Medicaid Expansion Tipping Point: The three reasons why reluctant states like Pennsylvania are warming up to Medicaid

It’s getting harder and harder for Governors to say no to the great deal being offered to them through the Medicaid expansion option.  Just last week Pennsylvania reached agreement with the federal government on a Medicaid expansion waiver and news stories show possible movement in Wyoming, Utah and Tennessee. This new momentum forward shows that more state leaders are willing to stand up to those with intransigent ideological views to find a commonsense approach towards managing their state’s finances and health care system.  Three factors are driving the change:

Hard Numbers

Before January 1, 2014 – the first day states that accepted the federal Medicaid expansion could open their programs – the costs of not doing so were largely theoretical.  Now that a growing majority of states have expanded coverage, the choice on Medicaid is no longer a hazy public policy debate but one where hard numbers on the cost of not expanding coverage are now available between the states that expanded coverage and those that have not.

A widely-reported study released last month by the Robert Wood Johnson Foundation and The Urban Institute had a great deal to do with providing the background data for this latest state policy shift:

 “In the 24 states that have not expanded Medicaid, 6.7 million residents are projected to remain uninsured in 2016 as a result. These states are foregoing $423.6 billion in federal Medicaid funds from 2013 to 2022, which will lessen economic activity and job growth. Hospitals in these 24 states are also slated to lose a $167.8 billion (31 percent) boost in Medicaid funding that was originally intended to offset major cuts to their Medicare and Medicaid reimbursement.”

The state level data contained in the RWJF/Urban report has been extensively cited both in news articles and editorials across the country. While Medicaid expansion has enjoyed strong nationwide coverage and editorial board support in the past, the RWJF/Urban data took the national debate to a new level where it is very clear what non-expanding states are losing in comparison to other states that have expanded.  Just this week McClatchy Newspapers used the Urban data to show which state taxpayers are going to be the biggest losers if their states continue to refuse the Medicaid expansion:

“Most of the money, nearly $88 billion, would come from taxpayers in just five non-expansion states: Texas, Florida, North Carolina, Georgia and Virginia.”

One other RWJF/Urban finding that’s also noteworthy is the researcher’s review of 16 state-level budget analyses from multiple states. The authors found every single state study showed federal Medicaid dollars from an expansion helping state budgets.  There have been multiple reports on individual state studies showing savings because states are already paying for care delivered to poor uninsured people that would now be covered by Medicaid.  However, this is the first comprehensive review of state fiscal analyses and it is powerful.

The final influential “hard number” comes from the Gallup poll last month showing which states had the largest drops in the number of uninsured people.  Arkansas and Kentucky were leading the list by far – two states with previously high numbers of uninsured. Both states overcame political roadblocks to expand Medicaid under the Affordable Care Act.

Hospitals Hurting

The second major turning point in the Medicaid debate has been the quickly emerging differences in hospital finances being seen between expansion and non-expansion states. Rural hospitals especially in many states are hard hit by a state’s failure to accept federal dollars for Medicaid expansion.  Often rural hospitals are the largest employers in many counties and job loss can be devastating.  For example, the North Carolina Hospital Association estimates that over 2,000 employees have lost jobs in the last year as the result of North Carolina’s refusal to accept Medicaid expansion dollars.

Hospitals in expansion states are also seeing a significant drop in the number of uninsured patients coming into their emergency rooms.  This is not true in states that did not expand Medicaid.  A recent article in Modern Healthcare laid out this issue in just one hospital system:

“At Tenet Healthcare Corp., owner of the eight-hospital Detroit Medical Center, the number of uninsured and charity-care admissions in its five Medicaid expansion states — where it has about a third of its beds — fell 54 percent in the second quarter compared with the same period last year. The decline was 8 percent in non-expansion states. Tenet’s Medicaid admissions increased 23 percent in expansion states, including Michigan, and 3 percent in non-expansion states.”

And the story is the same in other areas of the country. In Arizona, another Medicaid expansion state, hospitals saw a 31% drop in uncompensated care as more people arrive in hospital emergency rooms with Medicaid coverage.  And the accounting and consulting firm PricewaterhouseCoopers just released a report noting the significant and even surprising differences the Medicaid expansion is creating for hospitals in states that have expanded.

Conservative Governors Taking Charge

Governors play the role of CEO in their states.  Those looking at the new numbers and taking a “can do” approach to managing their state’s health care system and budgets are coming to the conclusion that the Medicaid option is too good of a deal to pass up. Governors are coming up with flexible ways of delivering health care to Medicaid recipients and the federal government is giving them a great deal of latitude to do just that. Many Governors are charting their own pathways to get try to get to “yes” on the Medicaid expansion.

Thus you have Indiana Governor Mike Pence advertising “the infusion of market principles” in his plan to expand Medicaid. In the same way, Utah Governor Gary Herbert introduced discussion of his “Healthy Utah Plan” by saying “We can do it our way in Utah.” Even in Wyoming, Governor Matt Mead is talking about “the best deal” he can get out of the federal government for a Medicaid expansion.

The clearest example of this trend occurred during last week’s announcement of federal government approval of Pennsylvania Governor Tom Corbett’s Medicaid expansion plan.  Corbett’s statement called his expansion, “[A] plan that was created in Pennsylvania for Pennsylvania, a plan that would allow us to reform a financially unsustainable Medicaid program and increase access to health care for eligible individuals through the private market.”

These three factors are a powerful combination. As states continue to find a safe course between the political and policy imperatives surrounding efforts to expand health coverage, expect more moves to state-crafted Medicaid expansion plans that are truly unique.

Written by Adam Searing, Georgetown Center for Children and Families. Cross-posted from the Say Ahhh! Health Policy Blog.