How the Supreme Court’s Medicaid Ruling Endangers Universal Coverage

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Protesters argues about the Affordable Healthcare Act outside the U.S. Supreme Court on June 28, 2012 in Washington, DC.

Of all the ways President Obama’s health care law is poised to alter the U.S. medical system, the extension of new health insurance coverage to some 32 million people has been billed as its most important. A lack of coverage forces this population to flock to emergency rooms, driving up medical costs for everyone. Studies indicate that thousands die every year purely because they don’t have insurance. (A 2009 Harvard paper put the number of unnecessary deaths annually at 45,000.) Pulling these uninsured people into the health insurance pool, Democrats said, would save lives and money, and bring justice and organization to a system that’s rife with inequality and waste.

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But thanks to the Supreme Court’s decision on the Affordable Care Act (ACA) last week, which upheld the law’s basic architecture and the controversial individual mandate, fixing the problem of the uninsured could be a lot more difficult that Democrats were hoping. In a move that surprised court watchers and progressive advocates, the Supreme Court, by a 7-2 vote, ruled that states don’t have to participate in a huge expansion of Medicaid, the state-federal insurance program for the poor, called for in the ACA. (The ACA was written so that states that decided not to expand their Medicaid programs would lose their existing Medicaid funding, but the court said funding already in place should not be affected by states’ decisions on the ACA changes.) This expansion, which would allow everyone earning less than 133% of the federal poverty level to become eligible for the program, had been projected to extend health insurance to some 16 million Americans, about half of the total number expected to get new coverage under the ACA. (The federal poverty level this year is $11,170.) The High Court ruling last week left this expansion vulnerable, and along with it the law’s promise to bring the national insured rate to over 90%.

The existing Medicaid program covers about 48 millions Americans, or 16% of the population, according to the Kaiser Family Foundation. Who is eligible varies geographically, with some states extending eligibility far beyond federal minimums; how much of a state’s cost is covered by the federal government also varies from 50% to 73%. Still, on balance, the ACA expansion of the program is a good deal for every state. Under the ACA, the federal government would initially pay 100% of the cost of newly eligible Medicaid enrollees, with this percentage gradually decreasing to 90% by 2020. If every state adopted the new eligibility standards, the federal government would bear 93% of the total cost or $931 billion from 2014 to 2022, according to an analysis by the Center on Budget and Policy Priorities, a think tank that studies public programs’ impact on low and middle-income Americans. Under this all opt-in scenario, the total state cost of the Medicaid expansion would be $73 billion from 2014 to 2022. That’s not free, but some analysts say the cost would be more than offset by savings from reductions in hospital uncompensated care and the stimulative effect of injecting hundreds of billions of dollars in federal money into local health care economies.

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Whether states want to participate in the Medicaid expansion isn’t just a matter of dollars. Republicans governors across the country, who have been vocal critics of the Affordable Care Act since it passed, are now signaling they may not opt into the Medicaid expansion. (Similarly, many of them turned down federal stimulus dollars.) Gov. Rick Scott of Florida has said he won’t support a Medicaid expansion, although the state legislature might feel otherwise. New Jersey Gov. Chris Christie said after last week’s ruling that he was glad the Medicaid expansion was ruled optional, but didn’t say whether his state would participate. Other Republican governors, like Nikki Haley of South Caroline and Bobby Jindal of Louisiana, have said they will not make moves to implement the ACA in their states, although it’s not yet clear if this means they intend to reject billions in Medicaid funding.

The irony is that, in many cases, it’s Republican-led states that stand to gain the most from the ACA Medicaid expansion. Texas, for instance, has the highest uninsured rate in the country at 25%. The ACA Medicaid expansion there could provide coverage to 1.5 million poor residents and inject $120 billion into the state economy over 10 years. But Gov. Rick Perry has indicated he intends to resist implementation of the ACA. Obama Administration officials say they believe all states will eventually opt into the Medicaid expansion, regardless of political ideology. Progressive advocates and health policy experts say they believe the Medicaid expansion will happen everywhere eventually, just more slowly as a result of the Supreme Court decision last week.

In the meantime, the fate of as many as 9 million uninsured Americans remains unknown. The failure of some states to adopt the ACA Medicaid expansion could leave some of the poorest and most vulnerable Americans without health insurance, even as insured rates go up for other groups. Policymakers wrote the ACA with the assumption that the Medicaid expansion would be adopted everywhere, so there are no other provisions in the law to help non-Medicaid eligible people earning less than 133% of the federal poverty level get insurance. Federal subsidies to help people afford insurance purchased independently will be created by the law, but are only available to those earning between 133% and 400% of the federal poverty level. Individuals and families earning less than that and living in states that don’t already allow them to participate in Medicaid could be left out of health reform’s insurance expansion altogether.

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