The Supreme Court on June 28th ruled that while the federal Affordable Care Act’s (ACA) Medicaid expansion is constitutional, in the event that a state does not implement the expansion, it would be unconstitutional to withdraw all Medicaid funding from that state. The ruling appears to leave intact both the mandatory nature of the expansion and the other remedies that the federal Medicaid authorities might use to enforce it. The states, however, might view the removal of the most aggressive remedy (full Medicaid defunding) as opening up some additional degree of choice about whether to forego the expansion and risk whatever lesser penalties federal authorities may impose (such as a partial withholding of funds). In Illinois, as in any other state, it is clear that expanding the Medicaid program on schedule in 2014 is by far the smart and right thing to do, regardless of the potential federal penalties for not expanding.
1. The ACA’s expansion is aimed at covering some of the most vulnerable low-income adults who are otherwise unable to afford private insurance. Not all low-income Illinoisans are currently eligible for Medicaid. Instead, right now, to qualify for Medicaid, a low-income person must fit into a “category,” such as being 65 or over, or totally and permanently disabled, or pregnant, or a child under age 19, or a parent or caretaker relative of a child under age 19. But if you are a single, childless, non-disabled adult without a penny to your name, you do not qualify for Medicaid. This expansion adds another category—having household income less than 138% of the Federal Poverty Level (FPL), which would apply to an estimated 500,000 individuals in Illinois. People in a wide range of circumstances will belong to the “newly eligible” group. Many will be low-wage, part-time workers. Some will be unemployed, either recent or long term. Some will have health conditions that, if addressed by consistent medical care, could and would allow them to get jobs. Some are really destitute, even homeless. Some are young adults, perhaps having aged off Medicaid, which they received as children, but are not fortunate enough to have parents with insurance that would cover them until they turn 26. Others are middle-aged or close to 65. Some are people who had insurance coverage, but lost it through changes in circumstances such as job loss or divorce.
Of the newly eligible population in Illinois, an estimated 431,000 Illinoisans with household incomes less than 100% FPL will be left in the cold without the Medicaid expansion. The ACA envisioned that these folks would qualify for Medicaid. That’s why the federal subsidy to help pay for private insurance premiums starts at 100% FPL and goes to 400% FPL. So, without the Medicaid expansion, these folks will likely be priced out of affordable health insurance through the Exchange because they won’t qualify for the federal financial help (unless they are lawfully residing residents ineligible for Medicaid). They will have to continue to access safety-net providers and emergency rooms for care, driving up costs for these providers and showing up sicker. And, these folks are still held responsible under the individual mandate to prove insurance coverage or why they are exempt.
2. Minimal state investment will reap overwhelming benefit. The ACA increased the Federal Medical Assistance Percentage (FMAP) rates for the newly eligible individuals under the expansion to 100 percent for calendar years 2014 through 2016, and then gradually declining to 90 percent in 2020 where it remains indefinitely. By 2020, when Illinois will pay just 10 percent of the cost of care for this new population, the annual state cost is estimated at $157 million. (This is 10% of the current cost per adult beneficiary in Illinois, $3,157, times 500,000 new beneficiaries). But even as this cost will rise due to inflation, it will also be offset by benefits such as larger state tax revenues from increased employment and provider income and an increased insured population. It will also be offset by increased efficiencies due to the new system to simplify and coordinate eligibility and enrollment for Medicaid and the Exchange, which is nearly entirely paid for by the federal government. It may also be offset by the stabilization of the health of almost half of the newly eligible population in the event that the federal government gives permission for Cook County to expand Medicaid early, this year or next. If Cook County is allowed to expand Medicaid early, an estimated 250,000 folks will have medical homes and coordinated care, which would likely stabilize chronic conditions, prevent disabilities, and therefore reduce future Medicaid costs. Finally, state costs can be further minimized by increasing efficiency through care coordination initiatives, especially for persons with chronic conditions and for dual eligibles (persons eligible for both Medicaid and Medicare). The Lewin Group estimates that the ACA will increase Illinois’s Medicaid spending by just 2.8% between 2014 and 2019. The Congressional Budget Office has estimated that the ACA would impose less than a 1% increase in state Medicaid costs. Moreover, these high federal matching rates are highly likely to stay. In Medicaid’s close to 50-year history, Congress has never decreased FMAP levels in Medicaid other than to allow the expiration of temporary FMAP increases enacted as parts of stimulus packages in recessions. The more states that adopt the “newly eligibles” expansion, the more members of Congress who will resist any reduction below 90% down the line. In fact, with sufficient support, Congress could amend the matching rate, keeping it at 100% indefinitely.
4. Participating in the Medicaid expansion will help stabilize the state budget.The budget is critically dependent on federal Medicaid funding. The Illinois Medicaid program is by far the largest source of federal revenues to the state. Federal funds also support the Department of Human Services, Department on Aging, Department of Children and Family Services, local public health departments, Cook County Health and Hospitals Systems, Illinois’s state universities, and local school districts’ special education programs, among others. The Medicaid expansion will provide crucial federal funds across the state and local governments to support programs now being delivered to the expansion population with no federal funds, or being withheld from that population due to lack of funds.
6. Illinois hospitals need the Medicaid payments to offset reductions in federal funds in other areas.Targeted hospital subsidies, known as disproportionate share hospital (DSH) payments, will decline under the Affordable Care Act. The reduction was justified on the theory that the Medicaid expansion will eliminate the need for DSH subsidies by greatly reducing the burden of uncompensated care. If hospitals lose those payments, and the loss is not made up by the expansion of Medicaid, it will devastate not only hospitals, but entire communities. Many Illinois hospitals, especially in rural areas, simply are not viable if their DSH subsidies decline without being replaced by expanded Medicaid. Hospitals are among the largest employers in their communities. When a hospital closes, the community not only loses a major employer, but providers leave too, and then the community has great difficulty recruiting new industry. Additionally, expanding Medicaid will ensure that Illinois’s medical providers will have the financial support coming from the Medicaid expansion to offset the ACA’s Medicare payment reductions. Doctors and hospitals are counting on the Medicaid expansion (which will bring in revenue for services to the newly eligible and reduce the need for uncompensated care) to be in place as the Medicare payment changes are phased in.
8. Federal Medicaid dollars will finally be paying for behavioral and mental health services for Medicaid enrollees. Under the ACA, the newly eligible population will have a benefit package that includes mental health and behavioral health services. These are costs now being borne by state and local funds, or else the services are simply not being provided—with impact on emergency rooms, state institutions and the criminal justice system. These state and local costs will be replaced with federally funded Medicaid.
9. Illinois’s veterans deserve health insurance. Not all veterans are able to get care at a Veterans Affairs hospital. And, in fact, roughly 43,000 Illinois veterans are uninsured (along with 25,000 of their family members). Illinois needs to take care of veterans, and the ACA’s Medicaid expansion will do just that. At implementation in 2014, nearly half of uninsured veterans will likely qualify forexpanded Medicaid coverage. Illinois should serve these veterans, just like they served its citizens.
10. Does Illinois really want to subsidize health care in other states? As Justice Scalia stated in his dissent, “Those States that decline the Medicaid Expansion must subsidize, by the federal tax dollars taken from their citizens, vast grants to the States that accept the Medicaid Expansion.” So if Illinois does not take advantage of the federal 100%/90% funding for the Medicaid expansion, other states that chose to expand will get the benefit of Illinoisans’ federal tax dollars.
11. Expanding Medicaid coverage helps the financial viability of community clinics.Clinics are our best—really only—strategy for providing health care to the uninsured outside of emergency rooms. There will still be plenty of uninsured after the ACA is implemented, plus many of the newly insured Medicaid beneficiaries will get their care from clinics. The only way that clinics can serve the uninsured is by serving a critical percentage of patients who have coverage. The Medicaid reimbursement for covered patients allows the clinic to also serve the uninsured. With a high percentage of patients covered, the clinics will be able to expand capacity to serve the uninsured as well as those newly coverage by Medicaid.
12. The Medicaid expansion is simply the right thing to do. We have a chance, through the incredible leveraging of federal funds, to provide health coverage—and the chance for better health and upward mobility—to hundreds of thousands of our state’s most vulnerable, needy residents. We can create a system that expands its circle of moral concern to include the uninsured, recognizing as Justice Ruth Bader Ginsburg wrote in N.F.I.B. v. Sebelius, that “[v]irtually everyone … consumes health care at some point in his or her life.”