GOP States Push Medicaid Expansion's Boundaries

States were encouraged to experiment with ways to expand health care, but how lenient will the feds be?
by | July 2015

When the Supreme Court decided that the federal government couldn’t force states to expand Medicaid under the Affordable Care Act, it substantially changed the rules of the game. States knew they’d have more leverage than before to negotiate with an administration eager to prove the success of its top domestic achievement. That’s meant a push for privatization, work requirements and greater costs for beneficiaries in conservative states that are also anxious to prove that their own ideas for health-care reform work.

Here’s the way things have played out so far: One state gets the feds to agree to funnel money to private plans; others push for the same. One state gets to charge premiums and other costs to beneficiaries; others try to top them. The latest state to break new ground is Indiana, which in January became the 10th state under a Republican governor to secure Medicaid expansion largely on its own terms.

In Indiana’s case, the federal Centers for Medicare and Medicaid Services (CMS) agreed to a complicated plan that includes premiums for people earning above and below the poverty line; a six-month “lockout” period for people above the poverty line who fall behind on payments; and stiff charges for people who resort to the emergency room for conditions that would better be handled in a doctor’s office. Some of those provisions don’t sit well with many health policy experts, who point to studies showing that they discourage people from seeking care without doing much to actually offset costs.

Not surprisingly, Indiana’s special waiver is prompting other conservative expansion states to push for some of the same conditions and more. This time, however, CMS is likely to hold the line. That could lead to standoffs that put health coverage for hundreds of thousands of lower-income people at risk.

Tennessee, for instance, now wants a lockout period similar to Indiana’s for existing beneficiaries. But CMS officials say they only agreed to Indiana’s request because it was “grandfathered in” from a previous waiver program. Similarly, Arizona, under unified Republican control, plans to seek a waiver that would require state officials to ask for mandatory work requirements and limit lifetime Medicaid coverage to five years for “able-bodied adults.” CMS has repeatedly refused to budge on such work requirements, even questioning their legality in a health program like Medicaid.

But the stakes are highest in Michigan. The 2013 law that authorized that state’s Medicaid expansion requires officials to receive a waiver by the end of this year that would push premiums for some longer-term beneficiaries to as much as 7 percent of their incomes. For a single person earning $11,700 a year, which is right at the poverty line, that’s more than $800. If the waiver request is unsuccessful, the law requires the state to end expansion for 600,000 people. But getting approval could be tough: The 7 percent contribution is above a 5 percent limit set out in the federal Deficit Reduction Act of 2005 -- meaning there’s little room to negotiate.

It’s true that CMS has encouraged states to experiment. But it looks like the leverage states received from the Supreme Court is finally reaching its limits. Michigan’s law will certainly test the federal government’s pliancy.