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Supreme Court Opens Door for States to Drop Current Medicaid Enrollees

July 5, 2012

In the wake of the Supreme Court decision in NFIB v. Sebelius, the greatest threat to enabling health insurance for 30 million uninsured Americans may come not from Republicans in Congress, but in the states. With the Court's ruling that the federal government cannot penalize states who refuse to accept the expansion of Medicaid, Republican governors are threatening to turn down $258 billion in funding that would cover roughly 9.2 million Americans. Worse still, as McClatchy reported this week, "Not only might some states opt out of increasing the number of adults in the government health-insurance program for the poor as a result of the Supreme Court's ruling, but they also might cut people who now are enrolled."

Phil Galewitz of Kaiser Health News explained how that nightmare scenario could unfold:

This wasn't supposed to happen under President Barack Obama's health law, which was designed to expand coverage for 30 million Americans, in part by adding 17 million people to Medicaid. But the impact of the Supreme Court's ruling last week making the expansion voluntary is likely to be compounded by another provision in the law that the justices left intact: In 2014, states no longer are barred from making it harder for adults to qualify for Medicaid.
Experts worry that those two developments taken together could spur some states to reduce the number of people covered.

Here's why. Currently, the $300 billion Medicaid program serves roughly 60 million Americans. On average, the federal government picks up 57% of the tab, with poorer states like Mississippi and Alabama getting 75% of the funding from Washington. Medicaid not only pays for a third of nursing home care in the United States; it covers a third of all childbirths. In Texas, the figure is one-half. But with the full implementation of the Affordable Care Act beginning in 2014, federal assistance will increase. The expansion of Medicaid to families earning 133 percent of the federal poverty level (FPL) and the availability of subsidies to those at four times the FPL will enable coverage for over 30 million more people nationwide. (Of these, the Urban Institute estimated that 8.1 million Americans would have their insurance paid for in full by the expansion of Medicaid. Another 10.9 million people would receive subsidies to buy private insurance in the new state exchanges, while only 7.3 million, 2 percent of the total U.S. population, would be required to purchase a health plan using their own resources alone.)

But as New York's former Medicaid director Deborah Bachrach explained, the Court's ruling last week means states could throw some low-income adults "into a black hole with nowhere to turn for coverage." Galewitz provided a potential case in point:

As a hypothetical example, if Mississippi opted out of the 2014 expansion of Medicaid, poor childless adults wouldn't gain coverage in that state. At the same time, the state could roll back eligibility for parents with children who are currently enrolled, reducing the number of participants in the program.

And as Glenn Kessler explained in the Washington Post last year, it is hard to believe that a state like Mississippi could make it current program any worse:

Mississippi provides some of the lowest Medicaid benefits to working adults in the nation. A parent who isn't working can qualify only if annual family income is less than 24 percent of the poverty line. Working parents qualify only if they make no more than 44 percent of the federal poverty level. Seniors and people with disabilities are eligible with income at 80 percent of the poverty line...
Translated from the federal poverty guidelines, that means a working Mississippi couple with one child could earn no more than $8,150 a year and still qualify for Medicaid, seniors and people with disabilities could earn no more than $8,700, and a pregnant woman could earn no more than $20,000 a year.

The new barriers states might erect to health insurance don't end there. "Another way states might choose to minimize their costs is by shifting people who are eligible for federal subsidies to buy private insurance out of the Medicaid program and into the new online markets created by the law," Galewitz wrote, adding, "That saves states money because the federal government pays the entire cost of the subsidies - unlike Medicaid, in which states share in the costs."
As it turns out, those new health insurance exchanges, which the federal government will establish for states like Texas and Louisiana which choose not to, may be tripped up by a glitch in the text of the Affordable Care Act. As TPM revealed:

Because as the result of a drafting oversight, Congress neglected to include automatic appropriations for federally facilitated exchanges (FFEs). That means there's money on hand to help states that want to set up the exchanges themselves, but the government's options vis-a-vis states that can't or won't act on their own are more limited.
Thus far, HHS has provided exchange establishment awards to 34 states. But the Kaiser Family Foundation lists over a dozen states that have either made no progress toward setting up exchanges or have announced they don't intend to comply with the ACA. And if conservatives have their druthers, states that have already received grants will be pressured to return them.
If Republican-led states react to the Court's decision by digging their heels in deeper on the exchanges, rather than by relenting, the federal government will face significant challenges. Though HHS has made some progress creating the federal exchange architecture, it's likely to run into financial and logistical obstacles.

And that gives Republican governors a trump card to play in pushing Congress to loosen eligibility requirements or demanding Medicaid funds as block grants turned over to the states. (As recent history shows, governors would take advantage of block grant status "by capping enrollment, thinning benefits, increasing co-payments, and so on.") So even if Senate Minority Leader Mitch McConnell doesn't succeed in his quest to "repeal Obamacare, one way or another" in Washington DC, his GOP allies in the states may prevent the law from helping millions of Americans the Affordable Care Act was designed to serve.


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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