Year in Review
By Emily P. Walker, Washington Correspondent, MedPage Today
Published: December 23, 2012
Our Year in Review series highlights the major medical news stories of 2012. While the Supreme Court upheld most of the Affordable Care Act in a landmark ruling in late June, its ruling also complicated the law's Medicaid expansion. Here is the original article, published on July 2. In a companion article, you'll find out what has happened with it since.
WASHINGTON -- Following last week's Supreme Court ruling upholding the Affordable Care Act (ACA), the focus is now on the states and how they'll react to the law's Medicaid expansion and health insurance exchanges.
"States are now Ground Zero for health reform: the law puts enormous pressure on states to act quickly and decisively," Paul Keckley, executive director for Deloitte Center for Health Solutions, wrote in a Friday memo. "Should they implement an insurance exchange, or default to a federally run alternative? Should the state's Medicaid program be expanded per the law?"
State Medicaid Decisions Looming
In terms of the ACA's Medicaid provisions, although the Supreme Court's 5-4 decision upheld most of the ACA, it essentially allowed states to opt out of a crucial piece of the law -- the provision that expands Medicaid to cover nearly all people under age 65 with household incomes at or below 133% of the federal poverty level. That provision is set to go into effect in 2014.
While the court found the Medicaid expansion is constitutional, it ruled that the provision in the law that gives the Secretary of Health and Human Services (HHS) the authority to financially penalize states that don't comply with the expansion -- by withholding federal Medicaid matching funds -- is not constitutional.
Robert Laszewski, a consultant and former insurance executive, said in a statement that the major focus is going to turn to the states that opposed the ACA.
"Now, conservative governors who said they wanted no part of a Medicaid expansion shoved down their throats from Washington have the ability to opt out of it without a penalty," he said. "That puts those conservative governors and their legislatures on one big hot seat. Whether or not their state gets a Medicaid expansion is now entirely up to them. It's put up or shut up time for conservative governors and state legislators who said the ACA was an onerous expansion of federal powers over their states."
Put another way, without fear of being penalized, will states that oppose the ACA be compelled to expand their Medicaid programs?
Health policy experts are betting yes, they will.
Refusals Seen as Unlikely
Taylor Burke, an attorney and associate professor of health policy at George Washington University's School of Public Health and Health Services here, said he finds it hard to believe that states would choose not to expand their Medicaid programs given that the federal government will cover 100% of a state's cost of the expansion starting in 2014, and gradually decrease to 90% in 2020 and in the subsequent years.
"I have to believe that with 100% coverage of the expanded Medicaid population, it would be quite shocking, I think, that a governor and a state Medicaid director, purely on political and ideological lines, would say, "'We will not expand and we will not take this money from the government.'" Burke told MedPage Today. "That would be a tough political sell."
During oral arguments, Justice Elena Kagan also appeared incredulous that any state would turn down what she called "a boatload of money."
Colin Roskey, a partner at the Washington law firm Alston & Bird, also said it would be unlikely that governors would turn down those federal dollars.
"I think it would take a very, very hard state legislature or a hard-nosed governor to say 'No, we're not taking that,'" he said during a Friday panel discussion at the National Press Club.
Not All Costs Covered
The 26 states that sued the federal government over the law argued that expanding their Medicaid programs would break their state budgets.
Currently most states' Medicaid programs only cover pregnant women and children who are very poor, as well as certain low-income, disabled adults.
Although the federal government will pay for nearly all of the cost of expanding the program to cover everyone with an income that is 133% of the federal poverty level (which is $30,657 for a family of four), that federal assistance is just for paying Medicaid claims, not for the cost of setting up the expansion, administrative tests, and for implementing state-level fraud detection programs, Burke pointed out.
For some states with very limited Medicaid programs, the 133% expansion could still come with significant costs, he said. Not to mention that there is no guarantee that future congresses will continue to support the federal government footing most of the bill, he said.
Matt DeCamp, MD, PhD, an internist and Greenwall Fellow in Bioethics and Health Policy at Johns Hopkins University, said when he learned of the court's decision, he was immediately worried about what would happen to Medicaid if states chose not to expand their programs.
The Congressional Budget Office estimates that under the ACA's Medicaid expansion, an additional 16 million currently uninsured, low-income people will be covered.
"Some clinicians, including myself, will worry that populations otherwise in need of care might not get it," he said. "A day-to-day practicing clinician often sees those patients who don't qualify for Medicaid but are unable to afford insurance ... the hope that a lot of people had is that in bringing Medicaid up to 133% of the federal poverty level, many of those individuals would gain access to care."
On a Friday afternoon press call, an official with the Centers for Medicare and Medicaid Services said he was confident that all states would take Medicaid money. He likened it to the creation of the Children's Health Insurance Program (CHIP), which was resisted by some states at first. After 2 years, all 50 states participated in CHIP.
Health Exchange Decisions Due
Meanwhile, the deadline for states to apply for federal grants to assist them in setting up their health insurance exchanges came and went on Friday. In a call with reporters that day, HHS Secretary Kathleen Sebelius said the agency still hadn't heard from some states.
As of Friday, 34 states and the District of Columbia had received approximately $850 million in exchange grants, Sebelius said.
Health insurance exchanges -- which were mandated by the ACA and are meant to act as a one-stop shop where residents in each state can go to purchase insurance on their own -- were not challenged directly in the lawsuits considered by Supreme Court.
Under the law, states must either set up their own insurance exchange, or else defer to the federal government to do it for them.
The exchanges must be up and running by Jan. 1, 2014, but states that oppose the ACA have delayed moving forward on setting up exchanges while waiting for the Supreme Court to rule.
A day after the ruling, Sebelius announced it was making 10 new grants available to states to set up their health insurance exchanges.
The new grants will be available to all states "no matter where they are in the process of setting up their marketplace" and whether they want to run it themselves or partner with the federal government. Sebelius also said meetings across the country are planned this month in order to bring together states and HHS officials to discuss exchange implementation.
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Emily P. Walker, MedPage Today Washington Correspondent, covers Congress, FDA, other health agencies in Washington. She also covers an array of healthcare events in the nation’s capital, focusing on intersection of policy and medicine. After earning a BA in journalism and political science at Western Michigan University, she worked at the Kalamazoo Gazette, Congressional Quarterly, and wrote for several medical newsletters.
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