January Angeles, interviewed by Steven Roll and Deborah Swann
January Angeles is a Senior Policy Analyst at the Center on Budget and Policy
Priorities. She focuses on eligibility and enrollment for health care subsidy
programs, and can be reached at email@example.com. Steven Roll is assistant managing editor for
state tax with Bloomberg BNA. Deborah Swann is an editor for Bloomberg BNA's
National Federation of Independent Business et al. v. Sebelius, Secretary of
Health and Human Services, et al.,1 the
U.S. Supreme Court ruled on the constitutionality of the Patient Protection and
Affordable Care Act of 2010, upholding the law's individual mandate as a valid
exercise of Congress's taxing power.2 In
addition, the Court struck down, as unconstitutional, that part of the Medicaid
expansion provision, which withdraws existing Medicaid funding to states that
choose not to participate in the new program expanding health care to citizens
whose incomes fall below certain threshholds.
BLOOMBERG BNA: How does
the Supreme Court ruling affect health reform's Medicaid expansion?
ANGELES: As enacted, and
before the U.S. Supreme Court ruling, the Affordable Care Act (the ACA) required
states to expand Medicaid to most residents with incomes up to 133 percent of
the federal poverty line (roughly $25,000 for a family of three).
The current Medicaid program requires states to cover only
certain discrete categories of needy individuals: needy families, pregnant
women, children, the blind, the elderly, and the disabled. There is no mandatory
coverage for most childless adults, and the states have considerable flexibility
with respect to coverage levels for parents of needy families.
Right now, most states offer Medicaid only to
parents with incomes that are much lower than 133 percent of the federal poverty
line. In the median state, working parents can only qualify for Medicaid if they
earn less than 63 percent of the federal poverty line, and non-working parents
would have to make less than 37 percent of the poverty line. Also, only a
handful of states provide coverage to low-income adults without dependent
children, regardless of how far below the federal poverty line they fall.
Under the ACA's Medicaid expansion, 17 million
more people would have gained health insurance coverage through Medicaid by
2022. The U.S. Supreme Court has upheld the constitutionality of the ACA in June
2012, but it struck down the part of the Medicaid expansion provision which
withholds federal funds for a state's existing Medicaid program if the state did
not expand coverage. This means that it is now up to the states to decide
whether or not to expand their Medicaid programs to cover low-income parents and
other low-income adults whose incomes fall below 133 percent of the federal
poverty line, but who are above the coverage levels provided in the states'
existing Medicaid programs.
BLOOMBERG BNA: Who pays
for the Medicaid expansion and how much will it cost?
ANGELES: The Medicaid
expansion is a great deal for the states. The federal government will pay 100
percent of the costs of covering people who will be “newly eligible” for
Medicaid for years 2014 through 2016. These are persons who would not be
eligible under their states' current programs. After 2016, states will start
paying some of these costs, but the federal government will always cover at
least 90 percent.
ANGELES: The 90 percent
that the federal government will pay to cover newly eligible beneficiaries is
not time limited--this is what the federal government's share of the costs will
be on a permanent basis. States that are worried about whether the federal
government will uphold its end of the deal should look at the history of the
Medicaid program and how much federal funding states have received. The federal
contributions to Medicaid have been fairly steady since the program began in
1966. Even when the U.S. experienced budget crises, the federal government
maintained Medicaid funding to the states. There is no reason to think that this
trend will not continue and that federal funding for newly eligible
beneficiaries under the Medicaid expansion would go below 90 percent in the
Furthermore, the federal government will
continue to cover the same share of the costs associated with the populations
that are eligible to be covered under existing state programs--on average about
57 percent, though it varies by state.
BLOOMBERG BNA: How much
does the federal government pay for Medicaid expansion?
ANGELES: The federal
government pays the bulk of the cost of expanding Medicaid. If states choose to
expand their Medicaid programs in 2014 to cover most individuals under the age
of 65 with incomes below 133 percent of the federal poverty line, the cost to
the federal government would be $931 billion, and the states' share would only
be $73 billion during the first nine years (2014 through 2022).
BLOOMBERG BNA: Does the
$73 billion that states would shoulder include the cost of the administrative
resources necessary to support the expansion?
ANGELES: No. This figure
represents the dollars states would pay to increase coverage. It does not
include the cost of administrative resources. However, the $73 billion in
additional state costs does not take into account offsetting savings, such as
the reduction in costs that a state or county would otherwise incur paying for
medical care provided to the uninsured.
BLOOMBERG BNA: Which
states are likely to benefit the most from the Medicaid expansion?
ANGELES: States that
traditionally have had the stingiest Medicaid programs and have not expanded
them very much, such as Florida and Alabama, have the most to gain from the
Texas, for example, has a very
large number of people without insurance. Five million Texans have no health
insurance today, about a quarter of the state's population. If Texas expands
Medicaid, nearly 1.8 million low-income adults (most of whom are uninsured
today) will get insurance coverage through Medicaid, according to a study by the
Urban Institute and Kaiser Family Foundation.3
To cover this many additional people, the state would
have to increase its spending on Medicaid by about $2.6 billion in the first six
years. That sounds like a lot of money, but in reality it is just 3 percent more
than what the state is projected to spend on Medicaid even without the
expansion. Also, that $2.6 billion in state spending will bring $52.5 billion in
federal dollars to Texas. That is a significant benefit to the state economy.
And, Texas would save money in other ways, especially by reducing the
money it spends providing health care in emergency rooms and health clinics to
people without insurance.
Uninsured people also receive services that are
state or county funded, such as mental health and substance abuse treatment, and
some public health services. Some of these services could be covered by
Medicaid, and therefore largely covered by the federal government rather than
the state or county.
BLOOMBERG BNA: The
Washington Post on Monday, Aug. 27, 2012 ran an article that counties in
Texas may buck the state and join the Medicaid expansion. Would you care to
comment on this article?
ANGELES: The Washington
Post article is a good illustration of how much states and counties are
spending on care for the uninsured today, and how they would benefit from
expanding Medicaid. It also shows that there are many stakeholders who are
affected by the state's decision on the Medicaid expansion. States shouldn't
just focus on costs and savings to the state, but should also consider the
impact on counties and other entities that shoulder the cost of care for the
BLOOMBERG BNA: What could
be some of the consequences of a state's decision not to expand Medicaid?
ANGELES: A state's
decision to reject the Medicaid expansion would leave its poorest
adults--primarily parents and other adults working for low wages--out in the
cold. That's because the Affordable Care Act's federal subsidies to help people
buy coverage in the newly established health insurance marketplaces, called
exchanges, will be available only to people with incomes between 100 percent and
400 percent of the federal poverty line. People with incomes below the
poverty line will not be eligible for the subsidies, in part because the
Affordable Care Act envisioned that these persons would be covered by the
The U.S. Supreme Court's ruling
that basically makes the expansion optional means that, in a state that does not
expand Medicaid, a person could have income that is too high to qualify for
Medicaid (under the state's existing Medicaid program) but too low to qualify
for exchange subsidies. There will essentially be a “donut hole” in coverage for
low-income people, and these people are likely to remain uninsured without the
assistance that Medicaid or the exchange subsidies provide.
When people don't have insurance, they are worse off and
so is the state's economy. People with Medicaid are much more likely to have a
regular source of health care and to have seen a doctor in the last six months
than people without insurance. They have financial security when a catastrophic
illness hits. And, a new study tells us that when states expanded Medicaid in
the past, mortality rates fell. Medicaid literally saves lives. In turn, a
strong, healthy workforce is a key building block for a strong state economy.
Finally, states will still end up paying the large
and growing costs of caring for people without insurance. So if a state rejects
the expansion it would miss out on the chance to reduce those costs.
BLOOMBERG BNA: If a state
were to do a cost-benefit analysis of expanding Medicaid, what would be the key
factors to consider?
ANGELES: A really good
analysis looks at the complete picture: both the costs and the savings that
would result from expanding Medicaid. Many just look at the costs. If expanding
Medicaid will cost the state a certain amount of money, but that spending would
result in reduced spending on other areas in the state budget - for example,
because more people will be covered and the state will spend less on services
for the uninsured -- then those savings should be part of the equation.
Analyses should also make realistic assumptions about how
many people will participate and how much it will cost, on average, to cover
them. For example, it is inappropriate to assume that all people who would be
eligible for Medicaid will enroll. History tells us that just doesn't happen, in
Medicaid or in other programs. Similarly, analyses should not assume that the
people who will newly enroll into Medicaid will be much sicker and more
expensive to cover than the people who get Medicaid coverage now. Research shows
that is not the case.
States also have to take into account the fact
that there will be some new costs for covering people in Medicaid whether the
state expands or not. Because these new costs will happen regardless, they
should not be attributed to the Medicaid expansion. Specifically, the
requirement for people to purchase coverage (known as the individual mandate),
along with a significant amount of outreach to get people to sign up for
subsidies to buy insurance in the new health insurance exchanges, will lead
people who are already eligible for Medicaid, but not currently enrolled,
to apply and get coverage. States will incur the costs of covering these people
even without the Medicaid expansion.
BLOOMBERG BNA: Is there a
time limit for states' signing up for the Medicaid expansion?
ANGELES: No. The
Department of Health and Human Services has said that there is no deadline for
when a state can decide whether or not to move forward with the Medicaid
BLOOMBERG BNA: Are there
any downsides to a state expanding Medicaid?
ANGELES: No, it's a great
deal that states shouldn't pass up. By expanding Medicaid, states get to help
hundreds of thousands of their residents get the health insurance they need
while only paying a small fraction of the costs.
Ms. Angeles has authored a paper on How Health
Reform's Medicaid Expansion Will Impact State Budgets, which can be
found on the website for The Center on
Budget and Policy Priorities. The Washington Post article, “Texas
Counties Consider Going It Alone on Medicaid Expansion” is available in the
Aug. 27, 2012
1 U.S., No. 11-393 (June 28, 2012);
together with Department of Health and Human Services et al. v. Florida et
al., U.S., No. 11-398 (June 28, 2012); Florida et al. v. Department of
Health and Human Services, et al., U.S., No. 11-400 (June 28,
2 The individual mandate requires virtually
all U.S. citizens to obtain health care insurance or pay a penalty.
3 John Holahan & Irene Headen,
Medicaid Coverage and Spending in Health Reform: National and State-by-State
Results for Adults at or Below 133% FPL, Kaiser Commission on Medicaid and
the Uninsured (2010).