Billions of dollars for Medicaid expansion dangled in front of holdout states

The U.S. Capitol dome, photographed June 17, 2019. (Photo by Kathie Obradovich/Iowa Capital Dispatch)

WASHINGTON — U.S. House Democrats are trying again to entice a dozen holdout states — many of them in the South — to expand Medicaid coverage with the prospect of billions of dollars in federal cash.

The new offer, included in a massive $1.9 trillion COVID-19 relief package that House Democrats are pushing through committees this week, could help provide health coverage to more than 2 million Americans. They are falling between the cracks in government programs in the midst of the pandemic and economic downturn.

Most are childless adults who earn some money but still fall below the federal poverty level.

In the vast majority of states, people in that situation could qualify for Medicaid, a public program that provides health insurance to low-income people and people with disabilities. Iowa expanded its Medicaid program through the Affordable Care Act in 2014.

But in 14 states that have not yet expanded Medicaid, they are still ineligible for that program. Meanwhile, they are still too poor to get subsidized private coverage through insurance exchanges.

Edwin Park, a research professor with the Center for Children and Families at Georgetown University, said the House proposal could “move the dial” in some states.

“For others, unfortunately, I think they may walk away from this very good deal,” he said.

Holdout states include Florida, Georgia, North Carolina, Kansas, Tennessee and Wisconsin.

Missouri has approved a Medicaid expansion but has not yet rolled it out; it would receive the extra money included in the House Democratic proposal.

Supreme Court ruling

The gap that many low-income people fall into was created when the U.S. Supreme Court struck down part of the health care law, known as Obamacare. The court said Congress could not make states expand their Medicaid programs.

But states have gradually signed on over the last decade, because Congress provided them such big financial incentives to do so. At first, the federal government picked up the entire cost of adding childless adults and others to the Medicaid rolls. These days, it still covers 90% of the cost.

Throughout much of the South, along with places like Kansas, South Dakota, Wyoming and Wisconsin, though, state officials have resisted calls to expand their Medicaid programs. Republicans in particular have balked at what they see as an overreach by the federal government.

The latest measure, though, would add a new twist. It would give holdout states more money for the patients they are already covering if they agree to expand Medicaid.

“Even though states still pay 10 percent (for the new patients), they would still come out ahead,” said Robin Rudowitz, the co-director of the Kaiser Family Foundation’s Program on Medicaid and the Uninsured. “I think that changes the math.”

An analysis by the left-leaning Center on Budget and Policy Priorities shows that states would gain substantially under the Democratic proposal:

  • Florida could receive $3.5 billion.
  • North Carolina would be in line for $2.4 billion.
  • Georgia could bring in $1.9 billion.
  • Tennessee could collect $1.7 billion.
  • Wisconsin could gain $1.3 billion.
  • Missouri could receive $1.7 billion.
  • Kansas could bring in $330 million.

Texas stands to gain the most, with a potential of bringing in nearly $6 billion. The extra money would end after two years.

How Medicaid works

Medicaid is run jointly by states and the federal government. The federal government reimburses states a set amount of the money they spend on the program, and that rate varies by state.

States whose residents have lower average incomes get higher reimbursement rates. In March, Congress increased the reimbursement rate for all states for as long as the COVID-19 emergency remains. The Biden administration has said it will extend that emergency until at least the end of 2021.

The House proposal would further increase the reimbursement rates for new expansion states by 5 percentage points.

The new incentives would be part of a larger congressional effort to address the fallout of the COVID-19 pandemic. Democrats’ relief bill covers everything from distributing vaccines to supporting transportation networks to doling out stimulus checks.

That health emergency has also changed how state officials view an expansion of health insurance eligibility, Rudowitz said.

“The pandemic has certainly highlighted the issues around the need for health coverage, and you have more people (in states that haven’t expanded Medicaid) becoming uninsured as related to the economy,” Rudowitz said.

Kansas, Wisconsin, Georgia

Indeed, officials in many states were already advocating for Medicaid expansion before the latest congressional proposal emerged.

Kansas Gov. Laura Kelly, a Democrat, is pushing a proposal to provide health coverage to as many as 165,000 residents using money generated by legalizing medical marijuana sales. Kansas is one of only three states that has not legalized medical marijuana.

“After nearly a year of challenges brought on by COVID-19, we need to use every tool at our disposal to protect the health of our workforce and our economy,” Kelly said when introducing her proposal last week.

“Getting 165,000 Kansans health care, injecting billions of dollars and thousands of jobs into our local economies, and protecting our rural hospitals will be critical to our recovery from the pandemic.”

Wisconsin Gov. Tony Evers, also a Democrat, is expected to push for a Medicaid expansion as part of a budget he will release next week, but his previous efforts to do so have stalled in the Republican-controlled legislature.

In Georgia, Republican Gov. Brian Kemp secured approval from the Trump administration in October to provide Medicaid coverage for individuals who otherwise would not qualify for the program. Applicants would have to show they worked or performed other qualifying activities for 80 hours a month to get Medicaid insurance.

Kemp said that expanding Medicaid outright would be too expensive, costing the state $550 million a year instead of the $218 million a year he says his plan would cost.

But two Atlanta-based plaintiffs sued the federal government in January, arguing that the Georgia plan would “tear a hole” in the health care law. Separately, the U.S. Supreme Court announced in December that it would hear a case to determine whether states can impose work requirements on Medicaid recipients.

States may resist

Park said that the federal government picks up the costs of the expansion, and people who get health coverage demand fewer state services. “The fiscal impact of (Medicaid) expansion has always been positive … But some states may resist for ideological reasons rather than looking at the numbers.”

The House Energy and Commerce Committee will hold a hearing on the proposed changes Thursday morning.

Among the other changes that the lawmakers are considering are measures to ensure that women retain their Medicaid coverage for up to a year after giving birth; fully covering the cost of COVID-19 vaccines under Medicaid; and allowing prison inmates to qualify for Medicaid 30 days before they are released.