States' stances on health reform reflect political, moral choices

Now that health care reform is established at a national level, the battle moves to the states that choose to accept or reject establishment of health care exchanges and federal funding for Medicaid.

The Supreme Court's ruling on the Affordable Care Act (ACA) makes the states the next battleground in the fight for universal coverage, as each of them is now confronted with two key questions to answer by early next year:

1) Will states accept federal dollars to expand Medicaid to residents with incomes up to 133% of the federal poverty level?

2) Will they set up exchanges to provide federally subsidized coverage to eligible residents with incomes up to 400% of the federal poverty level?

The ACA, as originally written, planned to use carrots and sticks to get states to extend Medicaid to anyone with an income below 133% of the poverty level. The carrot is that the federal government picks up 100% of the initial cost, declining to 90% by 2020, compared to the usual federal Medicaid contribution to the states of 57%. The stick was that the federal government could take away all federal Medicaid dollars for states that do not go along.

The Supreme Court ruled that the federal government could impose a tax on individuals who decline to purchase health insurance, resolving the biggest question about the law's constitutionality. But in a surprising decision, the court also held that the federal government could not pressure states to expand Medicaid coverage to all persons with incomes below 133% of the federal poverty level.

At least six states have said that they plan to turn down the federal dollars rather than expand their Medicaid programs; up to another 10 states have said they will expand Medicaid. Most haven't decided yet.

An even larger number of states have taken no steps to set up health exchanges. If they aren't ready to run an exchange by next year's deadline, the ACA mandates that the federal government run one on behalf of their residents.

However, some conservative legal scholars believe that the ACA only allows subsidies for people to buy health insurance through a state-run exchange, not a federally operated one. The Obama administration, Democratic leaders who wrote the ACA, and other legal scholars disagree, saying that it was Congress' clear intent for the subsidies to apply to both federal and state-run exchanges. This disagreement likely will lead to future court challenges.

Meanwhile, well-funded opponents of the ACA plan to spend millions to get as many states as possible to turn down the ACA's Medicaid dollars and state exchanges. For instance, FreedomWorks' “Five-Point Plan to Fully Repeal ObamaCare” urges its supporters to “stop your state from setting up an ObamaCare exchange” and “get your state to opt out of the costly ObamaCare Medicaid expansion.”

The Congressional Budget Office (CBO) estimates that 3 million fewer people will get health insurance coverage under the ACA now that the Supreme Court has made the Medicaid expansion optional. At the same time, it estimates that 92% of all U.S. residents will have coverage, expanding coverage to tens of millions of uninsured people.

However, if a larger number of states turn down the Medicaid expansion and the state-run exchanges than the CBO estimates, then ACA may end up covering tens of millions fewer people, especially if the anticipated lawsuits challenging the subsidies for federally run exchanges are successful. Without the subsidies, federal exchanges will not be able to make coverage affordable for residents in states that decide not to run their own exchanges.

Given the stakes, advocates for universal health insurance coverage must be prepared to make the case that it is in their own states' interest to accept the federal dollars to expand Medicaid and for them to set up an exchange. Fortunately, evidence is on their side:

  • It is a good budget deal for states. A new study by the Center on Budget and Policy Priorities finds that the federal government will bear nearly all of the costs of the Medicaid expansion, 93% compared to 7% for the states. As a result, the expansion will increase state Medicaid spending by only 2.8% over the next 10 years.
  • States can greatly reduce their uncompensated care costs. The Washington Post reports that nationwide, uncompensated care costs have increased from less than $5 billion in 1980 to almost $40 billion in 2010. These costs fall disproportionately on each state's safety-net hospitals and academic medical centers, which by law can't turn down anyone who seeks care, and on physicians providing charitable care. The cost of uncompensated care is shifted to everyone in the form of higher premiums and taxes.
  • States that expand Medicaid will have healthier residents with fewer people dying from preventable diseases. A study in the New England Journal of Medicine finds that states that have expanded Medicaid experience a significant reduction in mortality from all causes, especially for older adults, non-whites and residents of poorer counties.

Advocates for universal health insurance coverage need to make the moral case to their states. Reflecting on the Supreme Court decision, Atul Gawande, MD, wrote in The New Yorker that “... the Court's ruling keeps alive the prospect that our society will expand its circle of moral concern to include the millions who now lack insurance. Beneath the intricacies of the Affordable Care Act lies a simple truth. We are all born frail and mortal—and, in the course of our lives, we all need health care. Americans are on our way to recognizing this.”

What the states decide may tell us if he is right in saying that Americans are ready to expand their moral concern to the uninsured.