The Medicaid Gamble: Will Medicaid Survive the ACA?

[Here is a slightly edited version of my remarks at today's panel on NFIB v. Sebelius, Medicaid, and Health Care Federalism — a panel discussion at the annual meeting of the American Society of Law, Medicine, and Ethics.]

My remarks today on NFIB, Medicaid, and Federalism are
focused on the re-invention of Medicaid – by which I mean both the re-invention of Medicaid
originally contemplated by the ACA as well as the re-invention effectuated by
the Supreme Court.  And so I tip my
hand to reveal my perspective that it is not the ACA that is reinventing
Medicaid so much as it is the Supreme Court that is reinventing Medicaid. 

 

In acknowledgement of the ACA’s drafters'  bold attempt to re-invent
Medicaid by essentially federalizing it,  while so much of the country’s attention was focused on the arguably
less significant individual mandate provisions and accompanying insurance
market reforms, and the Supreme Court’s equally bold decision to reign in the
Secretary’s enforcement authority, I title these remarks: The Medicaid Gamble: Will Medicaid Survive the ACA?

 

From my perspective, the attempt to expand Medicaid
without building in a fall back provision (say, the equivalent of a federally
facilitated exchange for a non-exchange building state) was a tremendous
gamble, particularly in light of 
the now documented evidence that public support or disdain for  exchange implementation and Medicaid
expansion tracks highly ideological voting patterns making those correlates for the individual mandate seem mere partisan affairs by comparison. Not only were we, as students of the ACA,  focused on the wrong provisions of the ACA — when considering transformative power — we mismeasured the ideological force of the Medicaid expansion.  

 

I propose, in my limited time, to address three aspects of
health care federalism or health care reform implementation power struggles  that I think are particularly  pressing in light of Medicaid’s current vicissitudes:

 

1.     What’s
up with coercion? As Sara Rosenbaum phrased it so pithily yesterday, the
weaponizing of the coercion doctrine and the implications of that for Medicaid
going forward deserve some of our time. But my angle on coercion has to do
with the history of Medicaid’s origins.

 

2.     The
second is the battle being waged between the federal government and the states
over who, if anyone, should expand Medicaid.  I
want to say a few words about the battle being waged over what political unit,
within a state, should shoulder the burden of expanding Medicaid. This is a battle being waged in California.

 

3.     My
third and final topic will focus on a consideration of what will likely occur
in non-expansion states come January
1, 2014. And, I offer a few observations on what will likely occur in expansion states come January 1, 2014.

 

 

 

FIRST:

 

The immediate challenge before the states will be to
determine whether Medicaid expansion under the ACA is gift or Trojan Horse. And that determination may take a while.  Those of you familiar with the rollout of original Medicaid,
know that this takes time. 
Although 11 states were all in on original Medicaid  by 1967, New York was kicking around
legislation that  same year calling
for Medicaid’s repeal. Still, 8 more states were onboard by 1970, almost all
participating within four years, though Arizona (the final hold out) was not
onboard until 1982. I will note that Texas considered exiting the Medicaid
program as recently as 2011. But they did not. I  am still uncertain which way that cuts on the coercion
analysis.

 

Given Arizona Governor Brewer’s relative haste to be all in
on Medicaid expansion this time out of the gate, I have been wondering if there
are lessons that may be learned from Arizona’s  journey to participation in original Medicaid.  I 
discern three possible lessons:

 

Lesson # 1 
The cost of uncompensated care – however you slice and dice it – is  a budget buster. Arizona’s interest in
original Medicaid participation seems to have roughly correlated with the
exponential growth in indigent care costs born by the state (rising from $50 M
in 1974 to $125 M in 1980).  Although these numbers seem almost unbearably quaint by our standards, this represented significant money to Arizona in the 1970's and 1980's.  Mind you that Arizona, in the
mid-1960’s was insulated from the indigent care costs of some its poorest
citizens because those same individuals were  then eligible for free or reduced price care through the
federally funded Indian Health Service. So, let that be part B of the first
lesson: cost shift to the federal government where ever you can and for as long
as you can while you sort  this
out.

 

Lesson #2 When all was said and done, financial
exigency coupled with the argument that Arizonans were still taxed for the
program in which they chose not to participate, seems to have ruled the day.

 

 

Lesson #3  Arizona, to this day, operates what it describes as its
state Medicaid program under a section 1115 waiver originally bargained in the
1980’s.  I can find no mention of federal funding on the front page of Arizona's Medicaid web portal. 

 

Maybe these lessons are old
hat.  Maybe better historical grist
is to be found in the 1997 rollout of the CHIP program, you say?  Then you could look at the work of Ian
Hill at the Urban Institute. Perhaps. But we may want to reach back beyond
CHIP’s rollout and analogize to a rollout that – unlike CHIP—does not allow states
to impose waiting lists or impose enrollment limits to curb costs.  This is what makes the ACA Medicaid
expansion a gamble, in part, — neither of these options are available.

 

Ultimately, chastened by the cost of
uncompensated indigent care, Arizona came onboard with original Medicaid.  And, Arizona’s governor at least, does
not seem eager to be a poster child for “health care reform done right, outside
the ACA.”

 

At one point there were other
fleeting candidates for that role but the interest, now, has coalesced around
“health care reform done right, inside the

ACA.” Arkansas is the current
leading contender, though HHS’s provisional approval of a premium support
program or privatized Medicaid expansion won’t really mean much until we see
what the actual terms of the plan are. 
What we do know – as Sidney Watson so ably outlined yesterday —  “cost effectiveness” (the sina qua non
of Medicaid premium support programs) may be in the eye of the beholder,
especially in light  of the recent
invitation to the states to apply for 1115 waivers that broaden that phrase to
include incorporating imputed savings from reduced churning in the non-privatized Medicaid eligible
population and in the invitation to factor into the analysis reductions  in commercial insurance rates offered in the exchanges as products of increased
competition. 

 

I don’t know what “cost
effectiveness” will mean anymore, though I do think it will be interesting to
try to calculate whether the value of increased insured lives in some state
exchanges will enhance insurance rate competition and, arguably, benefit all
exchange purchasers, not just Medicaid premium funded purchasers.  The antitrust scholar in me would like
to see that. Because if the CBO is even close to accurate that it will cost the
federal government $6,000 a year to cover another individual American under
Medicaid expansion but $9,000 a year to cover the same individual (with the wrap
around coverage and premium subsidies necessary to make the commercial
insurance “Medicaid-like”), there are going to have to be some mighty
interesting offset calculations ahead. 

 

 

SECOND

 

While much of our attention is
directed at the federalism arena sparring between the states and the federal
government, I think not enough attention has been paid to the sparring between
and among political units within the states over the Medicaid expansion. 

 

Take California, for example.  For several decades, California has
worked hard at unwinding its statewide safety net. The full story would talk
about county by county variable standards for public assistance or the
incredible inconsistency with which MediCal applications were processed in
California but today I just want to focus on the state’s forcing (dare I say
coercing?) of the counties to assume responsibility for medical indigents.  Seen from one perspective, California
has perfected devolving the apparatus of the welfare state to the political
unit closest to community life. 
Seen from another perspective, unevenly burdened counties (particularly
those with high populations of uninsured Californians or undocumented
Californians such as the 198,000 undocumented individuals living in San Diego
County alone, roughly 6.5% of the total population) stagger under county
indigent expenses that only serve to emphasize the truism that California is
simultaneously our richest state and our poorest state. 

 

This means that, for Medicaid
expansion to be funded in California, the counties will have to transfer money
to the state. Fearful of bankrolling Medicaid expansion for the working poor
while still being left to serve the merely poor and definitively undocumented,
the counties are hanging tough. 
And that is what all the newspaper coverage about the Gov. Brown’s
negotiations with the counties to fund Medicaid expansion have been about.
Nicole Huberfeld has spoken, with dismay, of the state “ownership” of
Medicaid.  County "ownership" of
Medicaid anyone?

 

THIRD:

 

What will happen on January 1,
2014?

 

In some places, the bridge to
January 1, 2014 is already being built – not just the obvious example of
Massachusetts, but  groups like the 500,000 early Medicaid enrolled (wait for it — wait for it — on a county by county basis) in
California for example.

 

In October of 2013, the exchanges
will open– whatever forms they take – the navigators, non-navigator assistance
personnel, and just about every other insurance counselor you know — including yourselves — needs to be
braced for the biggest outpouring of those in need of insurance counseling we
may ever see in our lifetimes.  I do not see this as
a failure of the ACA in particular except insofar as it is health care reform grafted on our byzantine health insurance system. 
We are all of us woefully unprepared to understand our  health insurance system and the
complexity of selecting the appropriate insurance products for ourselves. Think
the rollout of Medicare Part D, only cubed.

 

But the real confusion will mount
when Medicaid expands in some places and not in others. The American public is
not aware that a mere state line may separate them from government funded
health insurance.  When this does
begin to percolate into public consciousness we will have a natural experiment
in border effects.  Conventional
wisdom is that, but for certain very specific disease groups, Americans do not
migrate to attain health insurance. If there ever were a fact pattern to test
that truism, I believe we’ve found it.

 

The confusion may likely peak when so many newly insured — as they did in Massachusetts — decide they are ready for their closeups.  By this, I mean the real gamble of the ACA may have been that we have sufficient provider supply to serve all of the newly insured. Our self-manufactured primary care provider shortage as well as our shortage of Medicaid accepting specialty physicians may show us up as the biggest gamblers of all on January 1, 2014.

 

Closing

 

All of this makes me want to know what  the cicadas will think about
health care reform and  Medicaid expansion the next time they arise?  ]Well, if we’re talking those  synchretized 17 year cycle East Coast
cicadas – I haven’t a clue. But if we’re talking the Missouri Brood Cicadas –
on a three year cycle (but split into three evenly sized non-synchretized
broods, so that one brood is always singing in the trees), I am confident
Medicaid expansion will be back before the Missouri legislature again next
session and possibly the session after that. 
Like Missouri Brood Cicadas, we just can’t stop ourselves.

 

 

 

 

 

 

 

 

 

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