Post-Op Policy Debrief: ‘Nontraditional’ Medicaid Expansion

Published March 1, 2016

Provisions in the Affordable Care Act (ACA) have given states a strong but temporary incentive to expand their Medicaid programs. Under the law, the federal government pays for 100 percent of Medicaid expansion costs for newly eligible enrollees through January 2017, but then the federal share gradually falls to 90 percent by 2020, with states paying only 10 percent.

President Barack Obama’s 2017 budget draft, released February 9, proposes the federal government pay 100 percent of Medicaid expansion costs for the first three years for states that have not yet expanded Medicaid but choose to do so going forward. The federal share would then gradually decline to 90 percent.

Currently, 19 states have rejected Medicaid expansion, and 26 have expanded their programs without otherwise significantly modifying them. An additional six states—Arkansas, Indiana, Iowa, Michigan, Montana, and New Hampshire—have expanded their Medicaid programs using nontraditional models, including partial privatization and individual co-pays.

How effective are these nontraditional models of Medicaid expansion? Health Care News asked Charlie Katebi, a health care policy analyst at the Wyoming Liberty Group, to explain.

Hamilton: How innovative are these six states’ models of Medicaid expansion?

Katebi: A number of states have obtained waivers from the federal government to expand Medicaid with more flexibility, but their flexibility is substantially less than what they sought and largely fruitless in terms of reforming the program.

Hamilton: Do “expansion waivers” give states flexibility to set their own recipient contribution requirements?

Katebi: Indiana Gov. Mitch Daniels initially sought an expansion waiver that would require recipients to contribute up to 5 percent of their income in order to receive Medicaid benefits. The minimum contribution required was $160 per year. But Indiana’s negotiations with the federal government, which current Gov. Mike Pence finalized, severely watered down these reforms.

Under Pence’s deal with the Obama administration, Indiana can’t charge enrollees more than 2 percent of their income. The minimum contribution they can charge for Medicaid’s “basic” plan is $0. For individuals seeking Medicaid’s comprehensive plan that includes dental and vision services, the minimum contribution is just $1.

Hamilton: Some program participants were required to contribute more than the minimums. What happens if they don’t pay their share?

Katebi: Gov. Pence sought a “lockout” provision, which would throw individuals that didn’t pay their required contributions off Medicaid and ban them from reenrolling for six months. But the Obama administration prohibited Indiana from locking out any Medicaid recipient below the federal poverty line. Individuals that are above the line can also renege on their contributions if they have dependent children, live in a county with natural disasters, or qualify for a number of other exemptions.

Hamilton: What about other states with nontraditional Medicaid expansion models?

Katebi: Iowa obtained a waiver for a modified expansion plan called Marketplace Choice, but Iowa was prohibited from charging more than $120 in premiums per year. Iowa was also limited to charging enrollees just $8 for unnecessary emergency room visits. When all was said and done, only 10 percent of enrollees were actually subject to these premiums and fees. This is why Iowa scrapped its waiver program in July of 2015.

Hamilton: What’s the bottom line? Do nontraditional models of Medicaid expansion increase state flexibility and help control costs?

Katebi: Once fully implemented, nontraditional models of state Medicaid expansion prove as inflexible, expensive, and encouraging of government dependency as traditional models of expansion.

Michael Hamilton ([email protected]) is The Heartland Institute’s research fellow for health care issues and managing editor of Health Care News.