In addition to the much discussed individual mandate, a central element of the Affordable Care Act designed to increase insurance coverage is the expansion of the Medicaid program to cover anyone with an income up to 138% of the federal poverty level. To put that into context for those who might not know, Medicaid eligibility currently has two requirements: income eligibility and categorical eligibility. Income eligibility means that your income has to fall below a certain level, which varies by state within certain federal guidelines. Categorical eligibility, which also varies somewhat by state, means that you have to be a certain “type” of person. For example, pregnant women and children are typically eligible for Medicaid, whereas very few childless adults are eligible. The Affordable Care Act changes that, making anyone who is low-income (again, 138% of poverty, or $30,843 a year for a family of four) eligible regardless of what other “category” they might belong to.
The odd thing about the ACA, though, is that it will actually be more generous to conservative states that have not previously established more generous Medicaid limits. Here’s why: Starting in 2014, the federal government will pay 100% of the difference between what states are currently covering and the new 133% of poverty threshold. This amount is gradually reduced over time, reaching 90% by 2020, where it is slated to remain indefinitely. While Medicaid is currently jointly financed by the federal and state governments, this new arrangement has the feds picking up the bulk of the costs of the new coverage. The thing is, some states, like Massachusetts, are already providing coverage of parents up to 133% of poverty. These states that are already quite generous will not receive much in the way of new federal money. By contrast, other states, like Texas, only provide coverage for parents up to 26% of poverty (that’s less than $3,000 a year). When they opt-in to the Medicaid expansion, the federal government will pay the full difference in cost of expanding eligibility up to 138% of poverty. That’s a lot of federal money to states like Texas. Generally, the more conservative states are the ones with the most uninsured persons and the strictest Medicaid eligibility requirements. Therefore, they are also the ones who will gain the most under the ACA.
Of course, this depends on their willingness to participate in the Medicaid expansion, which is optional. The ACA did include a provision that said that if states didn’t participate in the Medicaid expansion, the federal government could also withdraw their funding for the existing Medicaid program. The Supreme Court, however, said that this was coercive and unconstitutional. The result is that states are free to participate in the program or not, without fear of repercussions. Politically, republican governors are adamant about resisting implementation of the Affordable Care Act. Louisiana’s Bobby Jindal has already proclaimed that his state, whose health statistics place it squarely in the bottom of the country (50th in 2008, rising to 49th by 2011), will not be creating an insurance exchange and will not be participating in the Medicaid expansion. It’s unfortunate, because the people in these states are the ones who desperately need help the most.
Of course, the politically-motivated decision not to play ball will only hurt these states further, as they walk away from literally billions of dollars in federal assistance that would boost their economies and improve the health of their residents. There will also be pressure from organized health care interests to participate, because that money will reduce their uncompensated care costs. So, I’m not sure if the rhetoric we’re hearing today will hold true in the end. If it does, though, it will be a great example of bad politics dominating good policy, and the people it will hurt the most are the ones who are already wounded.
Update: As Nicole points out in the comments, the actual threshold is even higher than I originally stated. Medicaid eligibility goes up to 138% of poverty, not 133% as I had written. I have updated the text to indicate this.