As Election Nears, States Consider Medicaid Expansion

The Supreme Court decision in National Federation of Independent Businesses v. Sebelius transformed the expansion of Medicaid eligibility under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) from a mandate to an option. The decision whether to expand eligibility has become a politically charged “hot potato.” As we’ve discussed before, many governors and legislators who opposed PPACA  feel the same way about the Medicaid expansion. Governor Bobby Jindal of Louisiana, Rick Scott of Florida and Nikki Haley of South Carolina announced their refusal to participate almost immediately after the Supreme Court decision. Rick Perry of Texas and four other governors have joined them.

About 13 states have indicated they will participate, but most are undecided. Sam Brownback of Kansas and Jan Brewer of Arizona both plan to decide after the election. Indiana Governor Mitch Daniels, whose term is expiring, has left the decision to his successor. Idaho has convened a working group, which met September 27, to make recommendations.

Opponents of expansion argue it will break the bank. And some states already are facing budget shortfalls, so it’s understandable that officials don’t want to dig a deeper hole. However, proponents contend that the states will gain much more than they will lose if they expand eligibility to cover all adults with incomes under 133 percent of the federal poverty level (FPL). And they seem to have persuaded Arkansas governor Mike Beebe, who initially opposed PPACA, but recently decided to implement the Medicaid expansion. He now is convinced that the net benefit to the state greatly outweighs the burden, and he wants to make sure Arkansas gets its share.

The Grand Canyon Institute, which comprises former Arizona state legislators from both parties, reported that in the first four years of expansion, Arizona would spend $1.5 billion but would get back nearly $8 billion in federal funds and insure an additional 435,000 people by 2017. It analyzed three options: (1) maintaining the status quo, (2) full expansion, and (3) adding coverage only for adults with incomes up to 100 percent of FPL. The report concluded that full expansion as provided in PPACA would save the state $1.2 billion more than limiting coverage to adults below the poverty line because of the higher federal share. Furthermore, the influx of federal funds would create more jobs. According to Dave Wells, research director and author of the report,  “It adds more jobs, it improves our economy, it covers more people and it costs the state general fund less.” Analysts in Idaho agreed. The director of Arizona’s Goldwater Institute, which opposed the legislation, says that the expansion would benefit only the healthcare industry, people who already are doing well, not the taxpayers.

Opponents of expansion rely on the projected costs from studies by Milliman, Inc., a respected actuarial firm. Milliman has projected costs for many states. However, Milliman’s estimates are much higher than those of other analysts, including the Lewin Group and the Urban Institute. One important reason is that Milliman used different assumptions:

  • Everyone newly eligible for Medicaid would sign up;
  • Large numbers of people who were eligible for, but not enrolled in, Medicaid, would enroll;
  • Anyone with group coverage who would be eligible for Medicaid would drop the group coverage to enroll.

Another factor is that Milliman did not consider the potential savings that would result from expansion, including reduced spending for uncompensated care, fewer emergency room visits and assistance programs funded only with state and local funds.  These state programs include aid to the medically indigent, catastrophic coverage, and state programs for people with mental health, substance abuse or disability issues.  Many people with mental illness are uninsured and rely on the state-funded programs, but would be eligible for Medicaid under expansion.

Legislators in several states are now questioning the assumptions of expansion opponents and digging more deeply into the data. There will be much more action on this issue after the election.