PA’s Corbett is Latest GOP Governor to Take Medicaid Expansion. Will Others?

September 2, 2014
|In Medicaid, Policy & Health Reform, Sales & Marketing, Strategy
|By GHG Advisors

Last week the Center for Medicare and Medicaid Services (CMS) announced the approval of Pennsylvania’s Healthy Pennsylvania plan to expand Medicaid coverage to more than half a million low-income people, becoming the 27th state to do so under the Affordable Care Act (ACA) and the 9th Republican governor.

It’s a big step for Governor Corbett, who joins GOP governors in Arizona, Iowa, Michigan, Nevada, New Jersey, New Mexico, North Dakota, and Ohio in breaking party lines and taking the expansion.  The plan would require certain Medicaid-eligible people to pay directly for a portion of their care, utilizing ACA funds to purchase their benefits on the private market. A huge factor in Corbett’s decision: hospitals, which carry huge leverage in PA, both academic and for-profit.  Politically speaking, Corbett had little choice.  Economically speaking, he’s the latest RedGov to awaken to the fact that it makes no sense for states to pass up on the ACA’s huge Federal matching funds.

Does this mean more GOP governors will see the light and stop the obstruction on Medicaid expansion, enabled by last year’s infamous Supreme Court ruling? Yes — but not all.

As I wrote back in June, there are still 23 holdout Red states, whose governors like Rick Perry (TX) and Bobby Jindal (LA) continue to be hell-bent on throwing a middle finger at the White House while thousands of their constituents literally die because of inaction.  Speculation is that a growing number of Red states will fold and take the Medicaid expansion money — but not until after the midterm elections.  Here’s why:

  • Funding:  the Feds are funding 100% of Medicaid expansion through 2016, scaling down to 90% in 2020+. While the initial ACA backlash may have provided cover for states not to expand, it will be increasingly difficult to continue to defend not taking the federal money to insure a significant population group.  Remember, Red states have the highest rates of uninsurance per capita, largely due to their historically stingy Medicaid programs.  Texas, for instance, has more uninsured people than Colorado has people.
  • Access: most states that choose not to expand created a significant coverage gap. This happens because subsidies on the exchange are available from 100%-400% of the Federal poverty limit, but not below that, leaving a low-income population paying significantly more for healthcare coverage.
  • “You’re Still Paying for It”: The ACA funds Medicaid expansion largely from tax revenue. States like Texas and Florida are among the highest contributors to general tax revenue and have the highest number of uninsured population.  They are helping to fund Medicaid expansion for other states via higher income taxes, yet not receiving any of the benefits for their own population.  Medicaid accounted for about two-thirds of all federal funding to states in 2014, up from 43 percent two years ago.
  • Hospitals: hospitals traded in insufficient DSH funding and bad debt for Medicaid or exchange coverage in the ACA.  Hospitals in Red states that didn’t expand Medicaid are now reporting they can’t even issue bonds for capital projects, and are dying on the vine as the DSH funds are taken away without a substitute.  Considering hospitals are often the largest employers in their communities, and especially in rural Red states, their lobbying might is expected to break anti-ObamaCare partisanship after the elections are over.  They were a huge factor in Pennsylvania.

I’m not as optimistic as some on Wall Street that all RedGovs will fold in the face of these arguments, but suspect that several more will as we head into 2015. Immediately after the PA waiver approval, Tennessee’s governor said he may submit a similar proposal to CMS to help provide coverage for approximately 180,000 individuals.  The driver there?  Once again, hospitals:  Community Health Systems, HCA, and LifePoint all have a significant presence in TN, including the headquarters of several.  And given the central and growing role Medicaid plays in healthcare financing — it is the largest health insurer on earth now — health plans are awakening to the fact that if they’re not in it, they won’t be around long.

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