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White House to States: All or Nothing on the Medicaid Expansion


Sebelius: states must expand Medicaid all the way to 133% of poverty to be eligible for funding

The move for Republican Governors who didn’t want to be seen as needlessly cruel to their poorest residents was to try and work out an accommodationwith the White House on the Medicaid expansion. As you know, the Supreme Court’s ruling allows governors to essentially opt out of the expansion without risking current Medicaid funds. Some Republicans in the states sought to increase Medicaid to perhaps just 100% of the poverty line rather than the prescribed 133%. This would have the advantage of offloading the individuals between 100-133% of poverty to the exchanges, a federal outlay rather than a state one.

(EDITOR’S NOTE: I was always confused on this point, but apparently the line for the Medicaid expansion is effectively 138% of poverty thanks to a 5% “disregard.”)

The White House just shut the door on this. Health and Human Services Secretary Kathleen Sebelius announced that states will not be eligible for funding for the Medicaid expansion unless they expand it all the way to 133% of poverty as envisioned by the law.

[W]e explain how Exchanges and Medicaid administrative costs will be funded and how we will continue exploring opportunities to provide States additional support for the administrative costs of eligibility changes. We clarify in our new guidance that states have the flexibility in Medicaid and the Children’s Health Insurance Program to provide premium assistance for Exchange plans as well as to adopt “bridge plans” that offer coverage through both Medicaid and Exchanges – keeping individuals and families together when they cross the line between Exchanges and Medicaid. And, while the law does not create an option for enhanced match for a partial or phased-in Medicaid expansion to 133 percent of poverty, we will consider waivers at the regular matching rate now and, in 2017 when the 100 percent federal funding for the expansion group is slightly reduced, broad-based State Innovation Waivers.

So waivers are available for the current matching rate, but not for the expansion. In 2017, the State Innovation Waivers would enable a state to trade in the entire federal program for a different option if they can prove that it will provide the same level of coverage with the same participation of federal dollars. Vermont wants to use this waiver to enact their single-payer program.

Sebelius goes on to note that the federal government plans to pick up 100% of the cost of expansion in the first three years, eventually settling in to 90%, and that because of the savings in other parts of state budgets, from lowered payments to hospitals and the like, states could see “net savings from the Medicaid expansion.” States resisting the expansion have disagreed with this, particularly arguing that a “woodworking” effect will bring current eligibles out of the woodwork after the publicity of the expansion, raising their current costs (they would be on the hook for anyone eligible under the old rules at the old matching rates, usually between 50-75%).

At any rate, this hardline stance means that Governors will have to decide between Medicaid fully expanded to 133% of poverty, or no expansion at all. They could expand halfway, but the entire cost would be on the state, and the whole point of limiting the coverage would be to reduce costs. So now they have a choice to make. All or nothing.

Nine states have already opted for nothing. All of them except for South Dakota are in the Deep South. And this is another reason why you don’t want to muck around with the Medicare eligibility age. With no expansion of Medicaid, young seniors who don’t make enough to qualify for exchanges and who make too much to access Medicaid would have no recourse at all. As lower income individuals typically have more health problems, this actually strikes a fatal blow at them. Sometimes you hear it described as murder by spreadsheet. Raising the eligibility age in a state without the Medicaid expansion – indeed, in every state, under certain circumstances – will kill people.

And yet I’m the one being “shrill.”

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David Dayen

David Dayen