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Lou Cannon: Obamacare Money Talks as States Struggle to Expand Medicaid

Soon after President Barack Obama signed the Patient Protection and Affordable Care Act into law in 2010, one of the measure’s leading supporters in the medical community prophetically warned that the nation’s expensive health-care system would not be easily reformed.

“Health care is a journey, not a destination,” said Dr. Frederick Turton, a Sarasota, Fla., physician and chairman of the American College of Physicians Board of Regents. “We didn’t reach this destination when President Obama signed this legislation. There’s a lot more work to do.”

States are learning the validity of Turner’s observation as they struggle to comply with their responsibilities under the Affordable Care Act. These include navigating the changing landscape of Medicaid while also designing online marketplaces, known as exchanges, to provide affordable health-care policies for those without insurance. The marketplaces are due to be available for enrollment Jan. 1, 2014. The federal government will run exchanges for states unable or unwilling to operate them.

Meanwhile, many states are overhauling Medicaid (known as Medi-Cal in California), the federal-state program that provides health care for low-income families and the disabled. States are striving to control costs, improve preventive care and implement new federal rules that Gov. Jerry Brown, a Democrat and Obamacare supporter, calls “incredibly complex.”

But money comes with the complexity. Four Western Republican governors who oppose the Affordable Care Act — Jan Brewer of Arizona, Brian Sandoval of Nevada, Susana Martinez of New Mexico and Jack Dalrymple of North Dakota — have already changed course and decided to expand Medicaid in order to claim the federal dollars that come with it. Last week, Republican Ohio Gov. John Kasich joined them. Michigan Gov. Rick Snyder –- also a Republican, albeit one who has been far less strident in opposition to the ACA than his colleagues –- also endorsed the expansion.

Brewer, a frequent critic of Obama administration policies, is the surprise in this group. Opting for practicality, she said in her State of the State message that expansion would “secure a federal revenue stream to cover the costs of the uninsured who already show up in our doctors’ offices and emergency rooms.” Arizona would receive $1.6 billion in federal matching funds in 2014, the first year of the expansion.

Her change of heart drew barbs from fellow conservatives. National Review Online said Brewer exemplified an “unfortunate common strain of Republican leadership that is uncompromising in rhetoric but opportunistic in reality.” Nor is it certain that Brewer will persuade the Republican-controlled Arizona Senate to go along with Medicaid expansion.

“The devil is in the details,” said Sen. Nancy Barto, R-Phoenix, whose committee oversees health care issues. Barto wants to see these details before making a commitment.

Whatever happens in Arizona, Medicaid expansion is crucial to the Obama administration’s goal of insuring 30 million of the estimated 48 million Americans who now lack any health insurance. It’s believed that half of the 30 million will be insured through the exchanges and half through the Medicaid expansion. But these are at best rough estimates. More than 60 million people, about one in five Americans already receive Medicaid benefits and millions more are eligible.

Enrollment in Medicaid and the Children’s Health Insurance Program, created in 1977, has surged more than 70 percent since 2000, reflecting economic downturns and the elimination of health benefits by employers.

Twenty-four governors, most of them Democrats, have committed to further Medicaid expansion. Nineteen Republican governors, including the governors of five of the 10 most populous states, still oppose it.

These governors — and many Republican-controlled state legislatures as well — are able to resist additional expansion because the U.S. Supreme Court gave them an escape hatch in its 2012 ruling upholding the constitutionality of the Affordable Care Act. By a 7-2 margin, the justices decided that states could not be penalized if they declined to expand Medicaid programs to include anyone with income 133 percent or less above the poverty line. That would make Medicaid available for individuals earning up to $14,856 a year; for a family of three, the figure would be $25,390. The expansion will be fully federally subsidized for the first two years, then gradually reduced to 90 percent of costs by 2020.

Originally, all Republican governors opposed expansion of Medicaid. Some such as Texas Gov. Rick Perry have done so on philosophical grounds — bluntly put, they oppose additional aid for the poor — but the larger concern for most governors is fiscal. Many governors and state legislators, including some Democrats, worry that states, which already spend an average of 15 percent of their budgets on Medicaid, will be overburdened by Medicaid costs as federal subsidies diminish.

Melissa Hansen, a Medicaid expert at the National Conference of State Legislatures, said there is particular unease in the states about the so-called “woodwork effect,” which holds that availability of a new service can induce patients to come out of the woodwork to get it. If the theory is valid, Medicaid expansion could be wildly expensive for states with high numbers of uninsured, because the Affordable Care Act provides federal subsidies only for persons who are newly eligible — not for those who are presently eligible but have not enrolled in Medicaid. Potentially hardest hit would be states such as Texas, where more than 26 percent of persons have no health insurance. Massachusetts, at the other end of the insurance spectrum, has only 5 percent uninsured.

As Hansen and Laura Tobler of NCSL acknowledged in a Feb. 1 webinar on Medicaid for states, the full state costs of expanding Medicaid are not yet known. Supporters of Medicaid have suggested that opponents exaggerate the “woodwork effect” to discourage expansion. In Florida, Republican Gov. Rick Scott estimated last December that Medicaid expansion would cost the state $26 billion over 10 years. Last month he lowered the estimate to $3 billion. Similarly in Virginia, the administration of Republican Gov. Bob McDonnell lowered the estimated cost of Medicaid expansion to $137.5 million from $2.2 billion over nine years.

Whatever the costs, there will be a hole in the safety net if states decline to expand health care coverage for the poor. As envisioned by the Affordable Care Act, Medicaid will provide health care for those up to 133 percent above the poverty level and the exchanges will then offer affordable policies to individuals and families with income up to 400 percent above the poverty line. Without Medicaid expansion, there are likely to be millions of Americans who have too much income to qualify for Medicaid but not enough to purchase health insurance on the exchanges.

The actions of the governors in accepting a Medicaid expansion they strenuously opposed could be a sign of the times. If so, it would follow a familiar pattern. When Medicaid was created in 1965, a number of states declined to offer it. Eventually, lured by federal subsidies, all states signed up for the program.

Arizona in 1982 was the last state to provide Medicaid. If Brewer has her way, it will be in the forefront of those expanding it.

Lou Cannon, a Summerland resident, is a longtime national political writer and acclaimed presidential biographer. His most recent book — co-authored with his son, Carl — is Reagan’s Disciple: George W. Bush’s Troubled Quest for a Presidential Legacy. Cannon also is an editorial adviser to State Net Capitol Journal, which published this column originally. Click here to read previous columns. The opinions expressed are his own.

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