The Carrot Without The Stick

A divided Court upheld the individual mandate as I predicted, and Robert Reich was one of the few who joined me in this prediction.

However, the court ruled against another part of the law: the expansion of the federal-state Medicaid program, ruling that the federal government can’t put sanctions on states’ existing Medicaid funding if the states decline to go along with the Medicaid expansion.

However, I’m predicting that the states will implement Medicaid Expansion anyway, with very few, if any exceptions.

What Is Medicaid Expansion?

The vision of The ACA’s Medicaid expansion provisions was to create an integrated national program to cover about half of all those the ACA was supposed to cover, namely those with the lowest incomes.

Medicaid expansion raises the Medicaid eligibility threshold to 133% of the poverty level or $14,400 for a single adult and $29,300 for a family of four. The potential impact is that 16 million people would be covered under Medicaid expansion – roughly 50% of the 32 million predicted increase in coverage under the ACA.

What About States That Have Pushed Back?

The Court decision means that the federal government may still fund the Medicaid expansions, but that it can’t threaten to yank back Medicaid funding if a state chooses not to participate. This leaves the Federal Government without a stick.

26 states have legislators that have shunned the ACA for ideological reasons, disguised as affordability issues, and resistance to Medicaid Expansion is one of them.  Southern and Western states like Texas, Florida, and Mississippi, seeking to avoid assuming a higher share of Medicaid costs,  have created all kinds of barriers to Medicaid enrollment, and, as a result, have the highest numbers of uninsured  in the nation.

According to the Gallup Healthways Well-Being Index, more than one in five people are uninsured in roughly a dozen states, as compared to the nationwide average of 17.1% in 2011.  Consider these states:

  • Texas (27.6%)
  • Mississippi (23.5%)
  • Florida (22.9%)
  • Oklahoma (22.1%)
  • California (22.0%)
  • Nevada (21.9%).

Compare those figures with Massachusetts, which already has an individual mandate, and boasts the lowest rate of uninsured people in the nation, at less than 5%.

Further, compare these states with the ones that challenged the ACA:

Ironically, the costs to these states of expanded implementation would be far less than the costs incurred by not insuring these people. Many needy citizens in these states, due to restrictive provisions that prevent them from qualifying, have deferred treatment of health conditions until they become critical, at which point these patients overrun the emergency rooms. Obviously, this raises hospital costs.  A whopping 68% of the growth in Medicaid spending has been attributable to acute care.

A Carrot That Is Very Hard to Resist

Greatly Expanded Coverage at Little Additional Cost: Medicaid expansion would be a very good deal indeed for these red states that need it most. A Kaiser study predicts a huge jump in enrollment with very insignificant expected increases in state spending. For instance, here are what additional costs the neediest states would incur for increasing enrollment dramatically:

Washington DC: 16% enrollment increase; 1% cost incease.
Maryland: 32% enrollment increase; 2% cost increase.
Virginia: 42% enrollment increase; 2% cost increase.
Texas: 45% enrollment increase; 3% cost increase.

Federal Government To Bear Most of the Cost: The federal government currently shares the cost of Medicaid with the states, from splitting it 50-50 in wealthy states to picking up 75% in poorer states. Under the new law:

  • The federal government covers 100% of the cost for all newly eligible people through 2016.
  • Stepping down to 90% in 2020 and beyond.

This is paid for through industry fees, cuts elsewhere in the health-care system and higher taxes on the wealthy. Overall, the federal government will shoulder the lion’s share of the cost for expansion:

  • 92% – 95% from 2014 through 2019.
  • By 2019,  federal spending will increase by 22%, and state spending only 1.4%.

That Leaves Only Politics:

Higher participation means relatively small increases in state spending. Yet, for ideological reasons, the red state legislators oppose a very good deal, which could be a bit of a setback to the dream of near universal coverage.

The Carrot Is Mightier Than the Stick

It is up to each individual state to make that determination, and my prediction is that the vast majority, even the red states, will carry out Medicaid expansion. Here’s why:

  • A Less Partisan Environment: Following the November election, especially if President Obama is reelected, which is the most likely scenario, Republican state legislators can desist from towing a narrow ideological line dictated by politics.
  • Growing Constituent Pressure: There will be growing pressure on the states to accept government money to expand Medicaid eligibility. Thousands of hospitals, nursing homes, and physicians need the money to care for millions of people. The ideological activists (Tea Party) will most likely lose out to much larger constituencies that include service providers, and low-income, elderly, and disabled citizens.
  • An Irresistible Offer: Many wavering politicians represented districts that had much to gain from the new lawNPR’s Peter Overby noted that 53 of the 100 congressional districts with the highest uninsurance rates were represented “either by Republican lawmakers who are fighting the overhaul, or by conservative Blue Dog Democrats who have slowed down and diluted the overhaul proposals.” Between 2014 and 2019, Texas, for example, would  receive more than $50 billion in additional federal funds for ACA’s Medicaid expansion, with the federal government picking up more than 95% of total costs.
  • Aging Demographics: Bear in mind that Long Term Care is a major expense of Medicaid, and more and more Baby Boomers will need it.
  • Historical Precedent: Many red-state governors and representatives have railed against Medicaid and other programs while quietly accepting billions of dollars in subsidies to their districts and states. They are, after all, politicians.

The Mandate and Medicaid Expansion Go Hand In Hand

Without both the individual mandate (required for the insurance law of large numbers to work) and Medicaid expansion (required to cover the neediest Americans), the US health care coverage and cost problems will balloon.

While it is true that there has been unprecedented political polarization that is  culmination of corporate lobbying and some 40 years of systematic judicial activism for corporate personhood at the Federal, State and local levels (which originated with Nixon appointee Justice Lewis F. Powell, Jr.); and that the political parties have tended to put politics ahead of national welfare, still, economically, doing nothing is no longer an affordable option.

According to the World Health Organization, the US spent more on health care per capita ($7,146), and as a percentage of GDP (15.2%), than any other nation in 2008. A 2001 study in five states found that medical debt contributed to 46.2% of all personal bankruptcies. In 2007, 62.1% of filers for bankruptcies claimed high medical expenses. Since then, health costs and the numbers of uninsured and underinsured have only increased.

We are past the point to turn back the clock. And healthcare reform is not a single act but an irreversible ongoing process.

Stay tuned.