By Fr. Fred Kammer, S.J.
In June, the U.S. Supreme Court upheld the constitutionality of the Affordable Care Act [ACA], handing the Obama Administration a major legal victory. In the decision, however, the Court invited a major new political battle at the state level in terms of the ACA’s requirement that Medicaid be expanded to cover up to 138% of the federal poverty level. The poverty line or level is adjusted annually for individuals and families of different sizes. (The ACA provides for coverage up to 133% of the poverty level, but the first five percent of family income is not counted.) For example, this 138% level for 2012 is $2,195 per month for a family of three persons. What the court decided was that the federal government could not make the Medicaid expansion mandatory, thus leaving it open for determination at the state level. In addition to the individual health insurance mandate for other Americans, the Medicaid expansion was the second major way to cover millions of people under the ACA.
Shortly thereafter, governors of Florida, Louisiana, Mississippi, South Carolina, and Wisconsin all indicated that their states would not expand Medicaid coverage, blaming increased costs of the expansion for their states. 1 (These states—all with Republican governors—also had opposed the ACA in the Supreme Court case.) Because of the potential impact on the health and health care of millions of Americans, this purported decision by the governors needs to be examined more carefully by policy-makers and the public.
Medicaid Expansion under the Affordable Care Act
First, it is important to understand the possible scope of the Medicaid expansion contained in the ACA. To do that we must understand that, under current law, states are allowed to adjust the level of income in terms of the federal poverty level (FPL) which determines who is covered by Medicaid in their states and even to adjust the level for different groups of persons. For example, as reported by the Florida Center for Fiscal and Economic Policy, in the Sunshine State:
The ACA, however, proposes to raise the general eligibility for everyone to 138% of the federal poverty line.
How many people are potentially involved in this expansion?
"According to estimates from the 2010 American Community Survey, almost half (47 percent) of the nation’s uninsured could qualify for Medicaid under the Affordable Care Act based on their incomes and immigration status. A total of 22.3 million uninsured with income below 138 percent of FPL would be potentially eligible for Medicaid if all states fully implemented the ACA. Of these, 67 percent (15.1 million) are adults who are not currently eligible for Medicaid but would be made eligible under the ACA’s Medicaid expansion; 13 percent (2.9 million) are children who are currently eligible for Medicaid or the Children’s Health Insurance Program but not enrolled; 20 percent (4.3 million) are adults who are currently eligible for Medicaid but not enrolled." 3
Estimates for those adults eligible for Medicaid coverage under the ACA in the five Gulf South states are reflected in the table 4 below, along with those currently eligible, but not enrolled (All below 138% FPL):
As you can see, almost four million uninsured persons in the Gulf South are “newly eligible” under the Medicaid expansion provisions of the ACA, from a low of 231,000 in Mississippi to a high of 1,748,000 in Texas—the state with the highest percentage of uninsured in the nation. Including the 746,000 persons currently eligible for Medicaid, but not enrolled, Medicaid coverage would be available to 4.7 million people if the ACA were fully implemented in the Gulf South and all those eligible were enrolled.
Costs of Medicaid Expansion
Under the ACA, the federal government will assume 100% of the cost of the Medicaid expansion in the first three years (2014-2016) and then a declining percentage until the year 2020 when it reaches 90%, the federal share for all subsequent years. The Congressional Budget Office estimates that the costs of the Medicaid expansion over its first nine years (2014-2022) will involve 93% federal funding ($931 billion) and 7% state funding ($73 billion), as reflected in Figure 1. 5
While the $73 billion state share over eight years is very significant in terms of dollar amount, if the Medicaid expansion were fully implemented, the increase is estimated to amount to only a 2.8 % average increase in overall Medicaid spending by the states, as shown in Figure 2. 6 Estimates of individual state costs from various sources depend on many variables, such as how many eligible people are already insured, how many already eligible and newly eligible people actually will enroll, what current state health care expenses for uninsured people will be reduced when they are covered by Medicaid, etc.
For an initial look at the five Gulf South states provided by the authoritative Kaiser Family Foundation, the projected impact of full Medicaid expansion indicated the following: Alabama would see an increase of 36.9% in Medicaid enrollment, costing the state 3.6% in increased spending and the federal government 35.9% more; Florida enrollments would increase 34.7%, with state spending increasing 1.9% and federal spending increasing 24.3%; Louisiana would enroll 32.4% more people in Medicaid with a 1.7% increase in state spending and 21.6% more federal spending; Mississippi enrollment would increase 41.2%, spending 4.8% more state funds and 37% more federal funds; and Texas would see 45.5% more enrollees, costing the state 3.0% more and the federal government 38.9% more.
The Costs of “Opting Out” of the Medicaid Expansion
Before states decide they are opting out of the Medicaid expansion provided under the ACA, there are a number of ethical, fiscal, and political factors that should be considered. The first is the very fact that the Medicaid expansion under ACA now provides the possibility of widespread health care coverage for many of the poorest citizens of our country. As the above figures indicate, in the Gulf South alone, there are millions of low-income individuals and families that now could not access health care in ways other than hospital emergency rooms. The ACA Medicaid expansion allows those in government to promote the basic human right to health care that is integral to the concept of the common good in developed societies. Not to do so, when the ACA provides subsidies for those above the poverty line to purchase health insurance, would deepen the economic divides in U.S. society and further threaten the fabric of civil society. Those who choose not to extend this coverage should have far more compelling ethical, legal, and fiscal reasons than that their political party opposes the ACA or the President.
Second, very recent research reported in the New England Journal of Medicine indicates that—in a study comparing three states that substantially expanded Medicaid eligibility with neighboring states without expansions—“state Medicaid expansions to cover low-income adults were significantly associated with reduced mortality as well as improved coverage, access to care, and self-reported health.” 7 In a way, this is simply a case-example of the importance of health care access to fundamental human dignity and the common good of a developed society.
Third, the federal share of the costs of Medicaid expansion is 100% for the first three years and 93% of the first eight years (and 90% thereafter). This is far better than the federal-state split has been in traditional Medicaid. Even the projected costs to the states are likely to be much less--offset by a number of factors:
Fourth, Medicaid expansion is good for the economy. Each year states spend billions of dollars in tax credits and other incentives to try to attract business and jobs, often without any real evidence that new jobs are created or that new jobs would not have been created without the incentives. For example, the Louisiana Legislative Auditor found that the cost of the corporate income and franchise tax credits for the state was a staggering $3 billion between 2005 and 2010. 10 What we do know with the Medicaid expansion under the ACA is that the states can make an investment of millions that will bring in billions of dollars of new health care business. For example, the Center of Mississippi Health Policy observes that, under the ACA Medicaid Expansion:
"In 2014, it is estimated that Mississippi will have about 270,000 new Medicaid recipients as a result with Medicaid expenditures of $1.6 billion annually. Over the period from 2014 to 2019 state expenditures for the newly eligible Medicaid recipients will be about $11.4 billion with the Federal government paying 97% of those costs." 11
As the Mississippi Economic Policy Center argues, there are four reasons Medicaid is good for Mississippi’s economy: (1) the expansion will increase demand, which increases services and jobs that pay well; (2) the federal match will create jobs because of the 100% federal cost for the first year, injecting billions of new dollars into Mississippi’s flagging economy; (3) the expansion will not hurt the economy but is funded primarily from the growing health care sector, high income earners, and employers not providing health insurance to employees; and (4) expansion of health coverage under the ACA will make the labor market more efficient since people will be able to move between employers or start their own business without fear of losing their health coverage.
1. January Angeles, How Health Reform’s Medicaid Expansion Will Impact State Budgets, Center on Budget and Policy Priorities, July 12, 2012, p. 1.
2. Medicaid Expansion Would Reach Only Low-Income Floridians, Almost All of Whom Lack Access to Affordable, Quality Coverage, Florida Center for Fiscal and Economic Policy, Issue Brief, July 2012, p. 3.
3. Genevieve M. Kenney, Lisa Dubay, Stephan Zuckerman, and Michael Huntress, Opting Out of the Medicaid Expansion under the ACA: How Many Uninsured Adults Would Not Be Eligible for Medicaid?, Health Policy Center, Urban Institute, July 5, 2012, p. 1 (emphasis in original).
4. Ibid., p. 3.
5. Angeles, op.cit., p. 3.
6. Ibid., p. 4.
7. Benjamin D. Sommers, M.D., Ph.D., Katherine Baicker, Ph.D., and Arnold M. Epstein, M.D., Mortality and Access to Care among Adults after State Medicaid Expansions, New England Journal of Medicine, published on July 25, 2012, NEJM.org.
8. January Angeles and Matthew Broaddus, Federal Government Will Pick Up Nearly All Costs of Health Reform’s Medicaid Expansion, Center on Budget and Policy Priorities, updated March 28, 2012, p. 4.
9. Angeles, op. cit., p. 5.
10. Citizens for Tax Justice, Are Louisiana’s Billions in Business Tax Breaks Creating Jobs? Nobody Knows., March 6, 2012.
11. Center for Mississippi Health Policy, An Overview of Health Reform, Policy Brief, September 2010, p. 4.
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