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States may opt out of Medicaid expansion

Court ruling made refusal local decision

By Brian MacQuarrie
Globe Staff / June 30, 2012
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The Supreme Court’s ruling that states cannot be penalized if they refuse to expand Medicaid under the federal health care overhaul has left an opening for legislators who have assailed the health care act as a crippling budget-buster.

Legislators in many states, from tiny New Hampshire to Texas, say they are inclined to resist the expansion of Medicaid that is intended to provide coverage for 17 million uninsured people. Before the high court’s decision on Thursday, states that did not comply had been threatened with the loss of all federal Medicaid funds, which have covered an average of 57 percent of the cost of the program.

“I think there’s a very good chance that the state will not adopt an expansion,” said Representative William O’Brien, a Republican who is speaker of the House in New Hampshire. “We’re just not going to participate in a program that involves potentially wrecking state government finances throughout the country.”

In Maine, Governor Paul LePage also is weighing whether to boycott the Medicaid expansion, which is aimed at people under age 65 whose income is less than 133 percent of the federal poverty level. For a family of three, that threshold is $25,390.

“We’re still analyzing exactly what this will mean for Maine,” said Evan Beal, a spokesman for LePage, a Republican and Tea Party favorite who is a fierce critic of the health care act. “He wants to make sure we fully understand.”

After the ruling on Thursday, LePage said the decision means “the federal government can force you to do or buy anything, as long as they call it a ‘tax.’ ”

Maine was among the 26 states that sued the federal government over the health care law, in large part because of the costs of the Medicaid expansion.

The decision on Medicaid expansion was part of the court’s ruling that upheld the constitutionality of the overall law. Regarding Medicaid, Chief Justice John Roberts wrote that the law’s penalty for not joining the expansion “is economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”

States do not face a deadline for opting out of the expanded Medicaid program because regulators had not anticipated the court would rule as it did, said Matt Salo, executive director of the National Association of Medicaid Directors.

“This was not on our radar screen,” Salo said.

New questions are swirling, he said, about whether states can delay participation until after 2014, whether states can join in 2014 and drop out later, and whether partial expansion is allowed. “We just don’t know,” Salo said.

The authors of the health care act tried to mitigate the expanded program’s financial burdens by providing that the federal government would cover 100 percent of the added cost for the first three years after implementation in 2014.

For the three years after that, state governments would pay up to 5, 6, and 7 percent of the bill. After that time, the states would pick up 10 percent of the added costs.

Despite this promise of assistance, many states, buffeted by plummeting tax revenues and massive public layoffs, are wary of any added financial burdens.

Hospitals, the insurance industry, and health care advocates are expected to pressure states to join the program, but analysts are predicting that some will not participate, at least initially.

“The pressure will certainly come from the Democrats, and also from patient-advocacy groups and from the health and medical community, because it is taking money out of the pockets of health professionals, physicians, and health centers,” said Dr. Joseph Restuccia, a professor of health care at the Boston University School of Management.

“Some, for ideological reasons, will not cooperate. But the real question is whether they can sustain that with the political backlash that will occur,” Restuccia said.

At this time, Republican lawmakers in Mississippi, Nebraska, and Missouri are opposing the expansion, and officials in presidential election battleground states such as Florida, Ohio, Colorado, and Pennsylvania have not committed to participating.

In Ohio, Republican Governor John Kasich said that “the administration will carefully analyze the decision to determine the appropriate next steps. We are very concerned that a sudden, dramatic increase in Medicaid spending could threaten Ohio’s ability to pursue needed reforms in other areas, such as education.”

Figures provided by the governor’s office estimated that 440,500 new people would be added to Medicaid at an additional cost to the state of $457 million over five years.

“Until we figure out how to cover these new costs to Ohio taxpayers, we don’t have the luxury of considering whether to expand Medicaid,” said Robert Nichols, a spokesman for Kasich.

The benefits and burdens of the Medicaid expansion are particularly great in states with the greatest number of low-income uninsured residents.

In Texas, the expansion would add 1.2 million people to Medicaid in the first year and cost the state $27 billion over 10 years, said Stephanie Goodman, spokeswoman for the Texas Health and Human Services Commission.

In Indiana, Republican Governor Mitch Daniels has decided to defer a decision about the Medicaid program to the next governor and Legislature. Expanding the program in Indiana, he said, would add 500,000 people to the rolls and cost the state $2 billion over 10 years.

Although states face a financial burden if they do participate in the program, low-income residents face living without insurance if the states do not. In those states that opt out, residents could be uninsured if their income falls below 100 percent of the federal poverty level but is greater than the state’s threshold for Medicaid benefits, Salo said. In New Hampshire, that bar is 66 percent of the federal poverty standard.

For people whose income falls between 100 and 133 of the federal poverty figure, Salo said, subsidies under the health care act should be available to buy insurance on new exchanges in each state.

Restuccia said he foresees a gradually forming consensus in state capitals that Medicaid expansion is acceptable.

Initially, he said, “some states that have strong Republican governors and legislatures are not going to cooperate.” But by 2019, Restuccia predicted, “we will see every state in the country having Medicaid expansion.”

The benefits will begin to be seen as all stakeholders work to control costs, just as they are in Massachusetts, he said.

”It’s hard to do this kind of work, but if one has the motivation and persists with it, it has a tremendously positive effect both on costs and quality,” Restuccia said.

Brian MacQuarrie can be reached at macquarrie@

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