Medicaid Could Soon Allow Partial State Expansions

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By Victoria Pelham

States could soon be granted more leniency over who needs to be included under a Medicaid expansion.

The 31 states (and District of Columbia) that chose to expand their Medicaid programs under the Obama administration had an all-or-nothing deal: They had to cover beneficiaries who make up to 138 percent of the federal poverty level to receive the Affordable Care Act’s higher match. Now, the Trump administration is reviewing whether it will allow Arkansas and Massachusetts to scale back their expansions to cover only those with incomes up to the poverty line.

The answer could be different depending on whether the request comes from a state looking to dial back its coverage or a traditional program hoping to partially expand. While Medicaid officials have promised a new era of flexibility for states, they have also been critical of the use of the safety-net health insurance program for able-bodied, working-age adults—hinting in recent days at a readiness to put more limitations on this group’s coverage. Still, approval from the Centers for Medicare & Medicaid Services could encourage other states to seek similar eligibility rules, analysts project.

Nearly 7 million new people could be insured if the 19 states that didn’t opt in could do so on a limited basis, according to a recent study from health-care consulting firm Avalere.

“The question is who is Medicaid for and who will it cover?” Trish Riley, executive director of the National Academy for State Health Policy, told Bloomberg Law.

Trimming Costs

Massachusetts in September asked to amend its Section 1115 demonstration with a host of provisions tightening Medicaid benefits. The goal was to bring MassHealth closer to private insurance and make it more sustainable in the long term. State officials warned that enrollment in the program is on the rise as more citizens move to public coverage. Medicaid, already 40 percent of the state’s budget, would take a financial toll if its growth is left unchecked, the request said.

Proposed overhauls included cutting the state’s benefits for nondisabled adults making more than 100 percent of the federal poverty level who are eligible for insurance under its exchange known as the Health Connector. Massachusetts would then enroll them in subsidized commercial plans on the exchange.

The CMS lists the state’s request as “pending.”

Farther south, Arkansas also is seeking to change its expansion waiver to insure only those up to 100 percent of the poverty line—and to add work requirements as a precursor to that coverage. That amendment is also still under review.

Setting an Example

Dan Mendelson, president of Avalere Health, said he expects the CMS to be more flexible with these types of requests, allowing them to possibly become “an avenue through which they drive coverage expansion over the coming years.”

A partial expansion could especially be a boon in administration-friendly, conservative-leaning states like Texas and Florida, he told Bloomberg Law. The Avalere study found the two would be among states with the most Medicaid growth: adding around 1.8 million in Texas and 1.1 million new people in the Sunshine State.

Medicaid personal responsibility measures, like work requirements and cost sharing—which administration officials have suggested they would support—would likely be part and parcel of these types of requests, he said. And that could make expansion “more palatable to some conservative states.”

“If they roll back eligibility in waivers, does that also open the door for states that might want to expand coverage but just to 100 percent [of poverty level], and there’s been interest among states at least historically,” Riley said.

Still, boosting coverage and trimming it are two different stories, she said. The CMS could approve an expansion amendment, but that wouldn’t necessarily translate to accepting a first-time smaller expansion.

Administrator Seema Verma questioned recently the sense in using a program designed for the most vulnerable for nondisabled adults and supported changes aimed at moving this group out of poverty—without, she said, the Obama administration’s “soft bigotry of low expectations.” She warned of strained resources for the most needy within Medicaid’s ranks.

The CMS’s new landing page for Section 1115 demonstrations removes Obama-era language around the goal of growing coverage, instead touting such missions as “efficiencies” to strengthen sustainability, bringing Medicaid and private health insurance policy more in sync, improving access to services, and driving value.

Trump-era officials might not support any new Medicaid expansions, Riley said. But then again, they’re also encouraging of state flexibility and the federal-state partnership, so it’s unclear which side they’ll fall on.

Gaps in Insurance

Mendelson said there is “substantial potential” to insure more people by allowing limited state Medicaid expansions.

There are “millions of people who have income below the poverty level who are presently not eligible for Medicaid, so that policy could be attractive to the administration going forward,” he said. “It could serve as the basis of an expansion.”

“I do think the [Trump] administration will be judged ultimately on how many people had coverage at the start and finish of the administration,” he said.

Medicaid income eligibility varies drastically depending on where in the U.S. an applicant lives. In Alabama, the safety net only covers parents in a family of three who make up to 18 percent of the poverty line, according to the Kaiser Family Foundation. Next door, Georgia covers up to 37 percent for the same group. In much of the expansion Southwest, it’s 138 percent. That goes up to the highest 155 percent rate in Connecticut.

The poverty line for parents of dependent children (in a family of three) is $20,420 and $12,060 for an adult individual, KFF said.

Working With Exchanges

Congress may also be planning to address the health insurance marketplaces in early 2018, Mendelson said.

That has ramifications not just for those enrollees but also for Medicaid, because the populations are closely tied, he said.

“There is also potential for combining exchange policy with Medicaid policy going forward to simplify and rationalize how states approach low-income populations,” he said.

That approach could still have drawbacks for those with incomes close to poverty.

Riley said this group of people could have a “very difficult” time purchasing health insurance on the exchange “even with deep subsidies.” The Avalere report also suggests Medicaid beneficiaries who make between 101 and 138 percent of the federal poverty level could have to pay more for health care through the exchange plan if they’re booted from Medicaid.

In Massachusetts, the proposal was met with fears over more expensive cost sharing and out-of-pocket caps on the exchange versus Medicaid. The state’s officials responded by saying copays on the plans are generally “much lower.”

To contact the reporter on this story: Victoria Pelham in Washington at vpelham@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

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