Note: This is the second in a three-part blog series highlighting the upcoming 10th anniversary of the Affordable Care Act (ACA) (see part I of the series here). We invite you to visit ACA Now, the most comprehensive and user-friendly online resource summarizing key developments for every provision of the law over the past decade.
Nearly ten years ago the ACA narrowly passed under a Democratic-controlled Congress. Many elements of the legislation were controversial and impactful, but arguably one of the most vigorously debated and transformative was a provision of the law that mandated expansion of states’ Medicaid programs to adults with incomes up to 138 percent of the federal poverty level. Previously, the federal government required Medicaid be available only to children, parents, people with disabilities, and some people over age 65, and gave states substantial flexibility in setting income eligibility.
Although it was originally mandatory, the June 2012 Supreme Court ruling in National Federation of Independent Business v. Sebelius effectively made Medicaid expansion optional for states. Twenty-four states and the District of Columbia (DC) opted to expand immediately. By the summer of 2016, seven more states had signed on, and since January 2019 another five expanded or are in the process of expanding. Beyond the 27 states (and DC) that expanded by the book, another 9 states have expanded or will expand via a 1115 waiver that allows them to test policies not permitted under traditional Medicaid. Only 14 states have chosen not to expand at all.
Both states that have chosen to expand and states that have not point to financing as a determining factor. The ACA offered states 100 percent federal funding to cover the costs of newly eligible enrollees through 2016, decreasing the federal share to a low of 90 percent for 2020 and beyond. This arrangement makes states responsible for at most 10 percent of the total cost of expansion enrollees each year — significantly less than the roughly 25 to 50 percent that states pay for traditional Medicaid enrollees. However, states opposed to expanding Medicaid have voiced concerns that covering even 10 percent of expansion costs would be prohibitively expensive.
Contrary to this fear, states have realized savings by moving adults in existing state-funded health programs into federally-subsidized expansion coverage, and have reduced spending on uncompensated care as more people become covered. Further, some states have successfully used tax revenue to offset expansion-related spending. Although Medicaid spending in expansion states has undeniably increased, studies analyzing the effects of expansion have found that the extra dollars have a profound impact –  improving coverage, utilization and affordability of services, financial security, self-reported health, and quality of care.
Despite the measurable gains achieved through the ACA, states and the federal government are continuing to take action to reduce the cost of the Medicaid program and increase the personal responsibility of enrollees. This has led most 1115 waiver-based expansion states to implement, for example, beneficiary contributions requirements, which involve changes to the premium and cost sharing schedules so that all enrollees pay something for their coverage. Seven of these states are also implementing work and community engagement requirements as conditions of eligibility as well (a potential means for limiting coverage despite formally expanding).
In addition to approving waivers for cost sharing and work requirements, the Trump Administration also released guidance encouraging states to accept a limit on federal Medicaid funds by agreeing to block grants or per capita caps in exchange for “extensive flexibility.” Called the Healthy Adult Opportunity (HAO), the program would permit participating states to make programmatic changes that could, among other things: limit Medicaid eligibility for certain adults, limit covered benefits, implement a closed drug formulary, and impose more than nominal cost sharing. CMS would further incentivize states to implement a HAO program by offering between 25 and 50 percent of federal savings if actual Medicaid spending is below the cap and if states meet certain performance standards. These new flexibilities would impact not only adults covered through Medicaid expansion, but also other adults under age 65 that do not qualify on the basis of disability.
Both Medicaid work requirements – which have been successfully argued against in court  (e.g., here and here) – and the HAO are based on objectives not explicitly aligned with Medicaid’s statutory obligation to provide affordable coverage to low-income people. Because the goals of these initiatives are largely financial and political, there could be unintended consequences for Medicaid enrollees which may include rolling back some of the advances made under the ACA. As the law approaches its adolescence, it is clear that there is more change and upheaval to come.
Lauren Testa is an Associate Vice President at Wynne Health Group, primarily working on regulatory affairs with a focus on Medicare reimbursement as well as other key issues for providers and health plans. She is passionate about human-centered payment and delivery system innovation in health care. You can reach Lauren via email at lauren@wynnehealth.com, and can find her on Twitter and LinkedIn.
For searchable access to all of WHG’s Medicaid analysis in one place, ask us about a Policy Hub subscription.
