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The Court’s Medicaid Ruling And The Imperative To Communicate The Facts About The ACA



June 29th, 2012

Before yesterday’s remarkable Supreme Court decision on the Affordable Care Act (ACA), I expected Chief Justice Roberts would lead a majority in a constrained decision which would avoid all but the narrowest consideration of constitutional questions.  Some of us expected he might act to strike the individual mandate, yet avoid the “legislating from the bench” which further excision or nullification of the Act would entail.  While the scope of the decision on the mandate was narrow, Roberts surprisingly looked beyond conflicts in both legislative language and argument to conclude that the essence of the individual mandate was a constitutional tax provision which withstands challenge.  And while upholding it, he deftly did so without effecting further expansion of the Commerce Clause.

Left to the Administration will be the challenge of communicating the true impact of the individual mandate – which applies only when one can clearly afford to purchase coverage and fails to do so.  Complex explanations of every permutation have served to obscure the issue.  When one considers the integral affordability test which exempts those with premium costs exceeding eight percent of income, and further notes the substantial tax credit subsidies available, it is clear that not only will coverage be affordable to most, relatively few could face an individual mandate penalty.

More overlooked in the initial reactions has been how the decision of the Court to invalidate the withholding of Medicaid funds from nonparticipating states will impact the coverage of low income Americans.  Combined with SCHIP, the Medicaid expansion was projected to provide new coverage to 17 million individuals.  The Court’s findings under the Spending Clause have broad implications not only for the implementation of the ACA, but also for other federal-state programs.

Some Legislative History Of The ACA’s Medicaid Expansion

When Medicaid expansion was first considered in the ‘Gang of Six’ of the Senate Finance Committee, issues of disparate Medicaid coverage between the states were carefully considered.  The impoverished population served by Medicaid has some unique needs which state programs have grown to serve, and the concept of “filling in” coverage was clearly preferable to issuing tax credits for private coverage.  The latter would have not only been a poor model for serving the greatest at-risk individuals, it would also have resulted in substantial inequity in treatment of the states, particularly disadvantaging those states that had existing higher income eligibility caps.

It was thus prudent to establish a cut-point at which Medicaid would end, and private, tax credit-subsidized coverage would begin.  One can argue whether that should be at 100 or 133 percent of the federal poverty level, or whether some other standard should be used.  Yet under the ACA the federal government extends extremely generous terms to the states in financing those newly-eligible for Medicaid.  For three years the expansion population is fully federally financed, and thereafter, the federal match gradually phases down to 90 percent.

That will leave states with just 10 percent of costs for the expansion, and even that portion appears partly offset by other benefits.  These include additional state tax revenues from increased provider income, as well as economic benefits from both the economic impact of health spending and the enhanced health status of a  state’s residents.  While the justices may consider the terms of the expansion coercive in that the ACA placed an entire federal match at risk, the burden on the states is not a heavy one.  Indeed the CBO has estimated that the ACA would impose less than a one percent increase in state Medicaid costs.

Some states argued that changing the terms of the Medicaid program forces their participation in a “dramatic expansion” of health care.  The Court responded to the argument that the ACA Medicaid expansion, “crossed the line distinguishing encouragement from coercion”.  The Chief Justice’s conclusion was pointed: that the penalty of the loss of Medicaid funds is “much more than relatively mild encouragement — it is a gun to the head”.  Yet the Court found that coercion was severable, and wisely did not disturb other provisions of the expansion.  Nevertheless, this development poses a significant threat.  Should a state fail to expand their Medicaid program, millions Americans below the federal poverty level could be left without coverage.

The answer to this predicament involves neither complex health policy nor new legislation, for it is an economic argument.  The financial equation for expansion is a compelling one – even more so than that for implementing state health insurance exchanges.  For minimal investment in Medicaid expansion, a state reaps overwhelming benefit, and I have noted little dispute from the states to the ACA’s basic terms for covering the newly eligible.  The fact is that the ACA would extend disproportionate assistance to states which currently have low Medicaid income caps to cover millions of their uninsured.

State Concerns And Responses

Yet it is it is argued that states face other additional costs. The first of these concerns the coverage of many currently eligible but unenrolled individuals who may now participate and thereby create a new fiscal burden.  It is correct that the ACA does not offer an enhanced federal match to compensate for a state’s failure to implement its existing standards via effective enrollment efforts.  In such cases one may question why so many in a state were eligible but never enrolled – this suggests the absence of a good faith effort on the part of some states to even implement their programs as they themselves have designed them.

Secondly, some argue that Medicaid reimbursement rates will pose an access problem for the newly insured.  In that regard, it is notable that the ACA did take steps, albeit temporary, to raise the low Medicaid reimbursement rates – albeit temporary.  Indeed this is a longstanding problem – yet it constitutes a perverse justification by which to deny coverage to our nation’s most at risk individuals.

As the public becomes aware of the actual terms of the Medicaid expansion, the clear benefits to the states in reaching low income uninsured Americans becomes clear.  Both political and economic calculus should drive nearly every state government to act in the best interest of its constituency.  There is no legislative remedy required here.  In fact, the Court recognized that despite the invalidation of the coercive inducement, states “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”.

The Medicaid fiscal equation points to a critical issue – the fact that accurate and concise communication of the facts regarding the ACA remains sorely lacking.  While substantial improvements to the Act can and should be made, the public interest suffers as inaccurate and distorted political messaging substitutes for informed discourse.  That underscores the critical need for those in health policy to communicate these facts clearly.  It’s unlikely that campaign ads will.

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2 Trackbacks for “The Court’s Medicaid Ruling And The Imperative To Communicate The Facts About The ACA”

  1. Still more SCOTUS coverage, especially on Medicaid – The Pump Handle
    October 11th, 2012 at 9:06 am
  2. Still more SCOTUS coverage, especially on Medicaid [The Pump Handle] - Dennis Flint High CountryDennis Flint
    July 3rd, 2012 at 7:02 am

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