There was much anticipation leading up the U.S. Supreme Court’s decision on the federal health care reform law, and the June 28 ruling came with several surprises. Perhaps the most dramatic turn of events was conservative U.S. Supreme Chief Justice John Roberts siding with the more liberal judges on the court and writing a majority opinion that upheld the individual mandate, which requires that all Americans have health insurance or pay a penalty to be collected by the Internal Revenue Service. Roberts wrote that the government has the ability to make that requirement under its power to tax.
The mandate was the issue that had captured the nation’s attention. But another surprise came when the court struck down a provision in the law that had received less focus, a Medicaid expansion proposal that some states found coercive. Under the legislation, states that refused to participate in the expansion, which would offer Medicaid to individuals with a household income up to 133 percent of the federal poverty level — a household income of $30,657 for a family of four — would lose all Medicaid funding. Roberts wrote in the majority opinion that the threat of losing billions in funding left states with no choice but to go along with the expansion.
“As for the Medicaid expansion, that portion of the Affordable Care Act violates the Constitution by threatening existing Medicaid funding. Congress has no authority to order the states to regulate according to its instructions. Congress may offer the states grants and require the states to comply with accompanying conditions, but the states must have a genuine choice whether to accept the offer. The states are given no such choice in this case: They must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding,” the opinion stated.
The federal law, which is meant to ensure that the vast majority of Americans have access to health care, relies heavily on an expansion of the Medicaid program to ensure that low-income individuals have coverage. But the Supreme Court ruling left the door open for states to walk away from the expansion and fueled a national debate over the role of the Medicaid program, which was initially created as part of the country’s social safety net, and its effectiveness.
“States may now choose to reject the expansion; that is the whole point. But that does not mean all or even any will. Some states may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administrative resources necessary to support the expansion. Other states, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the act offers at the outset,” Roberts wrote.
Since the ruling, Republican governors in eight states — Florida, Iowa, Kansas, Louisiana, Nebraska, South Carolina, Texas and Wisconsin — say that they do not plan to participate in the expansion. Some Illinois Republicans would like to see their state make the same choice.
However, Democratic Gov. Pat Quinn says he plans to push ahead on the expansion. “The state of Illinois is going forward with the president of our country, President Barack Obama, to expand using Medicaid [to offer health care to] those who would be covered under the Affordable Care Act. That is the law. We’re not backing down. We want to go forward. This is fully funded by the federal government beginning in 2014 and ultimately 90 percent funded. We would be very wise in my opinion to insure as many people as we can in Illinois, who have fallen through the cracks,” Quinn said after the Supreme Court ruling.
Quinn’s administration estimates that 350,000 Illinoisans would be newly eligible for Medicaid under the expansion. The Illinois Department of Healthcare and Family Services estimates that when the federal government pulls back to funding 95 percent of the expansion in 2017, it would cost the state $119 million. When the federal coverage drops to 90 percent in 2020, the department predicts the cost to the state would be $238 million.
“Two short months ago, the Quinn administration and people in the General Assembly said that [the state’s] Medicaid [program] is on the brink of collapse,” says Rep. Bill Mitchell, a Republican from Forsyth. During the spring legislative session, Quinn called upon lawmakers to cut the state’s Medicaid liability by $2.7 billion this fiscal year. In response, the General Assembly passed a reform package that included reductions to Medicaid services, a plan to hire an outside company to remove ineligible recipients from the rolls and a tax increase on tobacco products.
Mitchell says the federal government cannot afford to expand Medicaid any more than Illinois can. He is sponsoring House Bill 6197, which would block the Medicaid expansion. “You’re going to add people on it and with no way to pay for it. There’s just no way to pay for it,” he says. “The federal government is broke. We’re the biggest debtor nation in the world.” Mitchell says that while the federal government plans to cover most of the upfront costs, the money still comes from taxpayers.
Rep. Patricia Bellock, who worked on the recently passed Medicaid reform plan, says that the expansion in the Affordable Care Act would grow a program that has already ballooned into something it was never meant to be. “What it was really intended to be was to be a health care safety net for the most vulnerable population in Illinois. Now what it has turned out to be is the largest health insurer in Illinois.” Bellock, a Hinsdale Republican, says she worries about how much cost the state would be on the hook for after 2020. “Even now, I am not sure what they are going to pay for down the line.”
She says that as long as the state is unable to pay vendors for services at the current eligibility levels, it doesn’t make sense to extend coverage to more people. “Providers are eight months behind on getting paid. You can talk to some small providers who haven’t been paid in a year,” Bellock says. “Ethically, I don’t think the state can move forward [on an expansion] and not pay their providers.” She has signed on as a cosponsor of Mitchell’s bill. However, she says that the state’s moratorium on expansion may make it unnecessary and could in fact force supporters of the expansion to have to seek approval from the legislature before moving ahead.
Rep. Sara Feigenholtz, a Chicago Democrat who also worked on the recent reform package, says it doesn’t make sense to turn down federal funds to cover people who are in many cases currently not paying for their own health care. “I look at it very differently. I look at it as finally getting a Medicaid match for a very large population of people who are costing us a great deal of money,” she says. Feigenholtz says that instead of debating the role of the Medicaid program, lawmakers need to adopt a pragmatic view on finding the most effective ways to provide access to health care. “I really want to get beyond the philosophical and political arguments and take a look at how the numbers work and whether or not the state will benefit,” she says. “I think at the end of the day, it will turn out that we can’t afford not to [accept the expansion].”
She adds, “We need to make a unified decision about how we are going to care for the poor.”
In states that choose not to increase Medicaid coverage, some low-income residents will have few options. Those who have a household income below the federal poverty line, which is $11,170 for an individual, and are not currently covered by Medicaid would not be eligible to receive federal subsidies to buy coverage in insurance exchanges — online marketplaces where consumers can comparison shop for insurance plans. States often do not cover younger, able-bodied residents who do not have children under the Medicaid program. “[Some] people below the poverty line — of which there are many that are uninsured — they won’t fit in the state’s Medicaid standard, but they also won’t fit into the subsidy requirements. ... They will be out of luck,” says Alan Weil, executive director of the Washington-D.C.-based National Academy for State Health Policy. The Congressional Budget Office and Joint Tax Committee estimates that now that states have the option to skip the Medicaid expansion, 3 million fewer people nationwide will receive coverage under the law.
Those crafting the Affordable Care Act never considered a situation where people living below the poverty line would need to turn to the exchanges to buy insurance. “[The Supreme Court decision] created a scenario that no one anticipated. So it’s not like anyone has had a lot of time to work this one through,” Weil says. He says that at some point, there will probably be a federal solution for covering people who would likely fall through the cracks in states that pass on the expansion, but it would have to come after the gridlock in Congress has loosened. “In the long run, I think someone will look at this picture and say, ‘This makes no sense.’”
But even if states opt to participate in the expansion, that does not ensure that doctors will take the new Medicaid patients. According to a study recently published in the journal Health Affairs, about a third of doctors nationwide are not accepting new Medicaid patients. The study found that about 35 percent of Illinois doctors currently do not take on new Medicaid patients. Many providers cited low reimbursement rates as the reason. The Affordable Care Act will offer a boost in rates to primary care doctors but only temporarily.
It appears likely that with the support of the governor and many Democratic legislators, Illinois will participate in the Medicaid expansion. However, the Democratic-controlled state will not be administering its own insurance exchange. Instead, Illinois plans to partner with the federal government for the first year of its exchange, which is scheduled to be up and running in 2014.
Quinn supported a state-run exchange, but lawmakers stalled on taking a vote to approve certain aspects of the exchange. Many said they wanted to wait for the Supreme Court’s decision. Now, Quinn’s administration says partnering with the feds on an exchange is in “the best interests of the state.” Quinn says he plans for the state to have its own exchange after one year.
According to the California-based Henry J. Kaiser Family Foundation, 16 states had taken steps to create their own exchanges as of July. But several Republican-controlled states do not plan to create exchanges. Residents of those states would likely be able to access a federal option, and states that are lagging behind, such as Illinois, would work with federal officials to customize that option for their residents. “Most of the states that have been working on this from the outset are certainly anticipating doing their own exchange,” says Weil. “But I think many states were in the category of considering their options, not really knowing what to do and maybe anticipating that the Supreme Court may make the issue go away.”
Weil says a possible downside to partnering with the feds on the exchange is that states may not be able to capitalize on their buying power when it comes to negotiating with insurance companies. “To me, the big opportunity here is to be a strong purchaser and do the same things that large businesses do and push for improvements.”
Exchanges are meant to be one-stop shops where consumers can determine whether they are eligible for Medicaid or subsidies to help them purchase insurance. If not, they can comparison shop several plans to find the one that suits their needs. But Weil says that in states that are handling Medicaid on their own while the federal government runs other parts of the exchange, the vision of a seamless marketplace may not become a reality. “While the two of them can certainly trade information, the odds of that harmony really working, I think, are lower.”
Jim Duffett, executive director of the Illinois-based Campaign for Better Health Care, says that by failing to create its own exchange, Illinois is missing out on a chance to make the exchange work to address the state’s specific needs. He says it is the insurance consumer who will pay the price in the form of higher rates. “It’s appalling that we have a Democrat Senate, a Democratic House and a Democratic governor, and this is the state where President Obama is from, and these folks have not moved the process forward at all.”
Sen. William Haine, an Alton Democrat, says conversations about the exchange were bogged down by the highly political debates surrounding it — such as the role of government in the free market and religious freedoms on issues such as contraception and abortion. He says the federal government left too much uncertainty surrounding exchanges to expect state lawmakers to jump on board. Haine served on a legislative study committee that issued a report but was unable to agree on recommendations for the state’s exchange. “The federal government has to answer many of these questions. I’m not ready to jump,” says Haine.
Some Republican legislators, such as Bloomington Sen. Bill Brady, are holding out hope that the presumptive Republican presidential candidate Mitt Romney can win the November election and make good on his campaign promise to get the law repealed. “Unfortunately, this whole thing has really been a quagmire for everybody in terms of a political hot potato. Democrats are afraid to embrace Obamacare in Illinois.” Brady also served on the legislative study commission. He says that “by and large,” Republicans oppose the law.
He adds, “So, it’s really been a mess.”
Duffett says that while many of the provisions of the Affordable Care Act, such as a ban on insurance companies turning away patients with pre-existing conditions, receive strong support in opinion polls, Obama’s administration “lost the war” over public opinion on the law as a whole. “The administration did a poor job in selling it. It’s been branded as death panels, as computer chips in your arm,” he says. “The real death panels are those governors and General Assemblies who are not going to enact the Medicaid expansion.”
Illinois Issues, September 2012