Bloomberg News

States Confront Tough Choice on Medicaid Funds After Ruling

June 28, 2012

Health Care for Poor Challenges Republican States After Ruling

Remote Area Medical (RAM) volunteer dentists during a free clinic held at the Oakland-Alameda County Coliseum in California. Photographer: Justin Sullivan/Getty Images

The U.S. Supreme Court ruling on President Barack Obama’s health-care overhaul forces Republicans in states that opposed the measure to make a difficult choice.

If the states go along with an expansion of the Medicaid program, they get federal money that covers the bulk of the costs. In doing so, they would also have to embrace a portion of a law that they rejected as unconstitutional or too costly.

The law was designed to open the state-run program to an estimated 17 million low-income Americans by forcing states to loosen income limits for those who can qualify. The court yesterday modified the measure by saying the federal government can’t threaten to withhold existing money from states that don’t fully comply with the Medicaid expansion.

“There’s probably a small group, at least initially, who won’t do it,” said Ray Scheppach, the former executive director of the National Governors Association who is now a professor of public policy at the University of Virginia in Charlottesville. “It’s part political. It’s part fiscal. There’s pressure on them both ways.”

Republicans won control of the majority of governorships in the 2010 elections, when concern about the expanded role of government under Obama boosted turnout among the party’s voters. Republican state leaders have opposed Obama’s 2010 Patient Protection and Affordable Care Act, and yesterday criticized the Supreme Court’s decision to uphold the core of the law, which requires individuals to obtain health insurance.

‘Unaffordable’ Expansion

Republican leaders of states that challenged the health- care law in court -- including Texas, Florida, Virginia, Ohio and Indiana -- say they’re not sure their states will opt in.

Florida Attorney General Pam Bondi, a Republican, called a Medicaid expansion “massive” and “unaffordable.”

“We will have a choice on Medicaid, which is good,” Bondi told reporters outside the state Capitol in Tallahassee. “We do have to decide what to do and we have to do it very quickly.”

Texas Health and Human Services Executive Commissioner Tom Suehs said in a statement the state is analyzing the ruling to decide how to proceed.

“I’m pleased that it gives states more ability to push back against a forced expansion of Medicaid,” he said.

Virginia Governor Robert McDonnell, the chairman of the Republican Governors Association, told reporters in Richmond that he is considering the ruling and hasn’t made any decisions. He said the expansion of Medicaid, which now consumes about one- fifth of the state budget, will cost the state an added $2.2 billion over the next decade.

‘Vast Expansion’

“That’s going to be a vast expansion in the amount of money going from the general fund,” McDonnell said.

The Medicaid expansion would cost states $21 billion through 2019, according to the Kaiser Commission on Medicaid and the Uninsured, a non-profit group that researches health care. The federal government would contribute $444 billion, the group said in the report.

The Medicaid program has put added financial pressure on states after the longest recession since the Great Depression as more residents were thrown out of work. As tax revenue tumbled, states were forced to close more than $500 billion of budget gaps.

Following the Supreme Court’s decision, Republican state leaders issued statements faulting a program they said ceded an excessively large role to the federal government. Congressional Republicans vowed to repeal the law, as did Mitt Romney, the former Massachusetts governor and Republican presidential candidate.

‘Everybody In’

Democrats celebrated the ruling. Illinois Governor Pat Quinn said his state will expand the Medicaid program. “We want everybody in, nobody left out,” he told reporters.

The law signed by Obama expands Medicaid to cover all Americans earning as much as 133 percent of the federal poverty level, or about $30,657 for a family of four this year, overruling eligibility rules that now vary by state.

The federal government would pay 100 percent of the costs of the expansion until 2017. After that, states’ share of the expansion rises to a maximum of 10 percent of the cost.

Should a state choose not to expand Medicaid, that may affect coverage for those who earn too much to qualify for the program and won’t receive subsidies offered under the law. Insurance for that group may be prohibitively expensive.

Coverage Gap

“Very low income people may be covered,” said Bruce Siegel, president and chief executive officer of the Washington- based National Association of Public Hospitals and Health Systems. “Lower middle-class and above may be covered. You could potentially have this group of people around the poverty line, millions of people, who are sort of out of luck.”

With pressure in Washington to curb the federal government’s budget deficits, state leaders may decide not to expand Medicaid out of concern that Congress might force them to cover more of the costs, said Marjorie Baldwin, a professor of economics at Arizona State University who tracks health care.

“Given the current state of state budgets, we could expect some states would decide they can’t do that,” she said.

While some states may decide against expanding Medicaid, most will likely choose to do so given that the bulk of the funding will come from the federal government, said I. Glenn Cohen, an assistant professor at Harvard Law School who follows health-care policy.

“It’s possible that some governors will, mostly for political reasons, do it, but I still suspect most governors will decide to expand Medicaid in keeping with what the federal government wants to do,” Cohen said. “The deal Congress has offered them going forward is really, really good.”

‘Screwy Opinion’

New Jersey Governor Chris Christie, who last month vetoed a Democratic bill that would establish a health exchange in the state, said his administration was still trying to make sense of the decision.

“It was a screwy opinion: to say you can’t mandate that people must buy something yet you’ll tax them if they don’t,” Christie said yesterday on his “Ask the Governor” radio show. He called an aspect of the ruling that limited the federal government’s power to require states to expand Medicaid like a “rainbow on a cloudy day.”

The law marks the biggest change to the U.S. health system since Medicare and Medicaid were established in 1965. It was designed to expand coverage to at least 30 million people -- primarily by expanding Medicaid and setting up markets where consumers could buy insurance -- while controlling the soaring costs of health care.

The law was challenged by 26 Republican-controlled states and a small-business trade group. They contended the measure exceeded Congress’s constitutional powers to regulate interstate commerce and impose taxes.

The challenge focused on the insurance mandate, which requires Americans to get coverage by 2014 or pay a penalty. The concept was championed by Republicans years ago as an alternative to Democratic proposals for a single government-run health system.

To contact the reporters on this story: William Selway in Washington at wselway@bloomberg.net; Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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