In the wake of June's Supreme Court opinion on the Patient Protection and Affordable Care Act (PPACA), government officials at the federal and state level and budget analysts have been thinking about implementation and analyzing the impact of the curve ball thrown by Chief Justice John Roberts and the majority of the Court as to implementation of Medicaid expansion. With a decision that determined PPACA's Medicaid expansion amounted to a second program and that a state's participation was optional, states have been determining how or if they will dip a toe in the proverbial water to obtain some financial relief in the form of the federal match promised of 100 percent of the costs associated with the expansion. A key element of PPACA's plan to cover some 30 million uninsured Americans was the expansion of the Medicaid program to all Americans who earned up to 133 percent of the federal poverty level, which currently corresponds to $11,170 for a single person per year. For those with incomes between 100-133 percent of the federal poverty level, federal subsidies will be available to purchase insurance coverage from the new state exchanges that would be established for the purpose of providing affordable insurance coverage to individuals and small businesses.
The Secretary of the U.S. Department of Health and Human Services (HHS) and those in the Centers for Medicare and Medicaid Services (CMS) have provided guidance over the summer signaling significant flexibility in implementation of PPACA's Medicaid expansion, indicating that states may opt in and opt out on their own timetables.
Most recently, several states have asked about whether a partial Medicaid expansion would be permissible. Indiana, New Mexico and Wisconsin are reported to be considering an expansion for individuals up to the poverty level of 100 percent, enabling them to gain the 100 percent FMAP available from the federal government and allow those whose incomes fall between 100-133 percent of the federal poverty level to purchase insurance off of the exchange with the benefit of the anticipated federal subsidies.
Experts at the Bipartisan Policy Center recently raised appropriate questions regarding whether a state's partial expansion will create what they call a new Medicaid "donut hole" -- those individuals between 100-133 percent of the federal poverty level who may be left without affordable health coverage. They raise the concern that this group of individuals, even with premium tax credits, still would be responsible for covering premiums on the exchange up to 2 percent of their income and would not be able to afford their coverage even on the exchange.
The Congressional Budget Office (CBO) has estimated that the difference in the federal outlay of funds for this population is about $3000 per person. That is, it would cost about $9000 per person for the federal government to subsidize an individual's purchase of insurance on the exchange versus about $6000 per person if that person were enrolled in Medicaid. Consequently, the plan to partially expand Medicaid for individuals up to 100 percent of the federal poverty level results in an unintended shift in anticipated expenditures to the federal government, as estimated by CBO.
As states determine which direction they will head with regard to the Medicaid expansion, providers remain in limbo. PPACA calls for significant cuts of $22 billion to Medicaid disproportionate share hospital (DSH) payments intended to help make up both the shortfall of Medicaid reimbursement in comparison to costs and for uncompensated care (the uninsured). These cuts were agreed to with an understanding and expectation that the number of uninsured would dramatically decline upon implementation of PPACA. If the number of uninsured Americans is unknown or significantly less than anticipated, DSH reimbursement for safety net hospitals will continue to be necessary to help defray costs for covering individuals in the Medicaid program and for uncompensated care.
In addition to the partial expansion discussion, several states, including two that have the largest numbers of uninsured individuals -- Texas and Florida -- have rejected the expansion altogether.
HHS is banking on the assumption that states ultimately will determine it is in their best interest to move ahead with a Medicaid expansion. Meanwhile, states look at their individual budget pressures and are clearly beginning to act in their own best interest, regardless of political pressures.
The only thing that is clear about Medicaid is the mud providers are wading through. Providers must continue to assert the importance of supplemental funding in the wake of significant uncertainty to secure the safety net, as priorities are developed and set post-election