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If GOP bill passes, most states likely to end Medicaid expansion

May 6, 2017

Many if not most of the 31 states that expanded Medicaid to low-income adults likely would end those coverage expansions if Congress ultimately approves the House Republican healthcare reform bill passed Thursday, state policy experts say.

Healthcare leaders and experts in Ohio, New Jersey, Pennsylvania, and West Virginia predicted their states would terminate their expansions if Congress passed the American Health Care Act with its Medicaid provisions intact. They and national policy experts said they see very few states having the financial capacity or political will to maintain the expansions if the bill’s large cut in federal funding is enacted.

That’s a huge concern for healthcare providers, who fear it would lead to a big jump in uncompensated care and reduced healthcare access for low-income adults, despite House Majority Leader Kevin McCarthy’s promise on CNN that “We’re not taking a benefit away. Nobody on Medicaid is going to be taken away.”

An estimated 14.5 million adults across the country have received coverage under the Affordable Care Act’s Medicaid expansion, which provided $73 billion in federal funding to the states in 2016, according to the Robert Wood Johnson Foundation.

“It’s almost beyond imagination that Pennsylvania’s Medicaid expansion could survive the reduction in enhanced federal funding,” said Andy Carter, CEO of the Hospital and Healthsystem Association of Pennsylvania, where nearly 700,000 people have gotten coverage through the expansion. His state, which faces a $3 billion structural budget deficit, would have to come up with $2 billion to $3 billion a year in state funds to replace the lost federal dollars.

“I can’t imagine how Ohio could continue the expansion, with the size of the Medicaid reductions envisioned in the AHCA,” said John Corlett, president of the Center for Community Solutions and a former Ohio Medicaid director, whose state has signed up more than 700,000 expansion enrollees.

The House bill, which narrowly passed Thursday with only Republican votes, would largely end the federal government’s enhanced Medicaid contributions in 2020 to cover adults with incomes up to 138% of the poverty level. States that chose to continue covering that population would have to pony up the difference between the enhanced federal matching rate of 90% and their traditional Medicaid matching rate, which averages 57%.

States would continue to receive the richer federal match for existing expansion enrollees who remained continuously enrolled in the program. But it’s projected the vast majority of those beneficiaries would cycle out of the program within two years, particularly given the bill’s requirement that they recertify eligibility every six months rather than the current annual requirement.

The nonpartisan Congressional Budget Office projected in March that five million fewer people would be enrolled in Medicaid by 2026 due to the bill’s various Medicaid changes. It said that due to the smaller federal contribution, no new states would expand Medicaid and that “some” expansion states would no longer offer that coverage.

The CBO based its prediction that some states would keep their expansion partly on the fact that several— including Arizona, Delaware, Massachusetts, Minnesota, New York, Oregon, Washington, and Vermont—had expanded Medicaid eligibility to some degree prior to ACA funding.

But Deborah Bachrach, a partner at Manatt Health and a former New York State Medicaid director, said even most of those states probably would not be able to continue the ACA’s Medicaid expansion. “They have to face the reality of 2020 and say, ‘Can I find the resources today to cover the federal matching dollars going away? I have the philosophical bent, but do I have the dollars to maintain that coverage?’ ”

Such political calculations already have begun. An Ohio Republican lawmaker last week unsuccessfully proposed a budget amendment to eliminate the state’s Medicaid expansion if the federal government shrank its contribution. Keeping the expansion is projected to cost the state an additional $7.8 billion from 2018-2016 if the AHCA passes.

Even in deep-blue Oregon, Democratic lawmakers recently suggested ending the state’s Medicaid expansion to 350,000 people in an effort to close a $1.6 billion, two-year budget shortfall.

In some states, the Medicaid expansion rollback could be automatic if the AHCA passes. At least eight states—Arkansas, Arizona, Illinois, Indiana, Michigan, New Hampshire, New Mexico, and Washington state—have laws requiring them to reduce or eliminate Medicaid eligibility and/or benefits for the expansion population if the federal government reduces its contribution.

In New Jersey, which faces major unfunded pension liability issues, “it’s highly questionable” whether the state would keep its Medicaid expansion, which covers more than 500,000 people, said Betsy Ryan, CEO of the New Jersey Hospital Association. “It’s hard to understand how the state could fund the expansion moving forward, because those long-term systematic issues would preclude lawmakers from doing the right thing.”

In West Virginia, “there’s no way I would see the state continuing the expansion if the AHCA passes,” said Simon Haeder, a health policy expert at West Virginia University, whose state has signed up 175,000 people under the Medicaid expansion. There, more than 22,000 people have received treatment for substance abuse through that coverage.

“The state already is running a massive deficit, and there was a big debate last year over whether it could come up with an additional $15 million match for expansion,” Haeder said. By 2020, the state contribution would reach $50 million.

The conservative Republicans who control the West Virginia Legislature are seeking to repeal the state income tax and are pushing for deep cuts in Medicaid and social programs, Haeder noted. There’s even debate about whether West Virginia should end the highly popular Children’s Health Insurance Program if the federal funding drops below 100%. “If you’re debating getting rid of CHIP, it doesn’t look good for keeping the Medicaid expansion,” he said.

There’s even concern in liberal bastions like New York and Washington state, though healthcare leaders and policymakers there are somewhat more optimistic.

In New York, which has covered nearly two million people through its expansion, the state would lose $4.5 billion over the first four years from elimination of the enhanced federal contribution. “I would say New York would do everything it can to keep the expansion, said Kevin Dahill, executive vice president of the Healthcare Association of New York State. “I’m optimistic they’d try to do the right thing, though we’re concerned (the AHCA) would have quite an effect on the state’s economy and on our hospitals.”

In Washington state, Democratic State Rep. Eileen Cody, chair of the House health committee, said finding the money to keep the state’s Medicaid expansion, which covers 600,000 people, would be a problem if the AHCA passes. “But we will certainly try to continue it because we don’t want to go backwards.”

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