Last Friday afternoon, the Centers for Medicare and Medicaid Services (CMS) issued a short frequently asked questions (FAQ) document that should remove any remaining belief that the federal government will give state lawmakers flexibility on the Obamacare Medicaid expansion. The message is clear: The only thing a state that agrees to the Medicaid expansion will get is a bigger Medicaid program.
The CMS reiterated the position it took in an earlier FAQ that the Obama Administration considers the expansion to be an “all or nothing” proposition for states.
What the Supreme Court Said
The issue arose out of last summer’s Supreme Court ruling on Obamacare. The Court held that the federal government could not coerce states into expanding Medicaid by conditioning continued federal funding for their existing Medicaid programs on states implementing the expansion. While the effect was to make the expansion optional for states, the Court did not address the practical consequences of its ruling.
In the wake of the Court’s ruling, a number of state officials suggested that, since the new federally subsidized exchange coverage will be available to those with incomes above the federal poverty level (FPL), they might be willing to expand Medicaid that far up the income scale. States would then give those with incomes between 100 and 138 percent of the FPL—who would otherwise be part of the Medicaid expansion—federally subsidized exchange coverage instead. However, the Administration has once more made it clear that it will not agree to such an arrangement.
Illusion of a “Non-Medicaid” Medicaid Expansion
Many state lawmakers are justifiably wary of the long-term costs to their states if they agree to expand Medicaid, yet they are being lobbied to do so by hospitals seeking more Medicaid funding. Some have been trying to square the circle by looking for ways to take the extra federal funding offered as an inducement for the expansion while limiting the risks to their states.
One idea—first floated last month in Arkansas and getting attention in other states—was to use the new Medicaid funding to enroll the expansion population in coverage offered through the new Obamacare exchanges. How such a “premium assistance” design might work, and what advantages (if any) it might offer, have never been fully explained.
Yet what the FAQ issued on Friday also makes clear is that under any such design, the Administration will still require that a state first expand Medicaid and that any premium assistance conform to Medicaid benefit requirements and cost-sharing limitations. In CMS’s own words:
Under all these arrangements, beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-sharing protections. States must have mechanisms in place to “wrap-around” private coverage to the extent that benefits are less and cost sharing requirements are greater than those in Medicaid.
In fact, states already have the option (under prior law) of using premium assistance to enroll Medicaid beneficiaries in private coverage. However, that option is subject to federal rules requiring comprehensive benefits and prohibiting more than nominal cost sharing. Congress previously set those restrictive parameters (in the Deficit Reduction Act of 2006) on the assumption that if states adopted premium assistance, most of the enrollees would be children in low-income families, since children currently account for between one-half and two-thirds of Medicaid beneficiaries in most states.
The People Covered by the Expansion
However, because Medicaid already covers poor children, the Obamacare expansion population will consist exclusively of adults, of whom almost all are able-bodied, 82 percent don’t have dependent children, and 52 percent are young (age 19 to 34).
If there is any group whose health care coverage should be designed with benefit limits and co-payments structured to encourage greater personal responsibility, it is this group. Yet expanding Medicaid to this population would preclude states from designing coverage that is more appropriate while forcing states to ask the federal government for permission to make even modest changes.
The False Hope of “Flexibility”
It should now be apparent to all that there are no “deals” to be had on the Obamacare Medicaid expansion and that the Obama Administration will not offer states any additional flexibility on benefits or cost sharing. Furthermore, it should also be obvious that any state that agrees to the Medicaid expansion will get exactly what the term expansion implies: simply a bigger version of the same expensive and dysfunctional program.
The 26 states that sued the federal government to prevent being coerced into expanding Medicaid should not now turn around a year later and tell the federal government, “Go ahead. Super-size me!”