Ahead of Tuesday’s primary election, Missouri’s ballot measure proposing the expansion of Medicaid to people making up to 138% of the federal poverty level continues to draw debate. Proponents of expansion list both the economic and humanitarian benefits, while those in opposition want to know how the state’s contribution will be funded.
Numerous studies speak to the possible benefits of expanding Medicaid, the health insurance program for low-income people. Increasing eligibility to 138% of the federal poverty line would make around 230,000 uninsured Missourians eligible for coverage, according to the Missouri Foundation for Health. An estimated 16,000 jobs would be created per year by expansion, according to the foundation, and state funding previously used to finance services covered under Medicaid expansion could be redistributed to other areas of the budget.
“There is an estimate that after five years, we could be saving a billion dollars a year, which seems a little hard to believe, like ‘Wait, what’s the catch here?’” said Abigail Barker, a professor at Washington University in St. Louis who has conducted multiple studies into Medicaid, health insurance markets and health reform. “I think what people don’t remember or realize is that when the (Affordable Care Act) was written, that was exactly the intention.”
Many discussions over expanding Medicaid in Missouri turn to the effects seen in the other 37 states that have already expanded the program. States that did so during the first few years after the passage of the Affordable Care Act were eligible for more federal funding, making a comparison to those states difficult. Additionally, the way each state has distributed its budget can dictate potential savings.
No two states are exactly alike, so there is no guarantee that two states taking similar approaches to expansion will have the same results.
“You can make the policy change, and make your best educated guess about how people’s behavior will change in response, but there’s a lot of moving parts,” said Jake Haselswerdt, a political science professor at the University of Missouri who previously researched the politics of health policy and Medicaid expansion while at the University of Michigan.
No state has repealed Medicaid expansion after approving it, although many have altered their programs in various ways. Also, no state has experienced “out of control” costs as a result of expansion, according to a study by Health Management Associates.
“I don’t know if it’s going to be this amazing budgetary savior for the state,” Haselswerdt said. “I think it is also really unlikely that it’s going to be a huge disaster. It just hasn’t been elsewhere, and I think that’s because the terms are so favorable for the states.”
While there are no direct comparisons or guarantees of how Medicaid expansion might play out in Missouri if voters approve it, there are a few tactics some states have employed in the enactment of their expansion programs that experts suggest could be relevant to Missouri.
Initial expansion and federal reimbursement
With the implementation of the Affordable Care Act in 2010 and the 2012 Supreme Court decision that allowed states to individually decide if they would opt in for Medicaid expansion, 25 states implemented expansion in 2014 when the program first became available. The program started with a 100% federal reimbursement for the cost of expansion during the first three years and gradually decreased to 90%, where it stands now.
“Six years into it, states would have realized so many other savings that it would effectively still be paying for itself,” Barker said of the states that initially opted in.
In 2017, states began to pay 5% of the cost of expansion. Michigan was one of the first states to implement Medicaid expansion, meaning it received the full reimbursement from the federal government until 2017. However, even when paying 5% that year, Michigan still saw $432 million in combined savings and increased tax revenue, according to a University of Michigan study.
This was due in part to the creation of about 30,000 jobs each year since the enactment of Medicaid expansion. One-third of those jobs were in health care and gave the state about $2.3 billion a year in additional personal spending power.
Federal reimbursement rates have now tapered down to 90% of the cost of expansion, but some that oppose Medicaid expansion in Missouri fear that this could someday decrease, leaving the state to fund a larger portion of the costs. However, this amount of federal contributions is written into the act in such a way that it would require a majority vote in Congress to repeal.
“There’s so many state-federal programs. If you start to worry that the federal government might someday change the terms of it, I don’t know how fruitful that is,” Haselswerdt said. “I think it’s more realistic to just kind of focus on the policy as it is written.”
During the period of full federal reimbursement, a 2017 study by the National Bureau of Economic Research showed that Medicaid expansion reduced unpaid medical bills sent to collection by $3.4 billion over the first two years alone. This equates out to about $900 saved per treated person that received Medicaid benefits.
Work requirement programs
Many states have looked for ways to supplement funding for expansion, and the enactment of work requirement programs has become a common practice. In early 2020, 12 states had approved work requirements, with several more considering them.
Arkansas was one of the pioneers of work requirements, although the state expanded its Medicaid program during the period of full federal reimbursement. In 2017, when the 5% contribution from the states was enacted, Arkansas implemented changes into its coverage program, including work requirements.
A study from the Commonwealth Fund showed that in 2017, Arkansas saw $112 million in Medicaid savings, with an additional $7.1 million in savings related to state spending for mental health and substance abuse treatment and $2.8 million in savings for department of corrections spending. These savings totaled roughly 66% of the total cost of state expansion.
In 2018, Arkansas began requiring able-bodied Medicaid recipients between the ages of 19 and 49 to work at least 80 hours a month or participate in a community engagement program. About 18,000 people lost coverage as a result of the work requirements in 2018. In total, enrollment in the state’s program dropped by 10% in 2018 and 8.5 % in 2019.
A lawsuit in March 2019 suspended the work requirement in Arkansas and in Kentucky. U.S. District Judge James Boasberg, who presided over the case, said that the approval of work requirements by the Department of Health and Human Services “is arbitrary and capricious because it did not address … how the project would implicate the ‘core’ objective of Medicaid: the provision of medical coverage to the needy.”
In order to initially pass the work requirements, states had to present them as something that would be beneficial to the health of the patient in some way.
“Someone who was advocating these kinds of policies might say to the public that this is going to encourage personal responsibility or similar conservative goals,” Haselswerdt said. “But when they defend these things in court, they have to make the case that it’s helpful for the person’s health and the reason is that those kinds of more general justifications are not enough under Medicaid law. They have to use different arguments in court than they might use in the court of opinion.”
Currently, work requirements have been halted in every state for various reasons. Six states have seen their work requirements halted by judicial authority, while programs in three other three states are still pending approval.
Premiums and tax revenue
While some states have been able to finance expansion through savings and budget redistribution, others have elected to create new streams of tax revenue or charge Medicaid recipients premiums to help fund their expansion programs.
In addition to work requirements, Arkansas also implemented Medicaid premiums for people earning more than the federal poverty level. They had to pay 2% of their household income, which only 20% of the people paid when it was enacted.
Montana charges premiums of 2% for those earning between 50% and 138% of the federal poverty line. For those who are eligible for the work requirement, the premium was doubled.
Montana voters rejected a 2018 measure that would have funded the state’s contribution to expansion costs through a tobacco tax. Voters instead opted to approve a six-year expansion with the stipulation that a work requirement be enacted.
Ohio has Managed Care Organization taxes which allow for state and local taxes to be collected on certain health care services. These account for $248 million in projected revenues, or about 46% of expected expansion costs. However, Ohio is still expected to have to pay 3% of its state contributions from other revenue sources, according to the Health Management Associates report, as the state did not produce enough in savings or taxes to cover the expense.
Indiana has a cigarette tax and a hospital fee that account for 100% of its funding costs for Medicaid expansion. Also, the state charges premiums to Medicaid recipients that use tobacco products.
Rather than instituting a premium dependent on wage calculations, Indiana created a program to classify enrollees into “income bands,” which would not charge more than the customary 2% of their income in premiums, but would also eliminate the administrative calculations involved in assessing premiums.