As the question of whether to expand Medicaid has been hotly debated in several states during the past year, one expert says it appears as if history is repeating itself.
“It will take time,” said Vernon K. Smith, principal at Health Management Associates, an independent national health care research and consulting firm. Smith also tracks trends in Medicaid for the Kaiser Family Foundation. “It will not be any different than what it was when Medicaid was originally adopted by the U.S. Congress in 1965.”
In fact, the number of states that had adopted Medicaid in 1966, a year after the program was approved—26—is the same number that adopted expansion after a year, Smith said.
While two dozen states may be holding out on traditional Medicaid expansion because of political or philosophical reasons, some state policymakers are forging a new path with expansion programs the likes of which have never been seen before.
How We Got Here
Smith points out that Medicaid has always focused on specific population groups—children and the adults who care for them, people with disabilities and people over age 65.
“If somebody didn’t meet one of those categories, no matter how poor they were, it was not possible for them to have health insurance coverage through Medicaid,” he said.
The Affordable Care Act was designed to change that. The law told states to expand Medicaid to those who traditionally hadn’t been covered, childless adults ages 18–64 who met certain income limits. The federal government is covering 100 percent of the costs of Medicaid expansion until 2016, gradually reducing it to 90 percent in 2020.
But a June 2012 ruling by the U.S. Supreme Court threw Medicaid expansion up in the air.
“The Supreme Court kind of turned the Medicaid expansion into a choice for states,” said Matt Salo, executive director of the National Association of Medicaid Directors. “States were essentially given the choice of do it or don’t. The way that played out was pretty clear. About half of the states said, ‘Yes, we’ll do it,’ and half of the states said, ‘no thanks.’”
States that expanded Medicaid could take the federal money, while those that didn’t left money on the table. Arkansas came up with a third option—the private option—and it is proving to be a popular idea among some states.
Arkansas’ Private Option
Arkansas Surgeon General Dr. Joe Thompson—who also is director of the Arkansas Center for Health Improvement, a nonprofit health policy center dedicated to improving the health of the state’s residents—said health care in the state was in crisis mode before the Affordable Care Act.
“We had the lowest (Medicaid) eligibility levels of any state in the nation,” he said. “To be on our program, you had to be a parent and to make less than 17 percent of the federal poverty level and have less than $2,000 in assets.”
The program covered no childless adults.
“We also had, I think, a growing kind of loss of private health insurance,” Thompson said. “It was really putting our health care, public and private sector, into a fairly dramatic crisis.”
Thompson said 25 percent of the state’s 19- to 64-year-olds were uninsured. In some counties, that rate was as high as 40 percent.
“Obviously, that puts the hospitals at risk,” he said. “It makes it to be a place where doctors don’t want to locate. It was a fundamental cause of a lot of the problems we were experiencing.
“We had huge needs. We were kind of at a tipping point. We had started some efforts to stabilize (the health care market), but the uninsured issue was a real cancer, if you will, that we had to address or our system was going to potentially collapse.”
Thompson said an expansion of the traditional Medicaid program was not going to fly in Arkansas. Legislators were concerned about expanding state government and low-income residents losing eligibility for federal tax credits that could be used to buy private health insurance.
The answer, Thompson said, came in an option states were given when Medicaid was created in 1965—premium assistance. If an employer’s private insurance plan was deemed to be more cost effective and the benefits just as good as those offered by Medicaid, the state could use the federal money to buy into private plans. But because employers’ insurance plans varied so widely, it was too time consuming for states to evaluate thousands of insurance plans and almost nobody ever used premium assistance, he said.
The Affordable Care Act, however, standardized what must be covered by insurance plans, opening the door for what has come to be called the private option. Arkansas became the first state to receive a waiver from the federal government to enact the private option.
“Essentially, it’s not fee-for-service and it’s not Medicaid managed care,” he said. “It’s actually us using Medicaid dollars through premium assistance to buy private insurance on the new marketplace exchanges.
“I think it solved some of the political issues for us locally because we now were buying private health insurance and not growing state government. We were solving the issue of our uninsured. We were going to be able to offer our providers commercial payment rates as opposed to the discounted Medicaid payment rates. I think from a solution perspective, we had a lot of benefits and not very many negatives.”
Thompson said policymakers estimate 220,000 to 230,000 residents may be eligible for the private option. By mid-March, almost 97,000 people had signed up.
Iowa and Premiums
Iowa, the second state to receive a waiver for Medicaid expansion, modeled its program after the Arkansas private option, but expanded the idea to include premiums.
The Iowa Health and Wellness Plan charges premiums—$5 monthly for those 50 to 100 percent of the federal poverty level, $10 for those above 100 percent of the poverty line—for residents enrolled in the Medicaid expansion. Premiums will be waived for the first year of eligibility and a wellness program can reduce premiums in following years. Plan members also can claim financial hardship and have the premium waived.
“Beginning this year, members who engage in prescribed healthy behaviors during the first year will have their premiums waived in the second year,” said Amy Lorentzen McCoy, public information officer for Iowa’s Department of Human Services. “The program uses a primary care case management program, giving members a primary care provider to coordinate all health care needs.”
Salo said states are walking a very fine line when they try to get waivers that include premiums for Medicaid patients. Iowa’s financial hardship exemption helped its waiver.
“It’s very tricky,” Salo said. “The administration does not take very kindly to placing health care out of the reach of people who can’t afford it. … What they agreed on is sort of a half a loaf, where Iowa is allowed to charge a premium, but they can’t enforce it. If a beneficiary says, ‘I don’t have the money,’ … there’s no repercussions.”
Pennsylvania’s Work Requirements
Pennsylvania is seeking federal approval for its Medicaid waiver, which includes a private option, premiums for all Medicaid recipients above 100 percent of the federal poverty line and reduced premiums for those completing a wellness program.
The unique piece in the Keystone State’s original waiver application was the requirement for the majority of Medicaid recipients who work fewer than 20 hours a week to take part in a job-training program to qualify for coverage.
“I think based on some of the conversations that we’ve had with (the Centers for Medicare and Medicaid Services), they clearly indicated that they have a very strong policy position about tying employment to Medicaid eligibility,” said Leesa Allen, executive Medicaid director for the Pennsylvania Department of Public Welfare.
In March, Gov. Tom Corbett submitted a revised waiver including a voluntary, one-year pilot project. Those working 30 hours or more per week would receive an automatic premium or copayment reduction of 40 percent. Those working 20–29 hours would receive a reduction of 25 percent, and those working fewer than 20 hours per week would be asked to participate in monthly job training or employment activities. Medicaid recipients who successfully complete the training or activities would receive a 15 percent reduction in premiums and copayments.
“I think Gov. Corbett has been very clear that we want to encourage folks to participate in job training and employment opportunities,” Allen said.
Smith of Health Management Associates said he’s unsure how the CMS will respond to Pennsylvania’s proposal. The agency, he said, has shown an interest in working with states to achieve other public policy goals or requirements as they are increasing insurance coverage.
“CMS is probably more constrained in what it can actually approve than what most states would like,” he said. “But within the constraints of CMS, they have demonstrated that they are interested in working with states in going as far as they possibly can.”
The Future of Private Option
Smith said the private option has been crucial in getting states reluctant to participate in the Affordable Care Act engaged in extending health insurance coverage.
“I think the significance of the Arkansas approach is that it opens a door for other states, regardless of the political makeup of their legislature and governor’s office, to consider a way to take advantage of this opportunity provided by the ACA,” Smith said. “It will be in play.”
But those plays may not be easy, even in Arkansas.
Earlier this year, the legislature had a bruising battle to reauthorize funding for the private option. Funding bills require a three-fourths approval in the Arkansas legislature. While the senate approved the funding legislation by a 27-8 vote, the house had four failed votes before finally passing it by a narrow 76-24 margin.
“It was a bruising fight,” Thompson said. “I think what will be different next year than this year, we will have close to 200,000 individuals (enrolled). … They’ll be getting treatment they otherwise wouldn’t be getting. I think the health benefits and individual impact of the private option will be present next year in the political discussion and it wasn’t this year because the program had just been initiated.”
Allen of Pennsylvania said both the CMS and state officials are learning as the waiver process continues.
“Over time, as each state participates in discussions with CMS and presents their policy case for certain requests,” she said, “that has kind of shaped where the federal perspective has gone. With each state that comes along, there have been nuances in what has been approved. … I think really looking at that and continuing to work with CMS and press them on some of those key policy issues is really critical for states.”
But, Salo cautions, administration officials have been on record saying only a limited number of waivers would be approved. Where that line is, nobody knows.
“At the end of the day, the core question is what does it take for the administration to be able to declare success,” Salo said. “Does success mean for them getting as many people covered as quickly as possible by whatever means necessary, or does success mean for them holding out as long as possible to get as many people covered through the traditional Medicaid program as possible. Those are two pretty different guiding philosophies. I don’t know which is theirs right now. … That, to me, is the key.”