Coming to a State House Near You: Medicaid Wars

Did the June 28th Supreme Court decision disallowing the federal government to coerce state participation in the Affordable Care Act’s Medicaid expansion kick a hornet’s nest or just lay it bare for more to see? Currently at issue is whether individual states will now “opt out” of participation in providing Medicaid coverage to an estimated 15 million individuals across the country by 2019 under Section 2001 of the ACA.

This past week one of the most vocal opponents of the ACA, Florida Governor Rick Scott, was out and visible at numerous media outlets willing to give him a bully pulpit to reinforce his position – that not only will Florida opt out of Medicaid expansion, but will also refuse to implement Health Insurance Exchanges as well.  Whether he follows through (he is not up for reelection until 2014) will be another matter.

In fact, the political challenge for him and the 28 other Republican governors who have to mull over that decision is a choice between increasing already tapped out Medicaid budgets or foregoing billions of dollars of federal funding available to the states that do not choose to opt out.  Since the cost sharing is initially 100% federal funding, stepping down to 93% by 2019, opting out might be economically prudent but very difficult to sell politically.  There are only three Republican governors running for reelection this fall: Jack Dalrymple (North Dakota), Gary Herbert (Utah)  and Luis Fortuño (Puerto Rico).  So expect more chest thumping bravado before some very difficult choices have to be made going into the fall of next year.

Complicating matters, the SCOTUS decision has caused an unforeseen wrinkle, or  donut hole as it were – a new potential coverage gap in the decades’ long protraction to bring this country politically kicking and screaming into the 20th Century by providing universal healthcare coverage to its citizens.  The math (actually the overlapping regulations) gets very tricky, so I won’t begin to try and explain what I haven’t been able to completely understand myself.

The up shoot is that individuals living in states that opt out of the expansion with incomes above those states’ Medicaid income eligibility but below 100% FPL will neither receive coverage under the ACA Medicaid expansion, nor be eligible for subsidies to help purchase health insurance in the new exchanges.  It should be noted this does represent a reduction in current benefits to this population – but the assistance that had planned to be available under the ACA now would not in states that opt out.  In any event, it would seem to have the makings of a political sword that could be used quite effectively in the future against any of the Republican governors choosing the opt out.

Underlying this whole discussion, of course, are even more challenging issues – issues that Pub patrons should be very interested in monitoring.  In states that really do end up opting out of the expansion, will that leave additional state budget dollars for long-term care coverage? <insert your favorite political sarcasm here>  In states that don’t opt out (which I expect will eventually be just about all) how will future efforts to negotiate FMAP rates for cost sharing of long-term care be impacted by the new coverage benefit (i.e., will federal lawmakers be pressured to reduce their share in lieu of Medicaid expansion)?

What we have shaping up – and has been in the making for the past twenty years – is a fierce generational conflict: as the aging demographics demand a greater share of public assistance for needs of the elderly it will become more and more difficult to maintain assistance for the non-elderly indigent and disabled.  Lack of a cohesive and widely accepted policy on immigration will serve as a catalyst to intensify that conflict, and the battleground will be state capitals.

At a practical level what this means for providers of senior housing, aging services and post-acute/long-term care is being caught between the lines: a labor force sympathetic to the economic struggles of their generation providing care to a powerful demographic that will, in the aggregate, carry dominating influence in how public funds are allocated.  My immediate reaction to this is to recognize now how incredibly valuable brand positioning and brand awareness will be in the future – and how critically important brand management must become for those providers wishing to survive this coming policy maelstrom.

   ~ Sparky