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The Future of the Medicaid Expansion under PPACA

Headlines regarding the pending Supreme Court case on the Patient Protection and Affordable Care Act (PPACA) tend to focus on the future of the individual mandate in national health reform. Critics argue that the commerce clause cannot be used to force individual citizens to purchase health insurance. Quite simply, they argue the clause cannot legitimately be used to regulate such activity.

But equally interesting will be what the highest court in the land says on the massive Medicaid expansion in PPACA since about one-half of those uninsured to be covered would theoretically be moved into Medicaid as opposed to the commercial state exchanges.

A number of state lawsuits, with divided outcomes at the federal court and appellate levels, are now at the Supreme Court. The state attorneys general also are arguing that Congress cannot use the commerce clause to force states to expand Medicaid and that the provision is a fundamental infringement on states’ rights and is coercive.

On both the individual mandate and the Medicaid expansion, a decision rests squarely with Supreme Court Justice Anthony Kennedy, who straddles the fence between the liberal and conservative benches.

Whatever the decision on the Medicaid expansion, the state arguments certainly rely on the greatest of nuance. When the Great Society program was passed now almost 50 years ago and as it evolved over a generation, states began to understand that they had agreed to a Faustian bargain. States had to cover mandatory populations with mandatory benefits. If you desired to cover other populations, these populations had to be offered the same gold-plated coverage. Even with recent reforms in the Social Security Act and 1915(b) and 1115 waivers, the fundamental paradigm in Medicaid remains: in return for generous federal assistance, states are required to accept rigorous and inflexible federal dictates. Escaping them takes inordinate time and expense, and usually means just minor relief.

What has developed is a system that is exceedingly expensive. While beneficiaries theoretically have Cadillac coverage, the reality is that provider rates have been cut so much that poor access and quality have impacted the actual care that Medicaid beneficiaries receive. Uninsured rates have blossomed in many states because the federal dictates and regulations favor covering fewer people with hefty benefits rather than more people with industry-standard benefits.

“While the [Affordable Care Act] purports to leave States’ participation in Medicaid nominally voluntary, multiple aspects of the Act evince Congress’ keen awareness that, in fact, no State will be able to reject its new terms and withdraw from the program,” the states’ brief says. The AGs are arguing the subtlety that the current system is voluntary (states technically retain the discretion to agree to the onerous federal dictates), whereas PPACA essentially requires every state to cover every citizen up to 133 percent of the federal poverty limit.

States have used the ability to drop rates, certain benefits, and certain populations to keep their budgets in balance. But the legal statement is a bit ironic as states already live the reality of being forced to play in a system that is badly in need of reform.

The states’ objections and legal case are really more about the state of the system as a whole. States, their governors’ associations, and their Medicaid Directors’ group have long argued for a new paradigm because the system now is all about high cost but low provider reimbursement, which fosters poor access and quality. There is little innovation and an ever-exceeding share of state government expense goes to Medicaid, thereby choking off other programs. With the state fiscal crises, this has become a political bombshell in many states as citizens look to blame Medicaid for shrinking education budgets. While the feds argue that the Medicaid expansion is 100% paid for by CMS, states look to the history of funding and know better.

Critics argue that Congress is relying on worn-out ideas and systems to solve the uninsured problems. While meritorious efforts are being made at the state and federal levels to drive cost-containment and improve quality in Medicaid, perhaps truly revamping the monolithic system would have more promise for the uninsured than funneling half of them into what many see as a broken and irreparable system.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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