By Rebecca Adams and John Reichard, CQ HealthBeat
February 4, 2013 – Last week Ohio Gov. John R. Kasich became the fifth Republican governor to announce support for expanding Medicaid, a decision that Health and Human Services (HHS) Secretary Kathleen Sebelius called "a great step forward."
Kasich's decision, which was announced in conjunction with the release of his two-year budget proposal, was widely anticipated. He had faced intense pressure from medical providers, business groups, religious organizations and patient advocates to expand the health care program for the poor.
Sebelius, who spoke to reporters last week after a speech in Washington to AcademyHealth's National Health Policy Conference, addressed a concern of many governors.
"I think there's a nervousness, and an understandable nervousness," Sebelius said, on the part of governors who worry that if they expand Medicaid, a "federal budget deal changes the formula." The formula provides a 100 percent federal match for those newly eligible for Medicaid for three years, a reimbursement that then phases down to 90 percent in 2020.
"I think the president made it very clear that he understands that this framework is essential to giving governors the confidence, that he would oppose any change in that framework,and he intends to keep the deal," Sebelius added. A top Obama official said last week that the president's fiscal 2014 budget proposal would not cut Medicaid.
Kasich said at a briefing for reporters that "this is the right decision for Ohio."
The administration had predicted that GOP governors would find it hard to turn down federal funding. The dynamic among states Republican leaders began shifting when three Western governors—including Arizona's Jan Brewer, a darling among conservatives—made statements beginning in mid-December that they supported broadening the program.
Kasich's decision puts his political reputation as a cost-cutter somewhat in jeopardy among conservative activists. Fifteen years ago, Kasich was in a role similar to that of House Budget Chairman Paul D. Ryan, R-Wis. One of the most fiscally conservative Republican members of Congress in the 1990s, Kasich used his perch as House Budget Committee chairman from 1994 to 2000 to become a nationally known spokesman for the virtues of budget reduction. During his tenure, Congress passed a far-reaching budget deal (PL 105-33) that was at the time projected to save a net $7 billion in Medicaid spending over the next five years.
Kasich's announcement will bring the total number of governors who have expressed support for expansion to 21. The District of Columbia also plans to expand Medicaid as called for in the 2010 health care law (PL 111-148, PL 111-152). In order to make the expansion happen, in most states the governors need to have the support of their state legislatures.
Last week, Pennsylvania GOP Gov. Tom Corbett is likely to announce whether he supports the expansion of Medicaid.
Kasich's Arguments for Expansion
The expansion will bring in $13 billion over seven years into the state, said Kasich and Greg Moody, director of the Ohio's Office of Health Transformation.
"It's our money," Kasich said at the press briefing. "Let's bring it home."
Overall, Kasich estimated that his state will save $773 million through 2020 if it expands. The projection assumes savings from higher tax revenues. In addition, expansion would enable the state to get more federal dollars in the future for some residents, such as prisoners or those who are currently covered in Medicaid as part of its optional population. Those in that category would be eligible for the higher federal subsidies.
An estimated 1.5 million Ohioans currently don't have coverage. More than 270,000 of them would be eligible for Medicaid in the first year if the state Legislature agrees with Kasich's position. An additional 230,000 people who are already eligible for Medicaid but have not enrolled are expected to sign up.
The governor said he has been negotiating with Obama administration officials to give the state some flexibility in implementing the expansion, such as allowing some of the people who are coming into the system to get benefits through the state's exchange instead of Medicaid.
"There is a discussion now about some flexibility," Kasich said, so that people whose household income is from 100 percent to 138 percent of the federal poverty line might be "able to buy onto the exchange to receive private insurance coverage,'' Kasich said when he unveiled his budget.
"We don't know what the details are going to be yet. We don't know what the cost is going to be for buying into the exchange, although it appears they're willing to waive budget neutrality," Kasich said. "I don't know where this is going to lead us, but I believe that these motions that lead us to a more flexible way to accomplish this is positive. But I want to be clear: I don't know if it'll be workable at the end of the day."
Kasich and Moody presented several justifications for the decision to expand.
Those with low incomes would continue to get their care through emergency rooms rather than in doctors' offices or other more appropriate settings, which Kasich said "costs everybody a lot of money." And if Ohio did not expand, hospitals would be put at a disadvantage if federal funding decreased for uncompensated care provided to the uninsured.
Kasich emphasized that state officials "are not endorsing an individual mandate" and that he is proposing that if the federal government reduces its financial commitment, the expansion would automatically be reversed.
A fact sheet also mentioned the sway of business groups. "Providing Medicaid coverage to more low-income, working Ohioans can spare employers job-killing penalties," it read.
And Kasich said he wanted to save money for local jurisdictions that provide mental health care funding, saying he is "very pleased about beginning to build that safety net for mental health."
As part of the expansion, Ohio would streamline the state's 150 or so Medicaid eligibility categories into three: children and pregnant women; people who are age 65 or older who have Medicare coverage or who need long-term services; and other non-pregnant adults who do not need long-term services and supports.
Ohio officials have already said that the state plans to partner with the federal government on an exchange and will submit a blueprint by the Feb. 15 deadline.
