One of the keystone provisions of the Patient Protection and Affordable Care Act (ACA) was the expansion of eligibility for Medicaid to individuals up to 133% of the federal poverty level (FPL) beginning in 2014. Because children below 133% FPL were already Medicaid-eligible, this provision could provide health coverage to an estimated 16 million uninsured adults in addition to the subsidies to be provided to another 16 million people who purchase private insurance in a state-based Affordable Care Act Marketplace.
Federal Match Rate is Higher than Regular Medicaid
A unique provision of the Medicaid expansion provision is the federal government's payment of 100% of the costs in the first two years, gradually phasing down to 90%, still higher than the federal share for regular Medicaid in any state. Evidence from previous Medicaid expansions in a number of states indicated the value of Medicaid eligibility expansion in reducing mortality and improving coverage, access to care and self-reported health.
States Respond to Supreme Court Ruling That Expansion Is Optional
In a 2012 decision, the United States Supreme Court ruled the Medicaid expansion provision of the ACA, which was mandatory in the language of the act, could not be imposed on states. Rather, states could choose to participate in Medicaid expansion at their option. The enhanced federal match provisions remained intact for those states choosing Medicaid expansion.
Many people assumed most or all states would participate in the now-optional Medicaid expansion. The coverage would be free or relatively low-cost, and failure to implement Medicaid eligibility expansion would create the unusual situation of individuals above 133% FPL receiving subsidies to buy insurance on the state Affordable Care Act marketplace at no or reduced costs while providing no health care coverage for lower-income adults between the states' Medicaid income eligibility levels and 138% FPL.
Despite the expectations, twenty states have chosen not to implement Medicaid expansion, citing a number of reasons, including concerns regarding ongoing funding, lack of providers to provide access to more Medicaid patients, and concerns regarding the need to improve current Medicaid programs before embarking on expansion.
Some States Choose Customized Expansion Plans
States who chose to implement Medicaid expansion faced a number of possible options: expansion of traditional Medicaid, enrolling individuals in managed care plans, providing access to new health insurance marketplace coverage options to the expansion population or other state-specific approaches approved by the federal government. States have developed numerous customized options for expansion:
- Michigan received approval to expand Medicaid eligibility to 133% FPL with full Medicaid benefits provided through mandatory enrollment in Medicaid managed care plans. The proposal included savings from reducing state funds previously used to serve the uninsured and investing the savings into a Health Savings Fund to finance the Medicaid expansion when the 100% federal funding ceases. The Michigan legislation also provided the option for individuals to enroll in the Affordable Care Act marketplace.
- Indiana has proposed an extension of its Healthy Indiana Plan which was already in place under a waiver to provide health savings accounts to low-income uninsured adults up to 200% FPL.
- Arkansas adopted a plan to utilize the new health insurance marketplace coverage options for the expansion population. The expansion population is given a choice between two plans offered on the state's insurance Marketplace, and the state pays the premiums to the plans as well as other costs sharing for individuals between 100% and 133% FPL. Medically frail individuals are enrolled in the regular Medicaid plan.
- Iowa implemented a two-part plan whereby adults up to 100% FPL receive comprehensive benefits equivalent to state employee health insurance augmented by medical homes and care coordination by accountable care organizations. For adults between 100% and 133% FPL, members select from among the new health insurance marketplace options with Medicaid paying the premiums to the health plans.
- Arizona, which has always operated a capitated managed care Medicaid program, used the Medicaid expansion option to restore coverage to 200,000 people who lost coverage when Medicaid was reduced as part of severe budget cuts beginning in 2008.
- Pennsylvania also received approval of a waiver to use Medicaid funds to purchase private coverage for the expansion through the Affordable Care Act Marketplace. However, Pennsylvania has begun to transition from its waiver plan to expansion of its traditional Medicaid program.
- The Montana legislature has approved a Medicaid expansion waiver expected to proceed as a customized Medicaid expansion plan.
In addition to these seven states with customized waiver plans, 23 states and the District of Columbia have implemented ACA Medicaid expansion of their current Medicaid programs.
Uninsured Rates Drop in Expansion States
As a result of Medicaid expansion and individuals above 133% FPL who have purchased insurance through new health insurance marketplace coverage options, over 25 million previously uninsured Americans have health insurance coverage. The percentage of uninsured adults dropped from 20 percent in 2010 to 16 percent in 2014 and to 13 percent as of May 2015. Reductions in the uninsured population have been a particular benefit to low-income individuals. Improvements in the percentage of uninsured adults have occurred primarily in states that have implemented Medicaid expansion, with states that have not expanded Medicaid experiencing uninsured rates more than double other states. This is a benefit to many hospital’s healthcare revenue cycle management since it ensures people can pay.
Simplified Eligibility Rules Implemented in All States for Medicaid and Marketplace
An important change resulting from the ACA is the streamlined Medicaid eligibility rules and processes. Rather than being tied to eligibility for cash assistance or welfare-based eligibility categories, Medicaid eligibility is now determined using a specific formula based on adjusted gross income. The same formula is used in all states and is used to determine eligibility for subsidies in the Affordable Care Act marketplace as well as for Medicaid.
The new eligibility requirements do away with the old face-to-face interview requirements and provide computer verification of data to the greatest extent possible, relieving enrollees of the burden of continually submitting paperwork to prove eligibility. The renewal process has been similarly streamlined. These changes have improved the timeframes for eligibility, a benefit to providers, and are facilitating the movement of individuals from Medicaid to the marketplace as employment and income situations change.
Expansion Improves Providers' Bottom Lines
Medicaid expansion has also had an effect on healthcare providers.
- Twenty of thirty-one recent closures of rural hospitals have occurred in non-expansion states. Many of those closures have occurred in states with relatively high rural populations, particularly in the Great Plains and the Atlantic Coast.
- One health care chain with hospitals in six states, three expansion states and three non-expansion states, has reported a 51% decrease in overall self-pay revenue. Of that decrease, the expansion states accounted for 90% of the decline.
- Another hospital chain saw a 54% reduction in the number of charity-care and uninsured admissions in its hospitals in expansion states while the decline was 8% in non-expansion states.
- During the first six months of Arkansas' Private Option Medicaid expansion demonstration, the Arkansas Hospital Association reported a 46.5% decrease in uninsured admissions and a 35.5% decrease in the number of emergency department visits, translating into a net gain of $69.2 million to hospitals in reductions in uncompensated care.
- The Iowa Hospital Association reported savings of $32.5 million to hospitals during the first half of 2014 due to an 18.5% reduction in uncompensated cases.
- Despite concerns regarding an inadequate supply of providers to serve the expanded population, a survey of doctors by the University of Michigan's Center for Health Care Research and Transformation found 81% of primary care doctors had the capacity to accept new patients.
State Budgets Benefit from Expansion
Medicaid expansion has also had an impact on state budgets.
- Arkansas reported savings of $17.2 million in 2015 due to reduced uncompensated care.
- California expects savings of $1.4 billion in funding to counties for indigent care over two years.
- Decreases in uncompensated care in Kentucky allowed the Commonwealth, City of Louisville and the University of Louisville to reduce contributions to the university's charity care trust fund by 46%, a reduction of more than $13.5 million.
Future of Expansion Is Uncertain
The final chapter in the ACA Medicaid expansion story is yet to be written. Participation by states may be affected in changes in Governors. Some states may revise programs after the initial 100% federal funding phase ends. The 2016 Presidential election may affect the future of the ACA. However, even with an incomplete response by states, Medicaid expansion has made its mark in its less than two years of existence.
Pete is the Vice President of Sales & Client Services at DECO Recovery Management. He covers the Mid Atlantic region and specializes in Medicaid related topics. It is DECO’s Mission to maximize reimbursement to our clients by leveraging innovative technology, processes and compassionate advocates to provide exemplary service.