Is Medicaid Expansion Still Voluntary?

by Charles Katebi

Throughout the debate to expand Medicaid during the 2015 Legislative Session, opponents repeatedly claimed that the federal government couldn't be trusted to keep its promise to cover 90 percent of Medicaid Expansion's costs. So it should come as no surprise that the Obama Administration has now broached the idea of reneging on its existing financial promises. In a letter to the Deputy Secretary of Medicaid in Florida, the head of the federal Center for Medicare and Medicaid Services (or CMS) threatened to withhold funding to a Medicaid pilot program in the Sunshine State unless it expanded Medicaid. If successful, the federal government would have found a way to undermine the Supreme Court's 2012 decision on Medicaid Expansion and foist a federal program that delivers woefully inferior healthcare onto millions more patients.

In National Federation of Independent Business v. Sebelius, the Supreme Court ruled that Medicaid expansion "violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion." It struck down the Obamacare provision that allows HHS to withhold existing Medicaid funding to states that did not expand the program's eligibility. The only funding HHS could withhold was the funding designated for Medicaid Expansion itself.

Now CMS is threatening to withhold funding to renew LIP, a Florida Medicaid pilot-program unless the state expands Medicaid's eligibility. In a letter to Florida's Medicaid director, the federal agency's Acting Director noted "the state' expansion status is an important consideration is our approach regarding extending the LIP [pilot] program." Put plainly, if Florida refuses to expand Medicaid, it could lose more than one billion dollars in federal funding for this program.

LIP, or Low-Income Pool, provides financial support to healthcare providers that offer uncompensated care to uninsured and underinsured individuals in Florida under a Medicaid Section 1115 Waiver. Section 1115 Waivers allow states to experiment with different funding mechanisms outside of certain Medicaid requirements, including eligibility, benefits, and cost-sharing requirements. Florida contributes $700 million to LIP and the federal government provides $1.3 billion.

LIP was first approved in 2005 and slated to last until June 30, 2015. But rather than renew the program, CMS's Acting Director said that expanding Medicaid would be more effective at addressing the problem of uncompensated care than LIP. Vikki stated in her letter:

"With Medicaid expansion, individuals with coverage would be less likely to seek bankruptcy protection or generate unpaid medical bills."

However, this uncompensated care rhetoric is not supported by reality. The federal government and many health experts measure uncompensated care by subtracting what doctors bill by what patients pay. However, insurers almost never pay billed prices—the bill they pay on behalf of patients is typically discounted by 55 percent. When comparing the prices insured patients pay with prices paid by the uninsured, two-thirds of uninsured patients actually pay more than those with insurance, including those insured through Medicaid.

Seems legislators in Wyoming were right. But if Florida's legislature and Governor fold under pressure, every state that did not expand Medicaid and took advantage of Medicaid's waivers could also lose billions in federal funding unless they expand this entitlement. Wyoming currently has eight Medicaid waivers that cover services ranging from assisted living to long-term care. At present, these eight pilot programs cost Wyoming over $59 million. Without federal funding, the cost of these programs to Wyoming taxpayers will double, putting these programs and the health of thousands of patients at risk.

Despite the Supreme Court ruling in NFIB v. Sebelius that the federal government can't withhold a state's entire Medicaid payments, the federal government can still find ways to blackmail state taxpayers into expanding Medicaid. Medicaid describes itself as a "state-federal partnership," but Florida's battle with CMS shows who really holds all the power. Whether it's healthcare or highway dollars, federal funds carry strings that bind state legislators. Medicaid strings are bankrupting state governments and leaving patients in poorer health than if they went without insurance at all. When will states realize that Medicaid dollars are not a windfall, but a fiscal straightjacket?