Missouri and Medicaid Expansion: The Paths Forward

A Policy Analysis Paper

by

Jeremy Wrinkle

January 12, 2015

Executive Summary

In 2012, a landmark Supreme Court decision preserved the Affordable Care Act, but made Medicaid expansion optional for the states. This has led to vigorous debate in politically divided governments on whether or how to expand the pool of covered citizens. Several conservative or GOP-governed states have move forward with expansion. Kentucky has had a straight-forward expansion that simply extended coverage without gimmicks or restrictions. That state has seen increased insurance coverage at little cost. Arkansas opted for a private model that allowed for the newly eligible population to be covered through private plans. Critics have charged that the Arkansas system is at risk for steep cost overruns. Iowa has also adopted a similar private model, with an additional emphasis on preventative care. Pennsylvania attempted to include an employment eligibility requirement in their expansion that would have forced new recipients to hold a job or be in job training. This was rejected by the Obama administration. Indiana has sought to expand a pre-existing Medicaid reform plan to newly-eligible recipients that would use high-deductible plans and health savings accounts. This is also being rejected by the administration, though negotiations are reportedly still going on.

 

Introduction

In 2012, the Supreme Court of the United States upheld the constitutionality of the Patient Protection and Affordable Care Act (ACA). However, one provision of the ACA was struck down. The Court ruled that the Federal government could not compel the states to expand access to Medicaid for those who make less than 138% of the federal poverty level (Wrinkle 2014). States, such as Missouri, now had to make a choice as to whether or not they will expand Medicaid.

One possible compromise solution was quickly taken off the table by the Obama Administration. Shortly after the court decision, the Obama Administration clarified that partial expansion, which would only cover part of the sub-133% Federal Poverty Level population, would not be acceptable. In order to receive the complete Federal aid for expansion, states must either fully cover that population on Medicaid, or find alternative coverage options (Carey & Galewitz 2012). Despite this restriction, several conservative states have moved forward with expansion. To provide guidance on how Missouri can move forward, several cases will be reviewed. Each state’s expansion has come with successes, some challenges, and a few pitfalls to be avoided.

Kentucky

Unique among conservative-leaning, or “red states”, Kentucky has embraced the ACA and Medicaid expansion. Passed in May 2013, Kentucky’s Medicaid expansion is the most straightforward. All adults who make less than 133% of the Federal poverty level were added to the state’s Medicaid rolls (Mann 2013). In selling Medicaid expansion, Kentucky’s Governor Steve Beshear projected that expansion would bring $15.6 billion in increased economic activity and 17,000 new jobs to the state through FY21 (Office of the Governor of Kentucky 2014). The expansion was projected to also add $800 million to the Kentucky budget over the same period.

While it will take some years to see if these projections turn out to be accurate, we can see positive benefits to expansion now. Before the expansion of Medicaid, most counties in Kentucky had uninsured rates exceeding 14% of the adult, non-Medicare population. After expansion, those rates have dropped. Most counties have seen rates drop to around 7%, though some have seen rates go below 5% (Spalding 2014). Statewide, the Gallup Organization estimates that uninsured rates have declined from 20% to 12%, an 8.5% drop (Witters 2014). Regardless of what numbers one accepts, there is agreement that the uninsured rate on average has declined 7%-8%. Politically, expansion appears to have been a winner. During the election campaign, Kentucky Republicans explicitly stated they would repeal Medicaid expansion once they took control of the state legislature (Loftus 2014). They failed to gain the five seats they needed to accomplish this, even in a very good election year for Republicans (Loftus 2014).

Including a discussion of Kentucky’s Medicaid expansion is important for analyzing other state’s expansion plans and Medicaid reforms. While most states will inevitably get to expansion in their own ways, the straightforward, gimmick-free expansion in Kentucky will more likely than not prove to have been the least costly, and the most effective.

Arkansas

In September 2013, after much rancorous debate, the Arkansas State Senate passed Medicaid expansion (Ramsey 2013). The Arkansas Medicaid expansion differed from other states’ plans. Arkansas opted to go for a “private option” plan. Rather than placing newly eligible enrollees on the public rolls, Arkansas’s private option would use Federal funds provided by the Affordable Care Act (ACA) to subsidize the purchase of private insurance plans. Arkansas’s plan also adds extra services not covered by the private plans, but already covered through existing Medicaid services. This includes ambulance service and family planning (Kaiser Family Foundation 2014). Persons who the state define as “medically frail” are exempt from the private option, and can be enrolled in standard Medicaid, even if they are an ACA enrollee. Currently, ACA enrollees may choose between two silver-level insurance plans. If they do not make a choice, one is automatically chosen for them. Unlike non-Medicaid plan participants, the State of Arkansas pays the premiums on behalf of the enrollees. For new enrollees who make between 100% and 138% of the Federal poverty level, there is a cost-sharing requirement of up to 5% of total annual wages. This cost-share is in the form of monthly payments to the state, graduated based on income. This cost-sharing requirement is void where it conflicts with Federal law. If the enrollee does not make their monthly payments, then they are charged a copay when they use healthcare services (Kaiser Family Foundation 2014).

The state’s alternative Medicaid expansion scheme was approved by the Centers for Medicare and Medicaid Services (CMS) on September 27, 2013 (Centers for Medicare and Medicaid Services 2013). At the time, the plan projected that the cost of the expansion would be $118 million in 2014, $126 million in 2015, and $135 million in 2016 (Kaiser Family Foundation 2014). Some are already accusing the state of cost overruns. According to Archambault and Ingram (2014) the projected cost for the first year of Medicaid expansion in Arkansas was supposed to be $437 per person, per month. However, the actual cost since the beginning of 2014 has been running close to $48 over per person/month projections. CMS has per person/month Federal reimbursement costs capped at $477.63. Any overrun greater than that amount would have to be approved by CMS, or more likely, paid by Arkansas taxpayers. Archambault and Ingram predict that by 2015, with 250,000 Arkansans on the rolls, that cost overruns could be between $16 million and $25 million.

These cost overruns are disputed, both by progressives and state officials. Solomon (2014), of the Center on Budget and Policy Priorities, states that Archambault and Ingram are over-blowing the significance of the above figures. The CMS waiver for states’ policy experiments have cost caps that cover the entire three year period–not for any single fiscal year. If Arkansas’s cost for 2014 exceed Federal caps, they still have two more years to reduce costs before the taxpayer is left with a bill. Arkansas also has negotiation leeway with CMS. If actual care costs exceed the state’s projections, they can ask CMS to increase the caps. Lastly, the plans offered to expand Medicaid enrollees had extra services that raised costs. Starting next year, those plans must forgo the extra services, and lower premiums. These changes would ensure that Arkansas does not exceed cost projections. Amy Webb, a spokeswoman for the Arkansas Department of Health and Human Services, has echoed these points in responding to GOP criticisms of Arkansas’s private option model. She says that critics are using projections to make claims about cost overruns, and that their three year experiment will stay in budget (Thistle 2014).

Iowa

On June 20, 2013, Governor Terry Branstad signed Iowa’s Medicaid Expansion into law. Like in Arkansas, this expansion was a compromise. In Iowa, the Governorship and the House are controlled by the Republicans and the Senate is controlled by the Democrats (Noble 2013). This political division necessitated a compromise bill that would bring in federal Medicaid dollars, while respecting the ideology of the Republicans.

Iowa’s Medicaid expansion is built around reducing bad health behaviors and inducing good health behaviors. In the state’s waiver request to CMS, the state describes how it will accomplish this. During the first year of enrollment, no new enrollees are required to pay premiums. It is during this time that the enrollees are to complete a wellness exam. The exam uncovers evidence of unhealthy behaviors such as substance abuse, tobacco and alcohol abuse, missing vaccinations, and obesity (CMS 2014). If the enrollee is deemed to be engaged in healthy behaviors, then the next year’s premiums will be reduced, up to being waived entirely. Every year afterward, the enrollee must continue to have the wellness exam and demonstrate healthy behaviors to have the next year’s premiums waived. Like in Arkansas, the newly added enrollees in the 100% to 133% FPL group are not added directly to the Medicaid rolls. Instead, the enrollees are directed toward a list of qualified health plans, and are allowed to choose among them. The waiver provided by CMS specifies that at least two plans will always be available. The plans are at the benchmark silver level (CMS 2014). For enrollees who are required to pay premiums, failure to pay premiums after 90 days will cause Medicaid benefits to be cancelled.

Iowa’s Medicaid expansion has already been a success– especially from the perspective of hospitals. In the first six months of expansion, the number of uninsured Iowans who were hospitalized dropped by 46%, over the same period a year before (Leys 2014). The number of emergency room visits increased by 1% over the same period. Iowa hospitals also saved $32.5 million in charity-care costs. While Iowa’s hospitals are pleased with expansion, a researcher for the Heritage Foundation, who was quoted in the same article, criticizes the way expansion was carried out. He states that enrollees should be required to have jobs in order to receive coverage. This may also be an objection raised by Missouri’s GOP legislators. We will therefore now review how Pennsylvania passed Medicaid expansion. As Pennsylvania’s experience demonstrates, work requirements are easier to advocate for, than to implement.

Pennsylvania

Pennsylvania had originally designed a Medicaid expansion plan with features resembling Arkansas’ and Iowa’s. There are subsidies for purchasing private plans, as well as health and wellness incentives. After rounds of submissions to CMS, Pennsylvania ended up with a much more watered down plan, foregoing many conservative policy goals. Parts of the plan that survived were premiums up to 2% of enrollee income, disenrollment after 90 days of failure to pay premiums, and withholding the non-emergency ambulance transportation benefit till 2016. Unlike Arkansas, Pennsylvania will not be subsidizing ACA health plans for Medicaid enrollees. Instead, enrollees with be on the same private managed care plans as the rest of the Medicaid population (Kaiser Family Foundation 2014).

The employment eligibility requirement was rejected by CMS (Kaiser Family Foundation 2014). However, the Encouraging Employment program still exists–though it is now optional. Had the work eligibility requirement been allowed by CMS, it would have operated as follows. Recipients between the ages of 21 and 64 who worked less than 20 hours per week would have been required to participate in the Encouraging Employment program. This requirement would not have been extended to the disabled or enrolled in Medicare. In the second year of expansion, person working more than 20 hours per week, or engaged in job training, would have had their premiums reduced. Persons who failed to meet the Encouraging Eligibility requirements would be ineligible for Medicaid for three months. Compliance checks with the work eligibility requirements would have taken place every 6 months (Pennsylvania Department of Public Welfare 2014). After the demonstration, the state would have conducted a two-part study. The first part would have determined if Encouraging Employment increased employment among participants, compared to a similar control group who did not take part in the program. Part Two would have measured health outcomes in those whose employment increases versus those whose employment was unchanged (Pennsylvania Department of Public Welfare 2014). This program may yet prove to be successful in increasing employment and health outcomes among recipients who volunteer to participate. If so, then implementing a similar program may be worth considering for a potential Medicaid expansion in Missouri, However, an employment eligibility scheme as a precondition for expansion will be a dead end with the Obama Administration, and such a precondition should be avoided.

Indiana

Like Pennsylvania, Indiana has attempted to use Medicaid expansion to advance conservative policy goals. Gov. Pence of Indiana, has rejected the expansion of standard Medicaid, which he has characterized as dysfunctional (Groppe 2014). Also like in Pennsylvania, the Obama Administration has been ambivalent to the GOP’s ideological preconditions for expansion.

Indiana’s Medicaid expansion is a continuation of the Healthy Indiana Plan (HIP), which was first passed in 2007. HIP combines a high-deductible insurance plan with a health savings account. Indiana holds that this form of insurance allows enrollees to become educated health care consumers, which in turn increases enrollee personal autonomy and decreases public costs (Indiana Family and Social Services Administration 2014). Patients enrolled in HIP are less likely to use the emergency room for non-emergency medical care, and more likely to seek preventative care. The state found in a 2012 survey that enrollees in HIP were as likely to seek preventative care as persons with private health insurance. Seeing success in changing enrollee behaviors, and cost savings, Indiana sought to expand HIP to not only include new ACA enrollees, but all Medicaid users (Indiana Family and Social Services Administration 2014).

The Obama Administration has rejected this plan. Indiana politicians believe the main hang up is the Health Savings Account (Network Indiana 2014). Critics say that forcing enrollees to put away their own money in Health Savings Accounts defeats the purpose of Medicaid– providing health insurance coverage to those of little to no means of paying for it themselves (Radnofsky 2014). Negotiations are still ongoing.

 

Archambault, J., & Ingram, J. (2014). Arkansas ‘private option’ price tag is rising by the month under Obamacare’s Medicaid expansion; State taxpayers to pay tens of millions. Forbes. Retrieved on 10/22/2014 from http://www.forbes.com/sites/theapothecary/2014/04/08/arkansas-private-option-price-tag-is-rising-by-the-month-under-obamacares-medicaid-expansion-state-taxpayers-to-pay-tens-of-millions/

Carey, M. A. & Galewitz, P. (2012). HHS tells states it will not fund partial Medicaid expansion. Kaiser Health News. Retrieved on 01/10/2015 from http://kaiserhealthnews.org/news/hhs-states-medicaid-expansion/

Centers for Medicare and Medicaid Services. (2013). [correspondence]. Retrieved on 10/20/2014 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ar/ar-private-option-ca.pdf

Centers for Medicare and Medicaid Services. (2014). Iowa marketplace choice plan. Retrieved on 11/22/2014 from http://medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ia/ia-marketplace-choice-plan-ca.pdf

Groppe, M. (2014). Gov. Mike Pence, feds unable to reach deal on Medicaid expansion. The Indianapolis Star. Retrieved on 12/13/2014 from http://www.indystar.com/story/news/2014/10/06/gov-mike-pence-feds-unable-reach-deal-medicaid-expansion/16825557/

Indiana Family and Social Services Administration. (2014). HIP 2.0 1115 waiver application. Retrieved on 12/13/2014 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/in/Healthy-Indiana-Plan-2.0/in-healthy-indiana-plan-support-20-pa.pdf

Kaiser Family Foundation (2014). Medicaid expansion in Arkansas. Retrieved on 10/20/2014 from http://kff.org/medicaid/fact-sheet/medicaid-expansion-in-arkansas/

Kaiser Family Foundation. (2014). Medicaid expansion in Pennsylvania. Retrieved on 11/26/2014 from http://kff.org/medicaid/fact-sheet/medicaid-expansion-in-pennsylvania/

Leys, T. (2014). Medicaid expansion slashes hospitals’ uninsured burden. The Des Moines Register. Retrieved on 11/16/2014 from http://www.desmoinesregister.com/story/news/health/2014/11/12/obamacare-medicaid-expansion-uninsured-iowans/18917987/

Loftus, T. (2014). Democrats hold control of Ky. house. The Courier-Journal. Retrieved on 11/12/2014 from http://www.courier-journal.com/story/news/politics/elections/kentucky/2014/11/04/ten-kentucky-races-determine-controls-house/18478605/

Loftus, T. (2014). GOP vows to cut taxes, fight Medicaid expansion. The Courier-Journal. Retrieved on 11/12/2014 from http://www.courier-journal.com/story/news/politics/ky-legislature/2014/09/02/gop-vows-cut-taxes-fight-medicaid-expansion/14978307/

Mann, D. A. (2013). Kentucky Medicaid eligibility to be expanded. Louisville Business First. Retrieved on 11/12/2014 from http://www.bizjournals.com/louisville/news/2013/05/09/kentucky-medicaid-eligibility-to-be.html

Network Indiana. (2014). Senators say political game preventing Medicaid expansion. Indiana Public Media. Retrieved on 12/20/2014 from http://indianapublicmedia.org/news/senators-political-game-preventing-medicaid-expansion-75124/

Noble, J. (2013). Branstad signs landmark health-care expansion legislation. Des Moines Register. Retrieved on 11/18/2014 from http://blogs.desmoinesregister.com/dmr/index.php/2013/06/20/this-morning-branstad-to-sign-landmark-health-care-expansion-legislation/article

Office of the Governor of Kentucky. (2014). The facts on ACA and Medicaid expansion. Retrieved on 11/12/2014 from http://governor.ky.gov/healthierky/medicaid/Pages/default.aspx

Pennsylvania Department of Public Welfare. (2014). Healthy Pennsylvania 1115 demonstration application. Retrieved on 12/03/2014 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/pa/Healthy-Pennsylvania-Private-Coverage-Option-Demonstration/pa-healthy-demonstration-app-022014.pdf

Radnofsky, L. (2014). Indiana’s Gov. Pence presses Obama on Medicaid plans. Wall Street Journal. Retrieved on 12/20/2014 from http://www.wsj.com/articles/indianas-gov-pence-to-press-obama-on-medicaid-plans-1412344426

Ramsey, D. (2013). ‘Private option’ Medicaid expansion bill passes Arkansas Senate, on to governor. Arkansas Times. Retrieved on 10/20/2014 from http://www.arktimes.com/ArkansasBlog/archives/2013/04/17/senate-to-take-up-healthcare-expansion-appropriation-at-1100-am

Spalding, A. (2014). Evidence of benefits of Medicaid expansion starting to come in. Kentucky Center for Economic Policy. Retrieved on 11/12/2014 from http://kypolicy.org/evidence-benefits-medicaid-expansion-starting-come/

Thistle, S. (2014). Arkansas officials call Maine GOP’s claims about Medicaid expansion in their state ‘misinformation’. Bangor Daily News. Retrieved on 09/26/2014 from http://bangordailynews.com/2014/05/24/politics/arkansas-officials-call-maine-gops-claims-about-medicaid-expansion-in-their-state-misinformation/

Witters, D. (2014). Arkansas, Kentucky report sharpest drops in uninsured rate. Gallup. Retrieved on 11/12/2014 from http://www.gallup.com/poll/174290/arkansas-kentucky-report-sharpest-drops-uninsured-rate.aspx

Wrinkle, J. D. (2014). Medicaid expansion and the Missouri economy. [white paper].