Insurers help states expand Medicaid; private options multiply

October 10, 2014

More states, including some initial hold-out Republican states, are joining the ranks of those that have already expanded Medicaid under the ACA.

Several states initially opposed to expanding Medicaid coverage are now using alternative strategies to broaden coverage, lured by hefty federal funding and support for flexible “premium support” programs. More than 26 states and the District of Columbia, most led by Democrats, initially tapped the higher federal subsidies to expand Medicaid to cover childless, healthy adults with incomes between 100% and 133% of the federal poverty level. These expansion programs helped spur more than 7 million Americans to enroll in Medicaid over the past year.

Now more “red” states are following suit, adopting market-based approaches to provide benefits to low-income individuals in the “gap” between traditional Medicaid and higher-income consumers who can purchase coverage through state or federal exchanges.

Hospitals and providers have put pressure on states to devise ways to expand Medicaid coverage. Hospitals in states with limited Medicaid programs continue to experience heavy emergency room visits and uncompensated care by uninsured who cannot pay the fees. Conversely, health systems in Medicaid expansion states report notable reductions in charity care and higher admission rates, according to a REPORT FROM PRICEWATERHOUSECOOPERS.

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Private options

Recent Medicaid expansions in Republican states largely utilize Medicaid funds to subsidize individuals enrolling in health plans through public exchanges. In August, the U.S. Centers for Medicare and Medicaid Services (CMS) approved a premium support program in Pennsylvania, backed by Republican governor Tom Corbett. The demonstration plan provides assistance to some 500,000 low-income individuals; they will pay premiums limited to 2% of household income beginning in 2016 to purchase benefits from managed care plans on the state’s exchange. Pennsylvania hospitals urged this action to moderate the continued use of emergency rooms for uncompensated care.

Utah is talking to CMS about its three-year Healthy Utah pilot project that would use Medicaid funds to provide subsidies to some 50,000-75,000 individuals not eligible for Medicaid but unable to afford insurance. New Hampshire has expanded Medicaid but now seeks a CMS waiver to adopt a premium assistance model. And Indiana’s conservative governor Mike Pence may propose a private option to expand coverage to healthy adults without adding them to the state’s Medicaid rolls.

READ: States forgo federal dollars for Medicaid

These states are following the lead of Arkansas, which gained CMS approval in September 2013 for a private option program that permits newly-eligible adults to enroll in managed care organizations (MCOs) offered to all consumers. Many of the 225,000 Arkansans eligible for the added coverage signed up, dropping the uninsured rate from 23% to 12% this year. Unfortunately, the program has been hit with political opposition at home and has run up higher-than-expected outlays, as revealed in a recent report from the Government Accountability Office (GAO). GAO is urging CMS to do more to monitor state Medicaid payments and controls on MCOs, particularly as more states follow the Arkansas model.

More than 20 states continue to hold out on Medicaid expansion. One is Virginia, where Republican legislators forced Democratic governor Terry McAuliffe to scale back his Medicaid expansion proposal by limiting added benefits to only 25,000 uninsured individuals with serious health problems. But Tennessee and Wyoming governors are talking expansion, and pressure on gubernatorial candidates in upcoming elections may lead to changes in Florida, Georgia and North Carolina. Experts predict that managed care plans will deliver care to 75% of Medicaid beneficiaries by 2015, and even more in the future, as states look to MCOs for more budget predictability and better care coordination.