Experts: All 50 States Expected To Expand Medicaid Eventually

July 26, 2015

Topics: Health Care Reform, Medicaid

Medicaid expansion continues to be one of the most contentious and followed issues surrounding the Affordable Care Act. While many states have chosen to expand their programs, a number of Republican-led states continue to oppose expansion for various reasons ranging from ideology to cost.

However, recent Supreme Court decisions and other political developments have provided a deeper sense of permanence for the ACA, and some experts believe Medicaid expansion for all 50 states is just a matter of time.

Where Expansion Stands

For a look at the status of Medicaid expansion, click the map below.

Conservative States Push the Boundaries

Although most observers view the decision to expand Medicaid as black and white -- you're either in or you're out -- that's not necessarily the case.

Take, for instance, some Republican-led states that expanded Medicaid and now are calling for the Obama administration to approve modifications that are more conservative than HHS has allowed in the past.

For example, Ohio is expected to submit a waiver to HHS that would require eligible adults who do not have disabilities to pay into health savings accounts. The model is based off of Indiana's alternative Medicaid expansion. Under the Indiana program, beneficiaries with incomes above the federal poverty level can lose coverage if they do not pay premiums into HSAs. HHS Secretary Sylvia Mathews Burwell has cited the Indiana model as an example of flexibility the administration is willing to give to states.

Further, Arizona has passed a new law that requires the state to apply every year for a waiver that would cap Medicaid coverage to five years and put in place work requirements for Medicaid beneficiaries. The Obama administration has never approved such requirements. Arizona also is seeking permission from the administration to require beneficiaries to pay more out of pocket for using emergency departments and ambulance services in non-emergency situations.

In order for Michigan's Medicaid expansion to continue, the governor must obtain a federal waiver this year that caps Medicaid eligibility at poverty level. Once individuals have been enrolled for four years, beneficiaries with incomes above poverty level would have to either pay up to 7% of household income to keep enrollment or enroll in an ACA exchange plan. Both options would face challenges in getting HHS approval, as the administration has said it will not allow states to keep full Medicaid expansion funding if their expansions only cover adults with incomes up to poverty level.

Why Resistant States Might Expand

The push to expand Medicaid in resistant states is far from over.

For example, in Tennessee, where the state Legislature has twice rejected proposals to expand Medicaid, ACA supporters met last month to renew their efforts.

And now supporters of expanding Medicaid in resistant states, like those in Tennessee, might just have a few more advantages now.

Pressure From Obama Admin, Others

The Obama administration boosted its push for Medicaid expansion following the Supreme Court's decision to uphold the ACA's subsidies. The administration's response to the Arizona, Ohio and Michigan's requests will show how far the administration is willing to go to get states that have resisted Medicaid expansion to expand.

Other states could consider expanding their Medicaid programs because of pressure from the Obama administration related to other programs aimed at helping care for people with low incomes. The recent flap between the administration and Florida Gov. Rick Scott (R) is a good example.

Earlier this year, Florida lawmakers were considering whether to expand Medicaid under the ACA, while $1 billion in federal funding for the state's Low-Income Pool program to assist state hospitals with uncompensated care costs was set to expire at the end of June. In April, CMS wrote to Florida officials that Medicaid expansion is an "important consideration" regarding whether the federal government will extend funding for the LIP program.

Scott ultimately filed a lawsuit against the administration, alleging the federal government was trying to force the state to expand Medicaid by not renewing a funding measure for hospitals that care for low-income patients.

Florida officials and the Obama administration ultimately reached an agreement to extend the state's LIP funding for another two years. However, the administration had emphasized that CMS views fiscal years 2015 and 2016 as a transitional period for Florida to find "alternative financing arrangements," and during that time, the state should move toward more comprehensive coverage arrangements for its uninsured population.

The events in Florida could affect eight other states that are subject to the same guidelines for funding considerations for similar programs. Matt Salo, executive director of the National Association of Medicaid Directors, said once funding for LIP programs goes away, the pressure further builds to expand Medicaid.

Meanwhile, Richard Albertoni, a manager at Public Consulting Group, said expansion-resistant states are facing pressure from health care providers to expand Medicaid, as well. He said, "Associations representing health care providers are influential across states, and they continue to advocate for expansion, making arguments that are based both on better healthcare outcomes and a positive impact on local economies," adding, "The ACA has endured election cycles and Supreme Court cases, so there is now a sense that it is here to stay."

Fiscal Factors

Fiscal reasons also could push states to consider Medicaid expansion. Under the ACA, the federal government will pay 100% of states' costs of expanding Medicaid eligibility through 2016. The federal government then gradually reduces its contribution, with the federal matching rate falling to 90% by 2020. If states enact a Medicaid expansion at this point, they would receive the 100% matching rate for less than half of their budget years.

Still, according to Salo, while Medicaid expansion would increase the size of states' Medicaid programs, it would also decrease other areas that weigh heavy on state budgets, such as uncompensated care, which do not receive federal matching funds. Salo added it would be advantageous to non-expansion states to move quickly on expansion to maximize the amount of matching funds they receive from the federal government.

Laura Snyder, a senior policy analyst at the Kaiser Family Foundation, noted that some expansion states already have seen budget savings because the federal funds have reduced the amount of money they have had to spend on initiatives like uncompensated care funds. She said expanding Medicaid would help to address the coverage gap, which currently consists of about 3.7 million residents of non-expansion states.

Still, Albertoni noted, "Many states continue to have real fears that even the small percentage of 'state share'" of the expansion costs "is not sustainable given the total price tag of expansion." He said, "Some states see Medicaid cost growth outpacing the growth rate in state revenues and do not see a financial path forward that doesn't put tremendous pressure on other funding priorities."

Expansion Will Come in All 50 States

Overall, Salo said it is not a question of whether the remaining states should expand Medicaid, but how they will. According to Salo, more states are likely to act on expansion now that the Obama administration seems more open to alternative plans. Further, states can look to Indiana and its expansion as an example of a more conservative way to broaden their Medicaid programs.

To put Medicaid expansion into perspective, Salo noted that it took from 1965 until 1970 for all 50 states to implement Medicaid. He noted while it is not surprising all states have not been on board to expand at this point, they are all on pace to expand.

by Ashley Fuoco Antonelli, senior staff writer