Medicaid Expansion: At a Standoff

It is a standoff between the states and Obamacare.  On one side is the Obama administration and its prerogative to get as many states as possible to sign up for the Medicaid expansion. The administration has provided a financial incentive, policy incentive and political incentive for all the states to accept the Medicaid expansion. On the other side is the state, its governor and administration, which must decide whether taking the federal money to expand Medicaid is in its best interest.

My projection: North Carolina will expand Medicaid. We will accept federal dollars? Why? Because NOT accepting federal money will be political suicide for Pat McCrory.  The second McCrory announces (theoretically) that he will not expand Medicaid, the news media will be interviewing 12,000 single mothers whose husbands died in Iraq and who have children with no healthcare coverage. When uneducated people watch the messages from the single mothers with no health care coverage for  themselves or their children, the uneducated people will be outraged. Therefore, not accepting federal funds will be political suicide. The scary facts about Medicaid expansion? See my blog: “Medicaid Expansion: BAD for the Poor.”  This blog concentrates on the monetary impact of Medicaid expansion.

Financially, Obamacare will cover 100 percent of the costs for new Medicaid enrollees for the first three years. Normally the feds pay approximately 60-80%, depending on the state.

Many states are wary of the cost of the Medicaid expansion, whether those high reimbursement rates could later get ratcheted back. There are still a number of Democratic governors who have yet to commit to expanding the program. Most Republican governors expect to refuse Obamacare.

Some states have asked the administration for permission to do a partial Medicaid expansion, covering everyone under the poverty line (the full expansion goes up to 133 percent). That could help shield states from the risk of taking on lots of new enrollees.

What exactly does “Medicaid expansion” mean?  Under the Obamacare health care law, people under age 65 will qualify for Medicaid if they earn up to 138 percent of the federal poverty guideline.  (Basically, it raises the poverty level for eligibility criteria for Medicaid; thus allowing more people to be covered by Medicaid).  For a single adult, that means about $15,000 a year. There are nearly half a million people in NC who don’t have health insurance and make under $15,000 a year. The federal government will pay 100 percent of the cost to insure these newly eligible enrollees for three years beginning in 2014. Eventually, the federal government’s share of the cost begins to shrink annually until it is 90 percent in 2020, and the state pays the rest.  Overall, NC would receive about $15 billion in federal money for health care providers over the next six years.

Usually characterized as health insurance for the poor, in North Carolina the program actually covers low-income legal residents only in specific categories: children under 19; seniors also enrolled in Medicare; pregnant women; and adults with disabilities (19-64 years old). Many are surprised to learn that non-disabled adults under 65, no matter how low their income, aren’t eligible for Medicaid in our state. Reversing this “categorical” exclusion is health reform’s biggest change.

Expanding Medicaid will enroll non-disabled adults earning below 138 percent of the federal poverty limit. That’s about $15,000 annually for an individual, or $25,400 for a family of three. Nationwide, 15 million would qualify. Most are men, the majority are under age 35 and three-quarters have earnings are below the federal poverty limit mit. Ironically, without expanded Medicaid enrollment, these individuals will not have access for insurance subsidies through the benefits exchanges which begin at 100 percent federal poverty limit.

So why would a state NOT want to cover health care for more citizens? What is the downside?

There are serious and legitimate concerns about states’ costs.  Obama makes the costs appealing for states because the true costs will not balloon until 2020.  In 2020, many states may go bankrupt from Medicaid costs.  Expanding Medicaid will mean that state administrations need to expand their oversight, even though the care is supported with federal funds. Also, when the new Medicaid is advertised, some applicants will discover they were already eligible — but not enrolled — in the “old” Medicaid benefit, where the state’s share is much higher (35 percent).  Also, another huge negative for expanding Medicaid is the real and deeply concerning truth of which I wrote about in my last blog: too many Medicaid recipients with not enough Medicaid providers equals sub-par health care coverage for Medicaid recipients.

According to the federal division of Medicaid’s projections, North Carolina’s six-year cost for Medicaid expansion is $830 million. Interestingly enough, the Kaiser commission on Medicaid and the uninsured projected North Carolina’s cost of Medicaid expansion as $1 billion to 1.8 billion.  Is the federal government trying to decrease how much Medicaid expansion will actually cost? Because those numbers are far from each other.  Where will this money come from? Hmmmmm, an interesting question that no one seems to know. But here are some projections of cost:

  • New NC Medicaid Enrollees by 2019: 633,485 – 877,560 depending on outreach efforts of state and federal government.
  • Previously uninsured newly enrolled in Medicaid by 2019: 429,272 – 661,292 depending on outreach efforts of state and federal government. Costing state $811 million – $932 million.
  • Total State expenditures on expansion: $ 1 billion – $1.8 billion.

Without Obamacare, Medicaid costs Tar Heels about 25 cents out of every dollar they pay in taxes. Education costs about 55 cents. Either the legislature will have to pass new taxes to support the Obama Medicaid expansion or take the money from both education and the 20 cents set aside for the State Bureau of Investigation, ferryboats and everything else.

Costs and the serious concern that Medicaid recipients will receive sub-par health care coverage are two large negatives.  However, the drawbacks to rejecting Medicaid expansion are large too. Rejecting Medicaid expansion will block billions of dollars of federally supported medical costs from reaching the North Carolinians. But notice I wrote “costs” not “care.” Because as discussed in my previous blog, holding a Medicaid card does not equal receiving the health care needed.

No one seems quite ready to budge. The States are not making decisions, and Obama’s administration is waiting.  Health coverage for millions of Americans, meanwhile, hangs in the balance.

States’ opinions on Medicaid expansion

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on November 19, 2012, in McCrory, Medicaid, Medicaid Expansion, Medicaid Funds, North Carolina, Obamacare, Taxes and tagged , , , , , , . Bookmark the permalink. 2 Comments.

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