Medicaid expansion worth the risk

By Robert Robb – January 30, 3013
The Republic |

The debate over Gov. Jan Brewer’s proposed Medi­caid expansion suffers from the lack of a full under­standing of the status quo.

The status quo is assumed to be a state freeze on new enroll­ments for childless adults up to 100 percent of the federal pov­erty level. But that’s far from all the status quo. The freeze has a considerable leak in it.

The Legislature, while put­ting the clamp on state general ­fund costs for the program, per­mitted other political subdivi­sions, including universities, to come up with the necessary lo­cal match to pull down federal funds for Medicaid-eligible pa­tients. Some have done so, the largest being Phoenix’s bed tax. The additional federal match­ing funds are used primarily to reimburse hospitals for uncom­pensated care. All told, from state and local sources, Arizona public funds of around $350 million are be­ing expended to provide health care to low-income childless adults up to 100 percent of the poverty level.

These Arizona public funds pull down a 2-1 federal match. So, they are generating in the vi­cinity of $700 million in federal funding.

Brewer proposes replacing all these current Arizona public funding sources with a state­wide provider assessment of roughly $230 million a year, when fully implemented. This replacement local funding source would be eligible for the enhanced federal match under “Obamacare,” which is 9-1 once all the dust settles. So, it would attract in excess of $2 billion in annual federal funds.

In making the pitch to legis­lators, Brewer urged them to do the math. There’s not much in higher-level math skills re­quired. The state would be spending less, considering all sources, than it is spending to­day. That lower local contribu­tion would bring in around $1.3 billion more a year in feder­al funds. Low-income childless adults would be covered up to 133 percent of the poverty level rather than partially covered up to 100 percent.

State general-fund finances would also be improved. Brew­er has cleverly, and appropri­ately, proposed that the provid­er assessment cover not just the cost of restoring and expanding the childless-adult population but also the state’s cost of con­tinuing coverage for those still on the frozen program. The gen­eral- fund savings for the first year of full implementation, fis­cal 2015, is estimated at $136 million.

So, relief for the state’s gen­eral fund, less overall state and local cost, considerably more in federal funds, broader cover­age for low-income childless adults. What’s not to like?

There are risks to the state from participating in the Medi­caid expansion that should not be lightly dismissed. Simply put, the federal government cannot afford to keep its Medi­caid promises. Those who wor­ry about the state being left holding the bag are not being paranoid.

But it is mostly Republicans who are arguing for reductions in Medicaid spending. And they are also arguing to give states more flexibility in the use of the money. The state is unlikely to be stuck with the reduction without the flexibility.

Moreover, there is also a con­siderable risk to not participat­ing in the federal Medicaid ex­pansion.

Arizona voters mandated coverage of childless adults up to 100 percent of the poverty level in 2000. The initiative also requires the Legislature to sup­plement tobacco-settlement money to cover the cost from “available sources.”

So far, the courts have up­held the enrollment freeze, say­ing that whether there are “available sources” is up to the Legislature to decide. That’s an easier conclusion to reach when the state’s obviously in financial trouble. In better times, a court might not look so kindly on the Legislature ignoring the man­date. The state might find itself having to fulfill it without ac­cess to the generous federal match currently being offered.

The governor proposes to protect the state with what she is calling a circuit breaker. If the federal reimbursement rate drops below 80 percent, the ex­pansion between 100 percent and 133 percent of the poverty level and the provider assess­ment will go poof.

That leaves the pregnant question of what to do about the mandate to cover childless adults up to 100 percent of the poverty level.

A better protection for the state’s general fund would be for the Legislature to declare that any state costs of covering childless adults under Medicaid will be paid through a provider assessment.

The hospitals will tell us when Medicaid has become a bad deal. Instead of lobbying for a provider assessment, they will begin lobbying for relief from it.

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