Decision on Medicaid Expansion holds coverage for many Tennesseans in balance
By Kristi Nelson
Posted June 2, 2013, updated June 4 2013
It was supposed to be one of the strongest tenets of the 2010 Patient Protection and Affordable Care Act. Instead, it became a political football, a metaphor for states’ rights. After the Supreme Court ruled that the ACA could not force states to expand Medicaid, Gov. Bill Haslam was among those who rejected the Medicaid expansion, instead offering his alternative “Tennessee Plan” for federal government approval.
But whether the federal government and the General Assembly will accept Haslam’s plan remains to be seen, along with how well it will work to cover those who currently don’t have health insurance.
“He’s either politically brilliant, or he’s making one of the worst mistakes he could make,” Rep. Joe Armstrong, D-Knoxville, told the News Sentinel in March.
What the ACA intended
Originally, the Medicaid expansion provision was to give state health insurance coverage to a group of people who made too much to qualify for Medicaid but too little to afford insurance on the health insurance exchanges, even with the planned government subsidies.
It expanded Medicaid to qualify people younger than 65 whose income is below 138 percent of the federal poverty guideline (a little more than $15,860 annually for an individual, a little less than $32,500 annually for a family of four).
It meant that, for the first time, low-income adults who don’t have children could get state Medicaid coverage, and it standardized other qualifications.
Many states, including Tennessee, limit Medicaid enrollment to certain categories of people. To qualify for TennCare, for example, you have to be low-income and pregnant, a child, blind, disabled, aged, or fall under multiple, specific categories.
Tennessee has nearly 1 million uninsured residents, of whom at least 140,000 and maybe more than twice that number, by some estimates, likely would enroll in Medicaid if it were expanded under the ACA guidelines. About three-quarters would have been previously uninsured. Under the ACA expansion, the federal government would pick up the entire cost of new, previously ineligible enrollees for the first three years, phasing to 90 percent by 2020. In Tennessee, federal funds would have amounted to about $1.4 billion in the first year alone.
States could receive federal matching funds for covering additional low-income residents under Medicaid as early as April 2010, with wide-scale enrollment beginning this October and coverage starting Jan. 1, 2014. However, in June 2012, the U.S. Supreme Court ruled that the federal government could not make states expand Medicaid — making a linchpin of the ACA optional.
So far, 20 states have moved forward with Medicaid expansion. Ten have rejected it outright, while 10 others are not doing it now but are looking at alternatives and have not ruled it out for the future (the government gives no deadline, though states waiting much longer to decide stand to lose federal funds for the first year). Three states are still undecided, while seven — including Tennessee — are crafting their own, alternate plans.
On March 27, Gov. Bill Haslam announced that Tennessee would not expand TennCare rolls under the ACA, instead offering up an alternative he called the Tennessee Plan.
“I don’t think just pure expanding of a system that we all agree is too costly for us, is too costly for the federal government to afford long-term, is the right way,” he said then.
The ‘Tennessee Plan’
Haslam’s proposal is that the state use federal funds not to expand TennCare but to purchase private insurance through the insurance exchange for people who would have qualified for coverage under Medicaid expansion.
He outlined the proposal in the broadest terms, including five “key points”:
Individuals identified as being eligible for the Medicaid expansion group would instead be directed to the exchange, where they would be allowed to choose any qualified health plan that offers a certain level of benefits (the Silver Plan).
The state would pay the monthly premiums, matchable with 100 percent federal dollars, for those people to enroll in the Silver Plan.
People in the Medicaid expansion group would be treated like all other people enrolled in the Silver Plan, with access to the same benefits and appeals process as other people in the plans.
People in the Medicaid expansion group would have the same cost-sharing as other Silver Plan enrollees with incomes below 250 percent of the federal poverty guidelines. (On average, Silver Plan policies would pay for 70 percent of health care costs, with the remaining 30 percent paid by the planholder.)
The arrangement would have a “circuit-breaker,” or “sunset,” ending after the three-year period of 100 percent federal matching dollars, and could be renewed only with approval of the General Assembly. (This is true for states accepting the Medicaid expansion as well; they can stop using federal funds and drop the expanded coverage at any time.)
In addition, Haslam would seek to reform the way providers are paid for services, with payment based on outcomes rather than a set fee for services. The money saved, he said, would be enough to cover the state’s 10 percent share of costs after the government’s share goes to 90 percent.
“One option for covering the Medicaid expansion group is simply to add them to the Medicaid rolls, or the TennCare rolls, in our case,” Haslam said of the plan. “We don’t want to do that. There are a lot of federal requirements that come with Medicaid that make it difficult to provide quality care in the most cost-effective way possible.”
But the federal government may not allow Haslam to forgo some of those requirements. While national Centers for Medicare and Medicaid Services guidelines indicate that the main tenets of the plan — using federal dollars to pay premiums for low-income people to have commercial insurance, and reforming payment — meet federal requirements, some of the details don’t align with federal requirements intended to protect Medicaid enrollees.
For example, Tennessee would need to give those with serious health conditions a choice of enrolling in TennCare or private insurance, unless CMS were to grant Tennessee a waiver to that requirement.
The federal government would require supplementation of benefits (sometimes called “wraparound”) to make sure the commercial insurance plans include all services that would be available through Medicaid. Hypothetically, this could be done through a supplemental premium to the Silver Plan insurance provider.
The government also limits co-payments for Medicaid-eligible enrollees.
There is also an appeals process in place, required by past Supreme Court rulings, so that Medicaid patients and their doctors can challenge insurance companies’ refusals to cover “necessary treatments.” Under federal law, Tennessee would have to allow Medicaid-eligible patients this due process.
A federal entitlement program, Medicaid was designed for a population upon whom “poverty imposes special needs and the need for special protections,” said Carole Myers, a nurse practitioner and associate professor in the University of Tennessee’s College of Nursing. “They don’t have the same voice in government as those with different economic statuses and organizational affiliations.”
Haslam acknowledged in April that Tennessee probably would have to limit co-payments and provide the wraparound services for Medicaid-eligible enrollees for the federal government to approve his alternative, but he said he still thinks his overall plan is “workable.”
Haslam’s plan is modeled on a plan by Arkansas, which also wants to use federal matching dollars to pay commercial insurance premiums for those eligible for the Medicaid expansion. But while Arkansas got legislators’ approval before approaching the federal government, Haslam has taken the opposite approach, presenting his plan to CMS first.
Haslam did not ask state legislators to vote on whether to take the federal Medicaid expansion funds this session, though he said he has not ruled out calling a special legislative session later this year to meet federal deadlines for the health exchange enrollment starting in October.
The Medicaid expansion is the only provision in the ACA that provides insurance coverage specifically to those between 101 percent and 138 percent of the federal poverty guideline. If Haslam fails to reach an agreement with the federal government, or does not opt to accept the federal Medicaid expansion plan (which he could still do), that population likely would remain uninsured.
However, the latest word among hospital executives and advocates is that an agreement could be near.
“I think (Health and Human Services) Secretary (Kathleen) Sebelius is really eager to find some alternative plans that meet the goals of the ACA but do so in creative ways and allow states to create plans beneficial to those individual states,” said Jerry Askew, senior vice president for governmental relations for Tennova Healthcare.
Through Tennova’s parent company, Health Management Associates, Askew works with hospitals in seven states. All of them, except those in Kentucky and West Virginia, have said no to the expansion.
“They’re all trying to figure out what to do. It’s really interesting to watch how the state is to meet their individual objectives,” Askew said. As for Tennessee, he added, “It is fair to say that the governor’s plan is being built on principles that the majority in the Legislature would agree with. But it’s not a given. It’s a lot of hard work.”
Consumer-advocate groups and hospitals were in favor of the expansion, especially since hospitals stand to lose money on uncompensated “charity” care that would have been partially covered, at least, if more people were insured through Medicaid. The Tennessee Hospital Association has said the state stands to lose 90,000 jobs and nearly $13 billion.
Having that population continue to go uninsured also means higher costs in the long run, Myers said, as studies have shown that those without insurance are less likely to get preventive or early care.
“When you are resorting to getting care only when it becomes so bad you can’t stand it, and you’re in the emergency room, it’s causing a major human toll,” she said. “We know that intervention on the earliest point of the illness trajectory is the most cost-efficient. The true measure of whether we’re successful in what we’re doing in health care is in whether people have long, happy, productive lives.”
Business writer Carly Harrington contributed to this report.
© 2013, Knoxville News Sentinel Co.