Medicaid expansion not easy for Alabama

Published 10:26 am Wednesday, October 30, 2013

By CAM WARD / Guest Columnist

As we move closer to 2014, the country finds itself questioning the impending Healthcare Reform provisions that are about to take effect.

The new year will ring in myriad new regulations under the Patient Protection and Affordable Care Act, also known as Obamacare. These changes include, but are not limited to, Health Insurance Exchanges, mandatory coverage, and the first wave of Medicaid expansion.

Initially mandated by Obamacare, the Supreme Court overturned mandatory Medicaid expansion, allowing states to choose whether to participate or not. The state of Alabama has so far chosen to opt-out of Medicaid expansion.

To better understand why some states are more willing to opt-in than others, you must understand the complexity of Medicaid. Prior to Obamacare, adults with children, pregnant women, children, the elderly and disabled individuals with low incomes were eligible for Medicaid.

The federal government required states to provide certain services, but states had some flexibility in deciding what they saw fit as mandatory coverage levels. In essence, Medicaid is essentially 50 state-level programs with the federal government picking up no less than 50 percent and no more than 83 percent of the tab.

Until now, states have also had the ability to determine what level of the Federal Poverty Line (FPL) makes a person eligible for their Medicaid program.

The federal government, using census measures, calculates the FPL as a dollar amount for what the government considers to be poverty according to how many members are in a family. On average, most state Medicaid programs set eligibility around 45 percent of the federal poverty line. The states alone do not provide for the Medicaid funding.

Obamacare’s Medicaid expansion requirements drastically changes the way states fund and provide Medicaid. The first and most notable difference is the requirement to cover individuals with incomes up to 138 percent of the FPL.

No state has covered individuals up to this percentage, so all states have to increase funding. This is three times more than what most states are currently providing. As an incentive to opt into the expansion program, the Federal government created a graduated system providing funding to states in decreasing percentages from now until 2019. The rates of funding will be: 100 percent in 2014-2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in the following years. Despite the small percentage, states will still be required to pay more than what they are currently paying.

Eligibility requirements also will change with Medicaid’s expansion. The expansion would now include all adults from ages 19-64, not just adults with children. So while 138 percent of the FPL is an increase by itself, you are also looking at adding an entire demographic into the mix.

There are several issues states are facing when considering Medicaid expansion. One issue is administrative cost. States would be required to cover the entirety of this unknown cost for all years — even the years the Federal government provides “100 percent” funding. Simply put, administrative costs are unknown and not included in the funding scheme.

Another issue is the FPL. The number of individuals under the FPL in New York is very different than Alabama. What this means is that more affluent states will be covering proportionally fewer people than poorer states. The burden of increasing funding, for both 138 percent FPL eligibility and an entire new demographic, disproportionately weighs on less affluent states.

Ultimately, uncertainty is a key reason for states opting out of the Medicaid expansion at this time. While the majority of the funding will be covered from 2014-2016, states are still unsure of the administrative costs. Many states, like Alabama, create their budgets based on tax revenue.

If any event occurs that decreases the amount of revenue taken in each year, the state might not be able to fulfill federal requirements. A recession or natural disaster could put many citizens out of work, which would greatly increase the population under 138 percent of the FLP.

In these instances, many states cannot risk defunding other programs to cover the amount of money the federal government requires for the funding scheme. Many states are still recovering from the recession and committing to funding at this time is not possible.

Medicaid expansion is a complicated issue that still has many questions unanswered. In the coming years, we will get a chance to see how the expansion works in other states but, as of now, many smart states, including Alabama, are choosing to wait.

Cam Ward is a state senator from Alabaster.