Expanding Medicaid without ‘Obamacare’

This November’s crucial midterm elections will reflect the public’s approval of the president and his party, including the implementation of the Affordable Care Act (ACA). Two of the most important components of the ACA are different from the version of the reform President Barack Obama supported in 2010. First, the White House preferred to develop a single national exchange for health care, rather than spending years trying to persuade states individually to create their own. The House version of the bill, which included a single national exchange, failed to pass Congress. Second, a 2012 ruling by the Supreme Court made the Medicaid expansion contained in the law no longer mandatory. As a result, millions fewer Americans will receive coverage unless their state takes action.

In both instances, states were given greater flexibility over the implementation of the ACA. Fifteen states and the District of Columbia, most of them led by Democrats, have both created their own exchanges and expanded Medicaid. Twenty-three states, most led by Republicans, have done neither. Idaho is the only state that created an exchange but rejected Medicaid. The remaining states expanded Medicaid but rejected creating an exchange.

As we have argued elsewhere, the stakes are particularly high with Medicaid expansion. Residents of states that did not build an exchange are still able to use the federal exchange to shop for insurance. On the other hand, residents of states that did not expand Medicaid have no federal fallback. As a result, Americans will experience the ACA very differently depending on where they live. 

Of the 11 states that are expanding Medicaid despite choosing not to create an exchange, six are led by Republican governors, and more than half (12 out of 22) of the legislative chambers are controlled by Republicans, showing that the ACA can transcend partisan politics. These states provide insight into how Medicaid expansion might be possible in the remaining states.

Governors are on the ballot in 2014 in 16 of the states resisting Medicaid expansion. Democrats have a chance at winning at least six of these races. This alone would change the dynamic in a state such as Maine, where Gov. Paul LePage has vetoed an expansion bill three times.

In some cases, the main obstacle to expansion is not the governor but the legislature. More than 6,000 state legislative seats will be on the ballot in 2014, though it is unlikely that the balance of control will tip in many of the resistant states. In these cases, the key to expansion will be persuading enough Republicans to support expansion. Waivers, as we have argued elsewhere, are one way to do this. Waivers have been used by states to experiment with the benefits, coverage and delivery of Medicaid programs. The waivers allow states the flexibility to use federal funding to tailor Medicaid to the needs of their residents. Waivers have been used to extend coverage to childless adults or to implement managed care. Thirty-two states and the District of Columbia have approved waivers from the Department of Health and Human Services.

Three states have used waivers as an important part of their Medicaid expansion within the ACA. This enables conservative legislators to tell their constituents they are reforming Medicaid rather than embracing “Obamacare,” while still receiving the large amounts of federal money available through the ACA. Arkansas received permission from the Obama administration to require all new Medicaid beneficiaries to purchase insurance coverage through the health insurance exchange. This approach has been known as the “private option.”

Iowa and Michigan mirrored several aspects of the Arkansas plan, as well as increasing cost sharing (PDF) for beneficiaries above a threshold of the federal poverty level. Iowa was allowed to eliminate a guaranteed Medicaid benefit: Private insurance companies are no longer required to provide nonemergency medical transportation for beneficiaries. Newly eligible beneficiaries in Michigan can reduce their cost sharing by engaging in healthy behaviors.

At least five more states are currently debating expanding Medicaid through waivers: Indiana, Missouri, Pennsylvania, Utah and Virginia. Each proposal pushes the boundary of what the Obama administration has approved a little further. Pennsylvania and Utah illustrate this point well.

Pennsylvania’s initial application built on the privatization, cost-sharing and wellness incentives in Arkansas, Iowa and Michigan, but also sought to reduce cost sharing for individuals who search for full-time employment and participate in job training programs. Gov. Tom Corbett has since altered the application to make the work requirements part of a pilot program and optional for newly eligible beneficiaries.

While the full details of Utah’s application have not been released, Gov. Gary Herbert is negotiating for Utah’s Medicaid program to receive a three-year block grant to fund private insurance coverage for the newly eligible, while requesting cost-sharing and work requirements for beneficiaries.

Waivers may be a politically feasible path to Medicaid expansion in many states that have so far resisted. However, this will not be true in every state. Republican resistance to the law is so deep in many parts of the country that it is unlikely any compromise can be reached.

There are also likely to be limits to how much the Obama administration will let states deviate from their current Medicaid programs. It remains to be seen whether it will approve a plan like Utah’s making Medicaid a block grant program, particularly given the politics surrounding a similar proposal in Republican Congressman Paul Ryan’s budget. It is also unclear whether Utah’s Herbert could win enough support in the Legislature for such a plan, even if the Department of Health and Human Services agrees.

Finally, once agreement is reached between the federal government, governors and state legislatures, there is no guarantee it will persist. The Arkansas experience is a good example of this. One year after passing legislation on which other states modeled their proposals, the Arkansas Legislature repeatedly rejected plans to renew the program. Opposition was eventually overcome, but this episode was an important warning for states considering using waivers as a politically feasible path to Medicaid expansion.

Editor's note: This article is based on research published in the Journal of the American Medical Association.