medicaid director until 2010.  (http://www.kaiserhealthnews.org/Stories/2012/July/03/states-could-cut-medicaid-rolls-after-ruling.aspx)   Another complicating factor is that under the PPACA most individuals with incomes less than 100% the Federal Poverty Level are not eligible for subsidies to purchase insurance at the newly formed state insurance exchanges and so may end up without access to insurance.  Such worries were confirmed as real when Maine’s Attorney General William Schneider announced plans to strike more than 20,000 Medicaid recipients from the state’s program to save $10 million for the state’s strapped budget.  Not everyone agrees that the Attorney General will be allowed to make this cut.  “‘The court decision was not crystal clear,’ said Alan Weil, a former Medicaid director and head of the nonpartisan National Academy for State Health Policy.  ‘I’ve been telling people [the rules] are still there.’” (http://online.wsj.com/article/SB10001424052702303684004577511103843368654.html) 

The progressive take on the SCOTUS ruling affecting the Medicaid expansion can perhaps be best summarized by Ed Kilgore:

“The sad truth is that Republican governors and state legislators have been claiming ever since ACA was enacted that the expansion, even with the ‘sweet’ super-matches, would bankrupt their budgets. And the even sadder truth is that many of these solons don’t think of this as primarily a fiscal issue, but as an ideological test of their hatred of the ‘welfare state.’ There’s a reason southern Republicans, perhaps even more than their compatriots elsewhere, love Paul Ryan’s Medicaid ‘block grant’ proposal. They want significant reductions in the existing Medicaid program, along with structural changes that would make it unrecognizable as a low-income entitlement. This involves a philosophical objection to giving poor people free health insurance, not just a budgetary concern.” (http://www.tnr.com/blog/plank/104458/why-the-obamacare-ruling-isnt-the-slam-dunk-most-people-think)

The reactions of many GOP governors seemed to confirm Kilgore’s conclusions.  “We’re not going to shove more South Carolinians into a broken system that further ties our hands when we know the best way to find South Carolina solutions for South Carolina health problems is through the flexibility that block grants provide,” said Rob Godfrey, spokesman for Gov. Nikki Haley. (http://www.washingtonpost.com/business/economy/health-care-laws-medicaid-provision-too-good-to-pass-up/2012/07/02/gJQABxkJJW_story.html) ”‘Floridians are interested in jobs and economic growth, a quality education for their children, and keeping the cost of living low,’ Governor Scott said. ‘Neither of these major provisions in ObamaCare will achieve those goals, and since Florida is legally allowed to opt out, that’s the right decision for our citizens.’”(http://hotair.com/archives/2012/07/02/gov-rick-scott-no-medicare-expansion-for-florida-thanks/) Similar defiant pronouncements were issued by Louisiana’s Governor Bobby Jindal and Wisconsin’s Governor Scott Walker. One might assume that a conservative state like Arizona with a controversial governor who is no friend of President Obama would be likely to refuse to participate in the Medicaid expansion.  For a fascinating look at how complicated and not straightforward Arizona’s decision actually is please go to http://www.azcentral.com/arizoannarepublic/opinions/articles/2012/07/05/20120705robert-robb-arizona-has-hard-choice-make.html.

At the end of the day, it may be hard for GOP governors and legislatures to pass up participating in the expansion.  While the GOP has focused on the costs passed onto to the states, some detailed analysis shows that the Medicaid expansion can save money for the states.  Some state and local governments currently help hospitals cope with providing uncompensated care for uninsured patients to the tune of $10.5 billion or 18.5% of uncompensated care nationally.  Having more patients covered by Medicaid would bring these costs down, which is why hospitals are lobbying so hard for their states to participate in the expanded program. (http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/07/05/how-the-medicaid-expansion-also-saves-states-money/)   “’Texas hospitals recognize there are concerns with expanding the Medicaid population, but given the state’s high number of uninsured, all options for gaining insurance coverage must be closely considered,” Dan Stultz, executive director of the Texas Hospital Association, said in a statement. ‘Without the Medicaid expansion, many will remain uninsured, shifting costs to the insured and increasing uncompensated care to health-care providers.’”  The Texas Hospital Association has never been known for their progressive views, and yet all hospitals are lobbying for states to participate in the Medicaid expansion (http://www.governing.com/blogs/view/gov-hospitals-likely-to-lobby-states-on-medicaid-expansion.html).

Expansion of Medicaid would also reduce state spending on mental health services for poor and uninsured patients; state and local governments spent $16.3 billion for such services, 42% of the cost of state mental health services in 2009. The Center on Budget and Policy Priorities estimates that state Medicaid spending will ultimately go up by 2.8% by 2022 if states join the expansion. However, that estimate “’actually overstates the net impact on state budgets because it does not reflect the savings that state and local governments will realize in health care costs for the uninsured…In fact states could end up with a net gain.’” (http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/07/05/how-the-medicaid-expansion-also-saves-states-money/)     For a state-by-state rundown on the Medicaid expansion please go to this link to a New York Times blog post. http://economix.blogs.nytimes.com/2012/07/02/how-much-would-the-medicaid-expansion-cost-your-state/.

The economic and political realities of the Medicaid expansion have already entered into some gubernatorial races.  Robert Blendon, professor of health policy and political analysis at Harvard, said,  “’Democratic candidates will say we should implement the law and put in exchanges and go after as much funding for coverage as possible, while Republican will say it’s too expensive.’”  “’Medicaid will be an issue anywhere Democrats have a chance to win,’ said Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University. That includes states such as West Virginia, North Carolina, Washington state and possibly Missouri, he said.” (http://www.pennlive.com/newsflash/index.ssf/story/medicaid-expansion-already-an-issue-in-some-gubernatorial-races/68c350064991ce90c070836422118994)  Democratic candidates will probably push for states to participate in the PPACA’s Medicaid expansion because if they do not, their state budgets will end up subsidizing Medicaid coverage for lower income people in other states that do sign up for the program. 

Governors who refuse to participate in the Medicaid expansion may face a backlash from voters like:

“Bunnie Gronborg, 64, of Festus, Mo., [who] said she has two sons in their 30s who are single fathers who lost construction jobs and now lack health insurance. She had hoped they could be covered by the Medicaid expansion, and she doesn't buy the explanation that the state cannot afford it. ‘There's absolutely no reason’ to reject the expansion,’ except being vindictive and playing political games with people's actual health care,’ Gronborg said.” (http://www.huffingtonpost.com/2012/06/29/medicaid-expansion_n_1638720.html)

Ezra Klein thinks that the Medicaid expansion is just too good a deal for states to pass up, even though some GOP governors will be tempted to gain political points with the base by refusing to participate:

“And governors also have to answer to non-Republican voters who don’t want their state missing out on billions in federal dollars, and to the hospitals in their state who have to treat uninsured patients that end up in their emergency rooms, and the insured voters who end up paying for their uninsured brethren.” (http://www.washingtonpost.com/business/economy/health-care-laws-medicaid-provision-too-good-to-pass-up/2012/07/02/gJQABxkJJW_story.html)

Another hard to predict political result of the SCOTUS ruling on both the individual mandate and the Medicaid expansion is the affect it will have on future SCOTUS decisions.  Some conservatives are so mad at Chief Justice Roberts that they are calling him a traitor and saying he should be impeached.  How will the Chief Justice react to the fallout?  Reagan appointee conservative federal judge Richard Posner speculates on how Chief Justice Roberts will respond to his new situation:

“‘These right-wingers who are blasting [Chief Justice John] Roberts are making a very serious mistake. I mean, what would you do if you were Roberts?’ Judge Richard Posner, of the 7th U.S. Circuit Court of Appeals, told NPR. ‘All of a sudden you find out that the people that you thought were your friends have turned against you, they despise you, they mistreat you, they leak to the press, what do you do? Do you become more conservative? Or do you say, ‘What am I doing with this crowd of lunatics?’”(http://www.politico.com/news/stories/0712/78182.html)

Before the SCOTUS decided the case of National Federation of Independent Business v. Sibelius, most of the attention was concentrated on the constitutionality of the individual mandate.  This blog post has examined the reasons why the SCOTUS treatment of the PPACA Medicaid expansion may have more important and more lasting effects on the transformation of the American health care clinical delivery system.