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State officials, hospitals seek clarity on how court's ruling will shape Medicaid coverage

July 23, 2012
 The Supreme Court’s recent decision on the “Patient Protection and Affordable Care Act” (ACA) has hospitals, state officials and others asking what it means for Medicaid expansion.

The court’s removal of any penalties for states that choose not to participate in Medicaid expansion “creates an enormous amount of uncertainty,” even as it puts “states in the driver’s seat of one of the biggest public policy decisions that we’re going to face in this generation,” said Matt Salo, executive director of the National Association of Medicaid Directors (NAMD). Salo spoke about the court decision’s impact on Medicaid coverage at a Health Affairs conference last week in Washington, DC.

The health care law sought to expand the program to cover all people earning up to 133% of the federal poverty level, with a 5% leeway up to 138%: those with higher incomes would receive federal subsidies to buy private insurance. While the law threatened to withdraw all Medicaid funding from states that failed to expand their programs, the Supreme Court ruled that such a threat was coercive and gave states the choice. The expansion was expected to cover about 17 million people, with the federal government paying most of the costs.

NAMD’s Salo said the ruling raises a number of questions, such as whether states need to opt in or opt out of the expansion. That becomes important in states where governors and state legislatures disagree on whether to expand coverage. “If you don’t proactively do something, you are left with the default – so what the default is does matter,” Salo said.

Another big area of uncertainty is whether another Medicaid provision of the ACA barring states from reducing their program’s eligibility standards below 2009 levels – the so-called maintenance-ofeffort provision – is still in effect.

And hospital leaders want to know how the ACA’s cuts in disproportionate- share hospital (DSH) payments would be implemented in states that choose not to expand their Medicaid enrollments. The law had intended to offset that reduction, beginning in 2014, by expanding Medicaid coverage to reduce the number of uninsured patients that hospitals treat.

“We could not survive if expansion of Medicaid doesn’t occur and DSH goes away,” said James Keeton, M.D., vice chancellor for health affairs and dean of the School of Medicine at the University of Mississippi Medical Center in Jackson. “That would be the perfect storm that would destroy about half of the hospitals in Mississippi that are very rural.”

Keeton, who also participated in last week’s Health Affairs session on Medicaid’s future, said the program’s expansion would add 300,000 residents to the state’s existing 700,000 Medicaid beneficiaries.

Earlier this month, Republican governors, the National Governors Association (NGA) and NAMD asked administration officials to clarify how the Supreme Court’s decision would affect states’ Medicaid options under the ACA. In a letter to NGA, Health and Human Services Secretary Kathleen Sebelius said that the Supreme Court’s decision affects only the Medicaid expansion and no other provisions of the law.

Responding to the Republican governors, Centers for Medicare & Medicaid Services (CMS) Acting Administrator Marilyn Tavenner said there will be no deadline for states to decide whether to participate in the Medicaid expansion. She also said a state can receive extra federal funding for Medicaid information technology costs and state insurance exchange implementation costs “even if it has not yet decided whether to expand Medicaid eligibility or to run its exchange.”

About a half-dozen Republican governors have said they are opposed to the Medicaid expansion, and others have hinted they are considering opting out. Some Democratic governors have not yet stated a position. Once governors make up their minds, many could face battles with legislatures controlled by the other party.

For more on NGA’s letter, go to http://www.nga.org/cms/home/federal-relations/nga-letters/executive-committee-letters/col2-content/main-content-list/july-2-2012-letter—-affordable.html. For more on NAMD’s letter, visit http://medicaiddirectors.org/node/466. And for more on the Republican governors’ letter, go to http://rgppc.com/medicaidand-exchange-letter-2/.

By Pete Davis