Compromising on Medicaid Expansion: Real Alternatives, or GOP trap?

Tomorrow, the big news for the Affordable Care Act will be the opening of the state-level insurance exchanges. But the other major part of the law, Medicaid expansion, proceeds apace. Republican governors in many states have simply rejected Medicaid increases, presumably on the grounds that providing poor people with health insurance is a nefarious communist plot. However, some GOP-dominated states like Michigan or divided-control states like Arkansas are working with the Department of Health and Human Services to develop alternative routes for expanding Medicaid coverage to the working poor. The challenge for the Obama administration (and progressive activists) is to determine which plans stay true to the spirit of the ACA and which ones may dangerously undermine it.

Obviously, the biggest goal is to increase coverage, but we also need to be mindful of the various strings that conservative governors and legislators might attach to the modified plans seeking waivers from the Department of HHS. 

Medicaid expansion was originally supposed to automatically apply to all states, but the Supreme Court’s 2012 ruling on the Affordable Care Act made it optional. Not surprisingly, 14 states with unified Democratic control immediately signed up for the expansion; the opportunity to provide universal health insurance to residents under 138 percent of the poverty line fulfilled a longstanding progressive dream – all made possible by the federal government picking up 90 percent of the long-term costs.

Of 24 states under complete GOP control, only two took the traditional expansion (North Dakota and Arizona) while 17 rejected it entirely. Six of the 12 states with divided control governments agreed to the standard expansion, while three have passed for now. (Here's a handy map with the state decisions)

That leaves six states under GOP control (Pennsylvania, Ohio, Michigan, Indiana, Tennessee and Florida) and three states under with split control (Arkansas, Iowa and New Hampshire)  that are either still actively considering the expansion or have proposed a non-traditional style of expanding Medicaid more agreeable to Republican majorities.

And that’s where things have gotten interesting. Follow me below the break for details.

The story starts in Arkansas last winter, where Democratic Gov. Mike Beebe favored expansion, but faced a newly elected hostile GOP legislature, which needed to approve any expansion plans by a ¾ vote.  Republican leaders told Beebe they would only consider doing an expansion if it were “market-based.” In response, Beebe and his staff proposed using the federal Medicaid dollars to let newly-eligible Medicaid recipients purchase commercial plans on Arkansas’ insurance exchange. Beebe got the votes for the compromise (SSH! don’t tell Ted Cruz or the Club for Growth), and last Friday the Department of Health and Human Services approved Arkansas’ waiver.

Iowa soon followed suit by approving a similar plan and is waiting for a final ruling on its waiver application from HHS, which should come in the next several weeks.

This analysis from the Kaiser Foundation compares Iowa’s and Arkansas’ expansion plans. In both states, the newly eligible Medicaid population would be allowed to choose one of several "high-value" Silver-level exchange plans. Arkansas’ plan would mandate some cost-sharing through co-pays for medical services for those above 50 percent of the poverty line, while Iowa’s would mandate paying a premium of $20 a month – which could be waived if the recipient met several health-improvement activities. Both plans would cap medical expenses (including premiums) at 5 percent of income.

Last month, Michigan passed its own expansion bill with a different wrinkle. New enrollees in Medicaid would have to enroll in managed-care plans run by a private contractor selected by the state. Most states already have some of their Medicaid populations in this model, though opinions differ on whether it actually saves money or improves services. Michigan follows the lead of Florida Governor Rick Scott’s attempt to expand Medicaid in Florida under a managed-care model. Florida’s legislature balked last summer and the plan is on life support (unlike the roughly 950,000 Florida citizens eligible for the expansion, who currently get no support.)

Other features of Michigan’s plan include mandatory health savings accounts, to which those covered must contribute at least 2 percent of their income to help pay for co-pays. Cost sharing would be capped at 5 percent, increasing to 7 percent after four years in the program. Those enrolled in Medicaid after four years can escape the higher cost savings requirements by purchasing insurance on the exchanges with state funds.

Ohio is also looking seriously at a similar plan, while Missouri, Alaska, South Dakota and Kansas(!)  have at least started publicly discussing a premium-support model for Medicaid. Pennsylvania Gov. Tom Corbett has come out grudgingly in favor of an Arkansas-style model.

 

For progressives, these plans hold certain promise and some potential pitfalls. Most obviously, these plans get the working poor and near-poor health insurance coverage – 470,000 in Michigan, 250,000 in Arkansas and 106,000 in Iowa. This coverage is real coverage. By the terms of the ACA, plans offered on the marketplace need accept all applicants regardless of pre-existing conditions, include a basket of standard services and provide free preventative care.  Covering these individuals would easily save several hundred, perhaps several thousand lives in a year.

If the choice for liberals are these hybrid premium support or managed-care plans, or nothing, the choice is clear – that showed up in the unanimous Democratic legislative support in Arkansas, Iowa and Michigan, as well as left-wing interest groups that enthusiastically backed the measure. (Labor pushed hard in Michigan to get votes, especially the nurses unions)

But there are trade-offs for compromising to achieve this long-cherished goal. In particular, the emphasis the plans put on cost sharing for the working poor is disturbing. Though all three plans place hard caps as a percentage of income on cost sharing from premiums, co-pays and co-insurance, the push to make sure that poor people have “skin in the game” for their health care seems at best misplaced. The emphasis on wellness programs and goals seems a bit intrusive as well (though it’s a good thing to get the working poor access to things like smoking cessation programs that are easily in reach of the financially well-off). It’s a stretch to compare it to mandatory drug testing for welfare recipients, but there does seem to be the whiff of a paternalistic stigma about poor people’s bad health habits being responsible for their poverty.

Finally, there is the question of having private contractors getting more influence in running greatly expanded managed care programs, some of which have quite a checkered history. One of the major progressive accomplishments of the ACA was that it increased the breadth of government insurance programs like Medicaid, limited corporate welfare for companies selling Medicare advantage plans and greatly tightened regulations on commercial insurers if they wanted to be able to take part in the exchanges. Allowing too great of an expansion of managed care and premium support for the working poor may give conservatives the ability to erode the strength of Medicaid and even Medicare over time. 

HHS Secretary Kathleen Sibelius and her staff have their hands full as they try to balance all these issues against the primary goal of better coverage as they consider waivers.

Ultimately, remember that elections have consequences. If you elect competent people who favor good public policy, you tend to get good public policy – just look at the 14 Democratic controlled states that quickly accepted the Medicaid expansion. (Now, if only we could get them to think productively about public pensions and education)