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Year in Review: ACA Medicaid expansion would cost $2B through 2019

By   /   December 25, 2012  /   No Comments

By Melissa Daniels | PA Independent

Editor’s Note: This story appears today as part of the PA Independent’s Year in Review series. This week, we will re-post several of our top stories from 2012. The article below was originally published on June 22, 2012.

HARRISBURG — Should the U.S. Supreme Court approve the constitutionality of the Medicaid requirement in the Patient Protection and Affordable Care Act, Pennsylvania faces around $2 billion in extra costs in the first five years of its implementation.

The 26 states contesting the federal law argue that it’s unconstitutional for the federal government to require states to expand eligibility at the risk of losing federal funding. The U.S. Supreme Court is expected to hand down its decision this month.

Currently states have different income eligibility requirements for Medicaid, which is paid for with a combination of state and federal funding. In Pennsylvania, the requirement is based on various factors, including family size, additional benefits, disability status and income.

But if the Medicaid requirement is upheld, it would set the new income eligibility requirements starting in 2014 at $15,415 for an individual and $26,344 for a family of three.

In Pennsylvania, that would mean adding 750,000 more residents to the program, according to the state’s Department of Public Welfare. The cost of the expansion would be around $2 billion, according to a joint Congressional report examining the expansion.

Carey Miller, spokeswoman with the state’s Department of Public Welfare, said Medicaid costs $4.9 billion in 2011-2012, or around 80 percent of the department’s budget including federal aid.

Miller said the expansion will further burden a system already growing at unsustainable levels.

By 2020, Medicaid is expected to grow by 44 percent, which translates into more than 900,000 Pennsylvanians, according to a federal Center for Medicare and Medicaid Services report from 2011.

From 2004 to 2007, Pennsylvania’s Medicaid spending grew by 5.6 percent, according to data from the Kaiser Family Foundation, a nonprofit health policy analysis foundation.

“The department is already heading towards financial instability, this budget year we were forced to look at the state-only funded programs to place us in line with budget appropriations,” Miller said in an emailed statement, “by expanding Medicaid further, Pennsylvania will be in a very difficult position and it could negatively impact consumers and taxpayers.”

Under ACA, states could apply for grants to get a jumpstart on installing certain Medicaid-related plans, including updated record-keeping systems. Pennsylvania has not received any such grant.

At this point, the department has not moved forward on any expansion plans as it awaits the U.S. Supreme Court’s decision, Miller said.

ACA’s Medicaid expansion requires the federal government to pay for 100 percent of the newly eligible participants through 2016, incrementally decreasing to 90 percent in 2020 and remaining at that rate.

Nationally, the Medicaid expansion is slated to cost a total of $564 billion from 2014 when the expansion goes into effect to 2020. Of that figure, $500 billion will be covered by the federal government, and $64 billion by states, according to a federal Centers for Medicaid and Medicare Services report.

But residents who join the Medicaid program if ACA is upheld and were eligible under previous state eligibility standards would be covered by the present combination of state and federal funding, exacerbating the burden on Pennsylvania’s budget.

If the U.S. Supreme Court upholds ACA’s Medicaid requirement, lawmakers could have tough decisions to face in future budgets, said Elizabeth Stelle, policy analyst for the Commonwealth Foundation, a free market think tank here.

“The reality is, we can barely afford the Medicaid spending right now in our current budget even without the Affordable Care Act,” Stelle said. “The trend line without the act is unsustainable. It’s not so much an issue of pressure on bureaucracy, it’s more a pressure of where are we going to take money from in our budget.”

If the Medicaid requirement is found unconstitutional, the state saves billions but hundreds of thousands Pennsylvanians would continue to be without health insurance.

Stelle said health-care policy reform should be a state’s priority.

“We can all agree the health-care system has issues. We can’t just do nothing,” Stelle said.

Dr. Dennis Gingrich, board chairman of the Pennsylvania Academy of Family Physicians, a primary care and health policy nonprofit, said if ACA is shot down in its entirety, the country will be “back to square one” for health-care reform, which means around 32 million Americans will continue to go without health care who otherwise would have a plan. It’s also unclear what would happen to ACA-recommended changes that have been rolled out by states and insurance companies.

Gingrich said health-care reform must be achieved through federal or state legislation, because it is a matter of public health.

“It’s not only the right thing to do for a patient to allow them to have coverage, but it’s the right thing to do for society just from a public health standpoint,” he said. “We can’t have patients with active tuberculosis not being treated just because they don’t have a way to be treated or a payment to be treated. That’s a hazard to everyone.”

Some say future reforms should lean away from government-controlled health care altogether. A reform package introduced by state Sen. Michael Folmer, R-Lebanon in early 2011, the Healthy Pennsylvania legislation, including a bill that would exempt Pennsylvanians from being required to purchase insurance.

The series of bills aims to reduce health care costs by relying on consumer-driven initiatives to get the government out of health care. Those changes would include evaluating and potentially removing insurance requirements that trigger high costs, and offering tax credits for small businesses offering health accounts.

Fred Sembech, Folmer’s chief of staff, said none of the bills have made it out of Senate committees.

“The real issue of health care is that it costs too much, and the quality has gotten watered down, because we’ve spent so much time looking at accessibility,” Sembech said. “We’ve ignored the fact that most people do have health care.”