In June, the U.S. Supreme Court upheld the constitutionality of the Affordable Care Act. In its decision, however, the court invited a major new political battle over the act’s requirement that Medicaid be expanded to cover up to 138 percent of the federal poverty level. The poverty level is adjusted annually for individuals and families of different sizes. For example, the 138 percent level in 2012 is $2,195 per month for a family of three. The court decided that the federal government could not make the Medicaid expansion mandatory, thus leaving it for state determination.
Shortly thereafter, a number of governors indicated that their states would not expand Medicaid, blaming increased costs. Many had long opposed the health care act. Because of the potential impact on the health of millions of Americans, this decision should be examined carefully.
To begin, it is important to understand the scope of this Medicaid expansion. Under current law, states can adjust the level of Medicaid eligibility according to family income, which is often far below the federal poverty level, and can change it for different groups.
The Affordable Care Act, however, proposes to raise the eligibility for everyone to 138 percent of the federal poverty level. The Urban Institute reports that 22.3 million uninsured people with income below 138 percent are potentially eligible for Medicaid if all states implement the expansion. Fifteen million (67 percent) are adults not currently eligible for Medicaid; 2.9 million (13 percent) are children who are currently eligible for Medicaid or the Children’s Health Insurance Program but not enrolled; and 4.3 million (13 percent) are eligible but unenrolled adults.
Under the A.C.A., the federal government assumes 100 percent of the Medicaid expansion costs in the first three years (2014-16) and then a declining percentage until it reaches a permanent floor of 90 percent in the year 2020. The Congressional Budget Office estimates that the costs over its first nine years (2014-22) will involve 93 percent federal funding ($931 billion) and 7 percent state funding ($73 billion).
Even if fully implemented, it is estimated that the the increased payments will represent only 2.8 percent in overall Medicaid spending by states. Estimates of individual state costs vary, depending on how many eligible people already are insured, how many already and newly eligible people will actually enroll, how much current state health care expenses for uninsured people will be reduced when they are covered by Medicaid and so on.
Before states opt out of the expansion, a number of ethical, fiscal and political factors should be considered. The first is that this Medicaid expansion, by providing health care coverage for millions of our nation’s poorest people, greatly advances the basic right to health care that is integral to the common good in developed societies. Not to do so, when the A.C.A. provides subsidies for those above the poverty line to purchase health insurance, would widen U.S. economic divides and further threaten the fabric of civil society.
Second, recent research reported in the New England Journal of Medicine comparing three states that substantially expanded Medicaid with neighboring states without expansions found that expansions to cover low-income adults were significantly associated with longer life expectancy and improved coverage, access to care and self-reported health.
Third, the federal share of expansion costs is far better than the federal-state split in traditional Medicaid. Even projected state costs are likely to be much less, offset by a number of factors: a substantial reduction in the costs of “uncompensated care”; improved preventive and regular health care to prevent more expensive treatments, which lowers overall costs; and a significant reduction in state costs for mental health services to the uninsured.
Fourth, Medicaid expansion makes economic sense. States spend billions of dollars in tax credits and other incentives to attract business and jobs, often without documented evidence of success. With the Medicaid expansion, a state can make an investment of millions that will bring in billions of dollars of new health care business, thereby increasing demand, services and good jobs.