TO EXPAND OR NOT TO EXPAND MAY DEFEAT HEALTHCARE REFORM GOALS

On June 28, 2012, the Supreme Court partially upheld the Patient Protection and Affordable Care Act, commonly known as the “Healthcare Reform Act” while declaring the requirement for the states to expand Medicaid unconstitutional as drafted. Specifically, the Supreme Court determined that under the Healthcare Reform Act, Congress’ requirement for the states to increase the Medicaid eligibility to all individuals who have an income at or below 133% of the Federal Poverty Level failed because the states were not provided an opportunity to consent and Congress granted the Secretary of the Department of Health and Human Services (DHHS) the authority to revoke the Medicaid funding to the states who do not expand eligibility. The Supreme Court found the restriction on Medicaid funding exceeded Congress’ authority. Therefore, in order to save the Healthcare Reform Act, the Supreme Court restrained the DHHS Secretary’s authority to withhold Medicaid funding.

Without fear of losing its Medicaid funding, the states have an option to either expand the Medicaid eligibility to all individuals with an income below 133% of the Federal Poverty Level or to decline such expansion. For many States, the Medicaid expansion means offering Medicaid benefits to hundreds of thousands of new people. Specifically, in the State of Georgia, there is an estimate that this would increase the number of people on the Medicaid rolls anywhere from 500,000 to 650,000 new people in 2014. For the first year, the additional Medicaid expenses will be covered by the Federal Government. Over the next several years, the amount of money funded and subsidized by the Federal Government will decrease; thus, increasing the State’s obligations for the Medicaid Program funding. As a result of this, several States have specifically stated that they do not intend to expand the Medicaid rolls, as it would not be financially feasible for the state to maintain the additional funding for the population on a long term basis.

So what does this mean if the states do not actually expand their Medicaid eligibility to 133% of the Federal Poverty Level? It means that, there will be millions of people who will not be eligible for Medicaid benefits and who also may not be able to afford the insurance through the state insurance exchanges due to their level of income. Moreover, it may be less expensive for these individuals to pay the penalty/tax instead of purchasing insurance. Therefore, one of the foundational tenets of the Healthcare Reform Act would be undercut. Specifically, the Healthcare Reform Act intended to provide insurance coverage for 32 million additional people which will not come to fruition if Medicaid is not expanded.

The Healthcare Reform Act is a comprehensive and complex law which includes insurance reform measures, reformation of healthcare provider and patient relationships and a platform to redesign how to deliver and pay for healthcare services. All of the components of the Healthcare Reform Act are inter-related so that in the event one component of the Healthcare Reform Act fails or is removed, it impacts multiple other provisions within the law that may have unintended consequences. In fact, if there are less individuals insured, it may create a financial burden upon the hospitals and healthcare providers. Specifically, in 2014, hospitals disproportionate share reimbursement will be decreased by 75%. This payment has been historically used to provide payments to the hospitals to cover some of the costs for individuals who are uninsured and who receive care at the hospitals. If this payment is reduced, and individuals within the States are not covered by Medicaid or elect not to purchase insurance, the hospitals will suffer a financial loss which will not be subsidized by the disproportionate share payment. Many hospitals depend upon the disproportionate share payment to stay open. Therefore, as states evaluate whether or not they will or will not expand their Medicaid eligibility enrollment, it is important to evaluate how this impacts the rest of the provisions of the Healthcare Reform Act which have been deemed constitutional and will remain in effect.

By allowing the states to have an option not to expand the Medicaid eligibility, the Supreme Court deeply impacted the entire implementation of the Healthcare Reform Act. All of the intricacies of the Healthcare Reform Act should be evaluated as states make a decision about their Medicaid rolls. The individual states’ decision will change how healthcare is delivered and paid for in the state and may emasculate the Healthcare Reform Act’s impact on the uninsured population.

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