Medicaid Expansion: Beyond Yes or No

By Angela Boothe

The rollout of the Affordable Care Act will be recorded as one of the great examples of government mismanagement. Wrought with political and policy missteps, this Keystone Cops escapade starring the federal government has confused and frustrated Americans -- whether they supported the law's passage or not.

But let's set that aside and focus on the present. Serious policy issues persist with the law, including the overburdening of the Medicaid system: The ACA will add millions of new beneficiaries, worsening Medicaid's access problems and crowding out vulnerable populations. This challenge has created an unexpected bright spot in the ACA implementation saga, spurring states to discuss the most meaningful Medicaid reforms since the program's establishment in 1965.

Governors across the country are negotiating with the Centers for Medicare and Medicaid Services (CMS) to implement solutions for their Medicaid programs that focus on the needs of their state, rejecting the static, blindly restrictive choice to simply expand or not. The administration should be welcoming innovative solutions at the state level, not delaying approval or restricting programs from Washington.

States are facing increasing Medicaid applications and enrollment numbers, signaling new costs and heavy impacts on state budgets. Even states that are not expanding their programs are experiencing increases. According to a recent study by Avalere, the average application rate has increased 27 percent among non-expansion states and 41 percent for those expanding. Tennessee reported that enrollment projections for the year have already been realized; since Tennessee has not expanded its Medicaid program, the cost of these individuals comes at the standard federal match level, not the temporary 100 percent funding level provided for the new expansion population. Governors are tasked with the challenge of providing care for those who need it most while managing these growing costs.

Today, Governor Scott Walker of Wisconsin is launching his Medicaid-reform initiative. Wisconsin currently has one of the nation's most generous Medicaid programs, in some cases covering beneficiaries with incomes up to 300 percent of the Federal Poverty Level (FPL), though it caps the number of childless adults who may enroll. The new approach, by contrast, deems all individuals earning up to 100 percent of the FPL (and children up to 300 percent FPL) eligible for Medicaid services and moves those above 100 percent of the FPL to the Federally Facilitated Marketplace to receive subsidized coverage.

With this change, Wisconsin will still provide Medicaid coverage to its poorest and most vulnerable residents, while greatly decreasing the number of individuals on waiting lists for Medicaid services. By moving more individuals into the insurance marketplace, Governor Walker's reforms will also place more responsibility for health coverage in the hands of the individuals receiving care. Between Medicaid and the exchange, an estimated 224,580 people will receive coverage -- reducing the size of Wisconsin's uninsured population by 47 percent.

Governor Walker is not alone in working to improve Medicaid at the state level. Under Governor Mike Beebe, Arkansas is pursuing Medicaid expansion using a market-based approach for its uninsured population of over 500,000. The state will use federal expansion dollars to fund private plans for its Medicaid beneficiaries through the Federal Partnership exchange.

Governor Tom Corbett of Pennsylvania, meanwhile, has a plan that encourages individuals to move into the workforce. Under the proposal, Pennsylvania would use the Arkansas private-option model while launching a pilot program under which under and unemployed beneficiaries would receive premium and co-payment discounts to participate in job training and employment opportunities. The proposal is waiting on the desk of CMS officials for approval after repeated outreach by the governor.

Other states have implemented personal-responsibility provisions in their Medicaid programs as well. The Healthy Indiana Plan introduces Health Savings Accounts to the Medicaid program, and Insure Oklahoma provides premium assistance for employer-sponsored insurance. Both programs are prime examples of innovative state-based Medicaid solutions, focusing on consumer responsibility and encouraging beneficiaries to seek employment. Yet these programs will be phased out due to the restrictions imposed by Obamacare.

As the implementation of the ACA continues, states are striving to adapt -- and forcing states into "expansion" and "non-expansion" camps stifles their creativity. All of the aforementioned governors provide reforms to one of the most costly programs on state budgets. There is no silver bullet for bending the Medicaid cost curve, and these are ideas we should be exploring. Governors are ready to innovate, but they need a willing partner in CMS.

Angela Boothe is a health-care policy analyst at the American Action Forum.

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