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States with Largest Uninsured Populations May Be More Likely to Opt Out of Medicaid

By John Reichard, CQ HealthBeat Editor

Any states that choose to follow the Supreme Court's ruling and opt out of the health care law's Medicaid expansion are likely to be those with a larger population of uninsured and poor people, experts said. But doing so would mean refusing huge sums of federal money, which could be difficult for most states to do.

"No state can afford to opt out," said Orrin G. Hatch of Utah, the ranking Republican on the Senate Finance Committee. "There's no state in its right mind that wouldn't take the money, because they're going to have all those additional people they're going to have to take care of."

Under the health care law, Medicaid eligibility was expanded to include adults with annual incomes up to 133 percent of poverty. The federal government will pay 100 percent of the costs of covering those eligible for the expansion in 2014, 2015 and 2016; 95 percent in 2017; 94 percent in 2018; 93 percent in 2019; and 90 percent in 2020 and thereafter.

The justices ruled that it would not be unconstitutional for the states to refuse to participate in that expansion and that they would not lose federal funds by doing so.

States with the largest projected increases in Medicaid enrollment under the expansion tend to be poorer and Republican, and a number have a history of limiting the size of their Medicaid populations. That could mean that fewer than the 16 million uninsured estimated to get Medicaid coverage under the expansion will actually do so.

Idaho is likely to opt out because of difficulties the state is already having in meeting its current obligations for Medicaid recipients, said Republican Sen. Jim Risch, the junior senator from that state. "They can't afford the Medicaid they have now," Risch said.

Lawmakers in both parties expressed doubts about whether legislation would be needed to entice states to opt into the expanded Medicaid coverage or provide other type of health care assistance to states that elect to opt out.

"We're talking about it. We haven't made a decision yet," said Majority Whip Richard J. Durbin, after he and other members of his caucus discussion the court's decision at a luncheon last week.

But Joseph I. Lieberman, chairman of the Homeland Security and Government Affairs Committee, said lawmakers could weigh proposals to offer incentives to states to take part in providing expanded Medicaid benefits. Even so, he added, the cost of such incentives could make it hard to build consensus for such legislation. "Maybe. But of course, we've got to keep the whole thing in fiscal balance," said Lieberman, I-Conn.

Many lawmakers, such as Sens. Barbara Mikulski of Maryland and Johnny Isakson of Georgia, said they intended to study the decision and consult with state officials back home on whether federal legislation is needed to clarify or change the law. "It's a little milky ... I'm waiting to hear from the governor, and the attorney general to hear what they think," Mikulski said.

In Maryland, as well as California, state officials said that they plan to move ahead with increasing Medicaid coverage levels in 2014 for eligible.

"I think we saw this as a very important part of the law," Joshua Sharfstein, secretary of the Maryland Department of Health and Mental Hygiene, told The Associated Press after the ruling.

Virginia Attorney General Kenneth Cuccinelli hinted in a statement that his state may opt out of the Medicaid expansion, praising the decision and saying that "this alone could save the commonwealth about $200 million a year -- money which would have to come from new taxes or other already stretched priorities, such as state education and transportation funding."

Sen. Lindsey Graham, R-S.C., introduced a bill (S 1587) last fall to allow states to opt out of the Medicaid expansion, and said he will ask Majority Leader Harry Reid for a vote on the measure.

"I want Congress to reinforce the ruling but be even more clear about it," Graham said in an interview. "I'm not so sure the legal decision is as clear as our bill."

Max Richman, president and CEO of the National Committee to Preserve Social Security & Medicare, said that advocates will do "whatever we can" at the state and local level to persuade states to opt into the expansion.

Others were not as sure. "While we are pleased that the court's ruling preserves existing Medicaid coverage, we are worried that the low-income people in any state that may reject the Medicaid expansion will bear the costs of that decision," said Jane Perkins, legal director of the National Health Law Program. "If a state chooses not to participate in the expansion, poor people will suffer."

Alan Weil, executive director for the National Academy for State Health Policy, declined to predict which states will opt out.

"All that's clear now is that states will have a debate over this issue they thought they didn't have any choice on," he said. "But it's still a very attractive option for states."

A Senate GOP aide agreed with Weil's assessment. "Congress threw a lot of money at the states in the expansion," the aide said. "They may still take it."

According to an analysis by the Kaiser Commission on Medicaid and the Uninsured, under the health law's Medicaid expansion, the states projected to have the biggest increase in Medicaid enrollment under the law by 2019 include California with 2 million, Texas with 1.8 million, Florida with 950,000 and Georgia with 650,000.

The Kaiser Commission said that the estimated federal increase in spending to finance the expansion will total $434 billion by 2020, with state spending growing by at least $20 billion by that time.

In its statement, the National Association of Medicaid directors said the court's ruling "was clear that this does not apply retroactively to previous federally mandated expansions, or necessarily to potential future expansions."

Medicaid experts said that they will examine the high court's decision for its implications on whether states would be allowed to opt out of any future modifications of the program.

"We will be analyzing the decision with that question in mind, about how the decision impacts Congress' ability to improve and strengthen the Medicaid program in the future," said Kevin Prindiville, deputy director of the National Senior Citizens Law Center. It may be difficult because the opinion's discussion of the Medicaid decision is limited, he said.

Congress over the years repeatedly has amended the Medicaid law since it was enacted in 1965, and added certain categories of people for whom coverage is mandatory, as well as services that must be covered. Those expansions have been allowed to stand.

"For example, the Medicaid Act requires state programs to make medical assistance available to low-income families with dependent children and to low-income individuals who are elderly, blind or disabled," the Justice Department wrote in a brief submitted to the Supreme Court defending the expansion.

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