Medicaid expansion is not inevitable

Matt Bevin’s dominant victory in Kentucky’s gubernatorial election is a stunning defeat for supporters of the Affordable Care Act (ACA). He won a hard-fought campaign promising to undo the major elements of “Obamacare” that Kentucky has been a leader in implementing. More than 400,000 people would immediately lose coverage if he follows through with his initial campaign promises.

He is unlikely to do so once he confronts the political and practical realities of taking away insurance from nearly 10 percent of the state’s population. However, even if nothing changes in Kentucky, this election should cause supporters of the ACA to pause and reflect on the status of implementation around the country. They should begin to confront an uncomfortable possibility that Medicaid expansion in all 50 states is not inevitable.

More than 16 percent of Americans lacked health insurance when the ACA was signed into law in March 2010. The uninsured rate has dropped sharply since then, to just 10.4 percent. This is a huge accomplishment, but it still falls short of the law’s full potential.

Nineteen states continue to resist Medicaid expansion, one of the key components of the ACA. The expansion was mandatory until the Supreme Court ruled in 2012 that states could opt out.

Pundits immediately predicted — and continue to predict — that every state would ultimately cooperate. The federal government would pay for 90 to 100 percent of the expansion, allowing state leaders to claim credit for helping their residents while mostly relying on federal money. Hospitals would aggressively push for the expansion, allowing them to receive compensation for treating people who otherwise would never pay.

The number of participating states has steadily increased since 2010. Twenty-five states agreed to expansion by mid-2013. This included states led by Republican governors, including current presidential candidates Chris Christie of New Jersey and John Kasich of Ohio.

Opposition to expanding Medicaid remains strong, especially throughout the South, where health needs are particularly great. Nearly 4 million more people would be covered if the remaining 19 states cooperated.

Some leaders in conservative states have looked for politically feasible ways to accept the expansion. Mike Beebe, the Democratic governor of Arkansas, led the way with a plan called the private option because it used the federal government’s Medicaid money to allow new enrollees to shop for coverage from a private insurer in the state’s new health insurance exchange.

This approach required a waiver from the federal government — an approach used by both Republican and Democratic administrations to allow states to test new ways to finance and deliver health care benefits to Medicaid enrollees. Four conservative states followed Arkansas by expanding Medicaid in the second half of 2013, including two that used waivers, Iowa and Michigan.

Despite this early momentum, only five states expanded Medicaid in 2014 and 2015. Of these, only New Hampshire and Indiana used waivers. Others are still considering this approach, including Kentucky, as Bevin has hinted he would do after repealing Medicaid expansion. In most states this has required legislative approval. A dying compromise in Utah is an example of how difficult this will be to achieve in conservative states.

Meanwhile, looming deadlines threaten the program in many states that are participating. At the same time as other states began considering the private option, leaders in Arkansas were struggling to keep the program alive. The private option, which was passed by razor-thin margins in 2013, was funded for only one year. Key supporters of the private option lost re-election in 2013, setting the stage for a tough reauthorization fight in 2014. The challenge was compounded by the state’s constitutional requirement to secure a 75 percent supermajority for any bills spending state money.

To attract greater Republican support and secure enough votes, the private option was reformed to include additional cost sharing for individuals below the federal poverty line and health savings accounts to promote personal responsibility among enrollees. This compromise was voted down four times before enough support was secured. The current deal is in place through 2016, and another tough vote is on the horizon.

Michigan and New Hampshire find themselves with similar challenges for the continued existence of their expansions. The 2013 law passed by the Michigan legislature required two waivers from the federal government. The first increased cost sharing for newly enrolled Medicaid beneficiaries and included programs aimed at improving healthy behaviors among enrollees. This waiver was approved, and Michiganders began receiving coverage in early 2014.

The law called for a second waiver to introduce cost sharing for higher-income Medicaid enrollees and shift enrollees onto the private insurance market. Medicaid expansion will terminate in May 2016 if Michigan does not receive approval from the federal government for the second waiver by the end of 2015, causing 600,000 Michiganders to lose coverage. It is expected that Barack Obama’s administration and state officials in Lansing will come to an agreement on this waiver, though the federal government has shown resistance elsewhere to increasing cost sharing in Medicaid.

In New Hampshire the expansion’s fate lies in the hands of Republicans in the legislature. The state’s expansion bill, enacted in March 2014, says the state’s participation will expire on Dec. 31, 2016, without reauthorization.

Democratic Gov. Maggie Hassan tried to push for reauthorization to be included in the state’s newest budget but received intense pushback from the legislature. She vetoed the budget passed in June 2015, triggering a stalemate lasting more than three months. The eventual compromise did not include Medicaid, setting the stage for a contentious fight during the upcoming session, starting in January. More than 30,000 people could lose their coverage.

A similar cloud hangs over the Medicaid expansion in Ohio. Kasich initially expressed support for pursuing a private option like Arkansas’, then tried to expand coverage during negotiations over the 2014 budget. After members of his party stripped the money for expansion from the budget, Kasich bypassed the legislature and requested the little-used Controlling Board to approve the funds for Medicaid expansion. Republicans legislators unsuccessfully sued the governor in an attempt to block him.

Continuation of the Medicaid expansion in Ohio is contingent on the legislature’s including it in the budget. Fellow Republicans cooperated in 2015, but there is no guarantee they will continue. They could pass a law at any moment removing the expansion, and a new governor could go through the Controlling Board to undo the program. The same is true in Alaska, where the legislature has sued Republican Gov. Bill Walker over his use of executive powers to expand Medicaid after failing to persuade the legislature to do so.

There are some reasons for optimism. The willingness of Ohio Republicans to include Medicaid in the 2015 budget suggests it will be very difficult for leaders to take away insurance from people who just started benefiting. The evolution of Bevin’s rhetoric throughout the campaign in Kentucky indicates that he may already appreciate this reality. Finally, Arizona did not begin participating in Medicaid until 1982 — 17 years after the program’s creation — suggesting that even the staunchest holdouts might one day relent.

Even so, the barriers for states to expand Medicaid will be greater starting in January 2017, when the federal share of the expansion is no longer 100 percent. Participation by all states is not inevitable. The political battles over “Obamacare” are unlikely to end anytime soon.