6 Things You Need to Know About the Supreme Court’s Ruling on Medicaid Expansion

Wednesday, July 11, 2012

Making Program’s Extension Optional Could Hurt Vulnerable Populations

SOURCE: AP/Cliff Owen
Rep. Tim Murphy (R-PA), center, holds up a copy of the Supreme Court's health care ruling during a news conference on Capitol Hill. At least seven states have abandoned an expansion of Medicaid in the Affordable Care Act in the wake of the Supreme Court decision.

By Jessica Arons, Center for American Progress 
This piece was originally published on CAP's blog.

In the Supreme Court’s recent decision upholding the Affordable Care Act, also known as Obamacare, an important question before the Court was whether it was coercive for the federal government to threaten to withhold current federal funding for Medicaid, the joint federal-state health insurance program for the poor, if states did not expand the program in compliance with a new requirement in the health reform law. The Court ruled that yes, it is coercive to do so.

Below are the six key things you need to know about the Court’s decision and how it will affect women, the working poor, and state and federal governments.

The federal government keeps its carrot but loses its stick

The Supreme Court said that it is up to states to decide whether they will join the Medicaid expansion established under the Affordable Care Act. That means states must have the ability to take or leave the new funds offered under the Medicaid expansion. If they take the new funds, then they must comply with the new rules of the program, which means extending eligibility to anyone who meets certain income requirements.

But if they choose not to participate in the expansion, the federal government cannot penalize them by taking away the Medicaid funds they already receive. This means that governors have full discretion to decide whether their states will participate in the expansion. Already seven states have denied Medicaid coverage to millions of citizens who became eligible under the Obamacare expansion.

The working poor will suffer if states do not participate in the Medicaid expansion 

Under the old Medicaid rules, only certain categories of poor people such as pregnant women, parents with dependent children, the disabled, and the elderly could qualify for Medicaid. But under the Medicaid expansion, anyone can qualify for Medicaid as long as their annual income is less than 138 percent of the federal poverty level.[1] In addition, the Affordable Care Act offers tax credits that help people with incomes between 100 percent and 400 percent of the federal poverty level ($11,170 to $43,320 for an individual) purchase private health insurance.

Two groups of people will be left out if a state chooses not to expand its Medicaid program: 1) those who make less than 100 percent of the federal poverty level but do not fit into one of the traditional Medicaid categories, including people who are single, childless, or do not live with their children; and 2) low-income people who qualify for premium assistance under the Affordable Care Act but nevertheless cannot find insurance that they can afford to purchase or use. The majority of people in both these categories are low-wage workers.

Women have the most to lose

Women make up a disproportionately high share of Medicaid recipients for three reasons: the traditional categorical eligibility requirements (such as being pregnant or a parent), women’s longer lifespans, and the fact that women are more likely than men to be poor. Indeed, women currently constitute 68 percent of all adult Medicaid enrollees.

Many more men will be able to join Medicaid once eligibility is determined solely by income level. But of the approximately 15 million adults eligible for coverage under the Medicaid expansion, around 10 million of them—or two-thirds of the expanded Medicaid population—are nonelderly women.

Because poor women who are pregnant or parenting already qualify for Medicaid in many instances, most of the women living under the poverty level who qualify for the expansion do not have children. But many of those whose incomes are between 100 percent and 138 percent of the federal poverty level likely do. In addition, many of the women who qualify for the expansion are among the working poor—maids, waitresses, and home health aides whose jobs do not offer benefits and who earn too much to currently qualify for Medicaid but too little to purchase private insurance on their own.

The decision may set a bad precedent for other social welfare programs

The full reach of the Court’s opinion is unclear, but it is certainly possible that states will use this precedent to challenge a number of social welfare programs and civil rights statutes as unconstitutionally coercive under the Medicaid ruling. Federal statutes that limit a penalty for a state’s noncompliance to the denial of federal funds for a small government program or to a small portion of a large program may fare better in a constitutional review, but the door to challenging these laws has been opened.

States can’t afford not to participate in the expansion

The federal government pays on average approximately 57 percent of Medicaid’s total costs under the current program. But under the Affordable Care Act, the federal government will pay the full cost of the Medicaid expansion for the first two years, from 2014 to 2016. The federal government’s share will then drop to 95 percent in 2017 and ultimately to 90 percent by 2020.

But even when states have to pay 10 percent of the coverage for the new group of enrollees, states will save far more than they spend. That’s because they currently pay high costs for uncompensated care obtained by the uninsured at public hospitals and clinics, and because insurance premiums for state employees and others are inflated to cover costs that are passed on from caring for the uninsured.

Under the expansion, states will be able to increase the number of insured people by an average of 25 percent, with an increased state cost of less than 3 percent. A report from the Council of Economic Advisers estimates that California would spend close to $2 million under the expansion but would save more than $2.2 billion. At a time when state budgets are shrinking, these savings are critical.

The initial uptake of Medicaid was slow but ultimately successful

When Medicaid was first enacted in 1965, states were given the option of whether to participate in the program. It took a little while, but all states joined the program by 1982. A similar time lapse may occur with this expansion, but ultimately all states will likely participate in the expansion because it is too good an offer for them to refuse.

The Supreme Court’s ruling on the Affordable Care Act’s Medicaid expansion has created a bump in the road on our country’s long journey to universal health care coverage, but the incentives are strong for states to participate in the expansion. All Americans deserve access to affordable health insurance. We can only hope that this political moment will pass quickly so that we can return to the work of repairing our nation’s tattered safety net.

Jessica Arons is Director of the Women's Health and Rights Program at the Center for American Progress.

See also:
Interactive Map: Why the Supreme Court's Ruling on Medicaid Creates Uncertainty for Millions by Maura Calsyn and Emily Oshima

[1] The statutory threshold is 133 percent of the federal poverty line, but 5 percent of an individual’s income is disregarded, which effectively raises the limit to 138 percent of the federal poverty line.