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Nixing Medicaid Expansion Would Leave Millions Uninsured Below the Poverty Line

By John Reichard, CQ HealthBeat Editor

March 21, 2012 -- If the U.S. Supreme Court affirms the health care law but strikes down its Medicaid expansion, millions of uninsured Americans with incomes below the poverty line won’t get government help to line up health coverage, unlike their somewhat better-off compatriots.

Hospitals would find themselves with rising uncompensated care costs at the same time their Medicare payments are being cut.

And despite years of funding increases supported by both Democrats and Republicans, the nation’s growing network of community health centers would be unable to meet many of the medical needs of those poor people who would not be covered.

To date, there are no indications that Republicans would propose to cover everyone below the poverty line as part of their “repeal and replace” strategy against the health care law.

Until January, many legal analysts downplayed the chances the high court would block the Medicaid expansion, which, starting Jan. 1, 2014, raises Medicaid eligibility to those with yearly incomes of up to 133 percent of the federal poverty line (or 138 percent if a state doesn’t count 5 percent of the income of a Medicaid applicant, something states now do).

But then the Supreme Court surprised legal observers by scheduling an hour of oral arguments March 28 on the constitutionality of the Medicaid expansion. Observers now take more seriously the possibility that the Medicaid provision could be struck down.

If the court does block the Medicaid expansion and the justices left the rest of the law intact, Americans with incomes between 133 percent and 400 percent of the federal poverty line would still have access to the federal subsidies the health law provides to Americans with modest or middle-class incomes to help them buy coverage in insurance exchanges.

But the estimated 17 million uninsured Americans who would have qualified for the expanded Medicaid program would earn too little to qualify for the subsidies. So millions of poor people wouldn’t qualify for the program that the media usually describes as the federal–state insurance safety net for the poor.

Uninsured Americans who are more needy would be left out, notes Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

“Ironically, if the Supreme Court throws out the Medicaid provision, but not the rest of the ACA, people under the poverty level are not eligible for subsidies through the exchanges,” she said, referring to the Affordable Care Act, the common name of the law (PL 111-148, PL 111-152).

If the justices were to declare the Medicaid expansion unconstitutional but keep the rest of the law, “It would be a political bombshell,” says a Senate GOP aide, who adds that he doesn’t know how Congress would react. “God knows. But I don’t.”

A Historical Note
The reason many poor people do not qualify for Medicaid relates to its historical ties to the federal welfare program, says Ron Pollack, executive director of the liberal-leaning advocacy group Families USA. The assumption underpinning that program is that only poor people falling into certain categories should receive federal cash assistance.

Pollack notes that “when Medicaid was established in 1965, it was built upon our social welfare system that was enacted in 1935. What that means is that the pathway onto Medicaid was by virtue of getting welfare benefits,” he says.

“The Social Security Act created four groups of people who would get welfare benefits,” Pollack adds. “They were people over 65 years of age . . . aid to the blind, aid to the permanently and totally disabled, and fourth, aid to families with dependent children.” That essentially meant children who are missing a parent in the household.

“So if you did not get any of these social welfare benefits, you were ineligible for Medicaid.” Congress subsequently “attenuated the link” to the welfare system, “but you still see the vestiges of it,” Pollack says.

“The 1935 Social Security Act has its antecedents, believe it or not, in the 16th-century Elizabethan poor laws, which did the same thing. They said, ‘It’s not just sufficient that you’re poor, but you have to fit a deserving category.’ ”

Children make up one such deserving category in the Medicaid program. “In virtually every state, the income eligibility standards for kids is at least 200 percent of the federal poverty level,” whether in Medicaid or the closely related Children’s Health Insurance Program (CHIP).

But “for parents of those very same children, you have different eligibility standards, such that the kids may be eligible for Medicaid or CHIP, but the parents are not eligible for public coverage. And the median income eligibility standard among the 50 states . . . is 62 percent of poverty.”

So in Florida, “you are ineligible for Medicaid as a parent if you are above 58 percent of poverty. For a family of three, that’s $11,072. If you’ve got more than that, you’re ineligible.” In Texas, Pollack adds, the eligibility cutoff is 26 percent of poverty. “For a family of three, if you have income more than $4,964 you’re ineligible as a parent for Medicaid.”

“Now consider adults who do not have kids. I’m talking about singles” or couples who either have no children or whose children are no longer dependents, Pollack says. “They literally can be penniless and they’re ineligible for Medicaid.”

“So what the Affordable Act does, it says ‘Wait a minute. We’re not going to continue to have these differentiations based on family status. We’re going to create a nationwide floor on eligibility.’ That floor is now 133 percent of the federal poverty level.” So an individual with income below $14,856 is eligible for Medicaid. A couple with income below $20,123 is eligible for Medicaid.

If the court strikes down the expansion, the United States “would continue to have the most meager eligibility standards for adults.”

Doubts About a Replacement Plan
Gail Wilensky, who ran the Medicare and Medicaid programs under President George Bush, says that if there hadn’t been a “my way or the highway” approach to overhauling health care during the Clinton administration, Medicaid eligibility could have been increased to the federal poverty level as a compromise between Republicans and Democrats, and the needs of the poorest uninsured Americans would have been dealt with.

Later, as an independent policy analyst early in the George W. Bush administration, Wilensky proposed increasing Medicaid eligibility to 100 percent of the federal poverty level for all Americans. Alternatively, her plan would have provided people in that income category subsidies to buy private coverage. That proposal, which Wilensky, now senior fellow at Project Hope, estimates would have covered about 16 million uninsured Americans, was never adopted.

Wilensky says she agrees with recent proposals by House GOP leaders to address the problem of lack of insurance through association health plans and the ability to buy coverage across state lines. But that won’t be sufficient to cover everyone below the poverty level. “That takes real money,” Wilensky says.

She says she hears no talk among Republicans now of such an expansion if the court strikes down the broader expansion under the health law. “This is not the focus of their attention,” she says. “They are clearly focused on other things.”

The Senate GOP aide agrees that Republicans aren’t heading in that direction. “We’d sit back and watch them stew,” he says of Democrats if the Court blocks the expansion.

John Reichard can be reached at [email protected].

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