Editor's Note: In a new article for the Harvard Law and Policy Reviewblog, Manatt Health associate Julian Polaris examines the coverage gap, a crack in the Affordable Care Act (ACA) created by the Supreme Court in the 2012 NFIB v. Sebelius decision that allowed each state to determine whether or not to expand Medicaid. The article, summarized below, details the collateral damage for low-income populations in the 19 non-expansion states, explores ways the gap could be addressed at either the state or federal level, and discusses how the Obama Administration is making expansion even more attractive for reluctant states. To read the full article, click here.
In 2015 more than 90% of Americans had health coverage, the highest insurance rate in the 50 years the federal government has collected insurance data. This astonishing progress is due in large part to the ACA. The victory is bittersweet, however, due to the coverage gap—a crack in the ACA so wide that 3 million low-income people have fallen through it.
The ACA, as originally passed, aimed to increase access to health coverage in two ways. First, the Act expanded and standardized Medicaid, the public health plan for low-income people. Second, the ACA established insurance exchanges, portals in each state where consumers can shop for standardized plans that aren't tied to a particular employer.
These overlapping reforms created a seamless continuum of coverage for low-income Americans. Everyone earning less than 138% of the Federal Poverty Level (FPL) is eligible for Medicaid, and subsidized coverage is available to those earning from 100% to 400% of the FPL.
Then came the Supreme Court's 2012 decision in NFIB v. Sebelius, which upheld the ACA's central requirement that all Americans secure comprehensive health coverage or pay a penalty. The Court, however, prohibited the federal government from instituting a nationwide eligibility standard and instead allowed each state to choose whether or not to expand Medicaid. Nineteen states so far have rejected expansion, leaving 3 million people trapped in a regulatory no-man's-land between Medicaid and the exchanges.
Addressing the Coverage Gap
Congress could close the coverage gap, but it's extremely unlikely that will happen, Since the ACA was enacted, Congress has prioritized attempts at repeal over attempts at repair. Therefore, all eyes are on the states. Medicaid expansion not only allows more individuals to enjoy the benefits of health coverage, it also benefits the states in the form of reduced costs and new revenues. (Click here to read Manatt's new issue brief, "States Expanding Medicaid See Significant Budget Savings and Revenue Gains.")
The Obama Administration has gone to great lengths to make the expansion deal more attractive for reluctant states. The Centers for Medicare and Medicaid Services (CMS) has granted waivers allowing states to modify their Medicaid expansions to fit their states' political environment. CMS recently announced that the federal government will fund 100% of healthcare costs for American Indians and Alaskan Natives who qualify for Medicaid, a powerful incentive for states with large tribal populations. (Click here to read Manatt's new issue brief, "Medicaid and the Indian Health Service: New Guidance Explains How States May Secure Additional Federal Funds.") In the President's 2017 budget proposal, he also extended additional federal funding to holdout states that agree to expand their Medicaid programs (though Congress is not likely to approve that). Yet 19 states remain unconvinced.
Meanwhile, 3 million people are stuck in the coverage gap, accounting for 10% of America's remaining uninsured population. Here's hoping we can bridge the gap and restore the ACA's promise of affordable coverage for all Americans.