Utah’s governor just signed into law a limited Medicaid expansion that the legislature passed over the past ten days. The new law overturns the full expansion that voters approved in November.
Utah’s voter-approved Medicaid expansion initiative was replaced Monday with a program that is more restrictive, initially more costly, and contingent on a series of uncertain federal concessions.
Utah lawmakers and Gov. Gary Herbert, though, say the bill is more economically sound over the long term.
Senators voted 22-7 to adopt the House version of SB96, which launches a partial medicaid expansion April 1 and would revert to full expansion only in the event that federal administrators reject multiple requests for Affordable Care Act waivers.
Over the short term, this bill will cost Utah more money. The Affordable Care Act provides for a 90% long term federal match (and a 93% match in 2019) for full expansion of Medicaid to 138% of the Federal Poverty Level (FPL). Partial expansions to 100% FPL don’t qualify for that full match. Instead, the feds will pay the standard match, which in the case of Utah is 68% of the incremental costs. Utah will be on the hook for 32% of the costs of a smaller population.
Utah thinks that they will get a waiver from the Center for Medicare and Medicaid Services (CMS). This waiver will contain the now “typical” work requirements but also two new major elements: A cost control cap with an associated enrollment cap and the full ACA enhanced matching rate. Those two elements have never been approved before.
Adrianna McIntyre, Allen Joseph and Nicholas Bagley reviewed partial expansion logic in the New England Journal of Medicine in the summer of 2017. They noted the financing mechanics and incentives for states to avoid the 100-138% FPL population in the Medicaid pool:
Why were states interested in these partial expansions? Starting in 2020, states are responsible for covering 10% of the costs associated with the Medicaid expansion. Because of a drafting mistake, however, the ACA says that the 100-to-138 population can receive subsidies to purchase a private health plan on the exchanges — but only if they are ineligible for Medicaid.3 For those people, the federal government bears the entire cost of subsidizing private coverage, with no contribution from the states. As a result, the states save money for every beneficiary whom they can move from Medicaid into their exchanges…
On the practical side, many states would probably demand similar waivers. Unlike the federal government, states are obliged under their constitutions to balance their budgets every year. They will welcome the chance to reduce Medicaid obligations and alleviate budgetary strain. Hospitals, physicians, and other providers will probably support partial expansion because private insurers pay them better than Medicaid does.
Partial expansion would not just shift a financial burden to the federal government; it could also increase the size of that burden. Arkansas’s decision to enroll beneficiaries in private plans increased expansion costs by 24%; in other states, the disparity between Medicaid and private costs could be much higher. Between premium subsidies and supplemental cost-sharing reductions, the federal government will probably shoulder more than 90% of the price tag for this costlier coverage, with beneficiaries picking up the difference….
CMS has denied a partial expansion for Arkansas. CMS has also never offered to pay the enhanced ACA rate for BadgerCare in Wisconsin. BadgerCare is a waiver program that extends Medicaid to Wisconsin residents who earn up to 100% FPL.
Utah’s new law is betting that CMS will establish precedent that transfers large costs back to the federal government and dramatically increase the likelihood that several more non-Expansion states will expand. The first assumption is a hard assumption under any administration. The second assumption is a difficult assumption under this administration. If the enhanced match rate is not authorized, Utah will default back to a full expansion after a little more than a year.
UPDATE 1: Adrianna McIntyre and I have a new piece at Health Affairs Blog that look into the policy implications. We build off of her framework from NEJM and incorporate silver loading effects.