Implications of SCOTUS Decision on Medicaid Funding of PA/LTC

Before I get to the heart of this post (the Medicaid story), please allow me to share some additional thoughts up front.

Dewey Wins Moment
First, as was announced this morning, the Supreme Court has found the Affordable Care Act is constitutional in its entirety (noted exception regarding Medicaid expansion).  I was following the announcement on the
SCOTUS blog this morning (where it was shared that the Individual Mandate was upheld), and so I had a very hearty laugh listening to John King of CNN go on for nearly five minutes about the implications of the Individual Mandate being struck down.  Apparently, a reporter in the Court read the opinion passage that, “the individual mandate thus cannot be sustained under Congress’s power to ‘regulate Commerce’ ” and failed to keep reading.  Ah, the risks of wanting to be first.

Maintaining Political Perspective
Second, a modest word of caution.  As I have written here and shared with industry peers and constituencies in various other formats, this is another step along the path of Healthcare Reform.  The next challenge the Affordable Care Act faces is the fall elections.  And I would not be the least bit surprised – or really, at all disappointed – to know that Republican strategists are in a back door way pleased with this decision because they can
now use it to energize their voting base.  It will be a rallying cry to get the vote (and donations) out.  Democrats will have to redouble their efforts (if not their campaign fund raising) if they want the ACA to survive in tact beyond the 113th Congress.

But, it will be very difficult now to rescind the entire Act regardless of what Messrs. Romney, Boehner, McConnell, et al would like us to believe.  First, there is the political reality of having to not only win the Presidency but to maintain a majority in the House and take back control of the Senate.  I think retaking the Senate will actually be a longer shot than Romney defeating Obama.  Second, by the time any new legislation could be drafted, vetted and passed, the ACA will be well into implementation.  Trying to go backwards at that point would have devastating social and economic consequences that elected officials of any stripe are unlikely to want to be associated with.

There very well could – and I would expect, regardless of election outcomes, will – be some modest tinkering in the future.  We still have the economic realities of a very fragile world economy that keeps us teetering on the brink of another deep recession.  So I think it is likely the essential benefits definitions and actuarial soundness of insurance plans under standardization of coverage will be tightened up in ways that improve budget projections. 

Medicaid Expansion
To some, like me, this part of the decision was more of a surprise than the IM being found as constitutional – and there could, potentially, be rather significant implications for post-acute/long-term care providers.  I am not by a long stretch a legal scholar, but I will try to give you my best understanding.

Title II, Section 2001 of the Act – Medicaid Coverage for the Lowest Income Populations – expands coverage for individuals with incomes at or below 133 percent of the federal poverty level ($14,856 in 2012).  As a practical matter, this means expanding coverage for adults without children or disabilities.  According to a May 2010 Kaiser Family Foundation Report, it is estimated that an additional 15 million individuals will receive beneficial healthcare coverage under this provision by 2019 at an estimated cost of $465 billion.

According to 42 USC § 1396c – Operation of State plans, the Secretary of HHS has the ability to withhold federal funding of a state’s Medicaid program for failure to comply with federal requirements (this was existing code not altered by the ACA).  Thus, states not complying with provisions of Section 2001 of the ACA would be at risk of having all federal Medicaid funding cut off – not just funding of the Medicaid expansion.  In lieu of the ACA’s Medicaid expansion, the Court found that application of 1396c in such instance would be unconstitutional because states could not have anticipated such an onerous exercise of coercion when electing to participate in the original Medicaid program.

The remedy of this finding is that the Act must be amended such that 1396c would not apply to a state’s decision whether or not to participate in the Medicaid expansion under Section 2001.  So, in theory, states now have the option of whether they want to participate in the Medicaid expansion or not.

Now, given that the program’s design will initially provide 100% federal funding for newly eligible enrollees under the expansion program – declining to 93% by 2019 – I cannot imagine how any state would choose not to participate.  It would seem to be political suicide for an elected official to forgo federal funding to expand healthcare coverage to the poor when the relative impact on that state’s budget is, by comparison to federal spending, rather small.  And by not participating, that state would essentially be choosing to lose a portion of the taxes paid by its citizens that will benefit the poor in other states.

On the other hand, as we witnessed when several Republican governors chose not to accept economic stimulus funding, there is a very real possibility that some states may choose to opt out of the Medicaid expansion as objection or disagreement with the expansion (or the Affordable Care Act in general).  Add to that concern over the potential Medicaid Crowding Out effect, and you can see where some states may choose to opt out of Medicaid expansion.

In as much as many post-acute and long-term care providers are very dependent upon state Medicaid funding, the ripple effect of how this plays out in the months ahead will be something such organizations will want to watch closely.  And, of course, we will be actively monitoring such developments here in the Pub.  There could be significant state policy ramifications impacting the budgeting of Medicaid funding for post-acute and long-term care.

That’s what I think, anyway.  I would be very interested to know what you think.

  ~ Sparky

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