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High court ruling opens Medicaid escape hatch for states

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While upholding President Obama’s health care law, the U.S. Supreme Court on Thursday also opened an escape hatch for states that do not want to take on the project of expanding their Medicaid programs.

Whether Indiana decides to opt out of the expansion—which was projected to cover an extra 500,000 Hoosiers, remains to be seen. But the ruling will give states more leverage with the federal government to create favorable arrangements, noted Mike Grubbs, a health care attorney at Barnes & Thornburg LLP in Indianapolis.

“It changes the states’ bargaining position from ‘boot on neck’ to traditional bargaining,” Grubbs said. He added, “If they choose to expand Medicaid, they don’t have to do it through traditional Medicaid. I think it’ll give more flexibility to the states in how they propose to do that.”

For example, Grubbs said, the Obama administration might be more likely to approve Gov. Mitch Daniels’ proposal to expand Medicaid coverage by using his Healthy Indiana Plan, which creates health savings accounts for low-income Hoosiers. The Obama administration had delayed ruling on Daniels’ proposal, pending the Supreme Court decision.

Traditional Medicaid is a state-federal health insurance program for low-income citizens under which Indiana pays about 25 percent of the costs.

Daniels spoke out forcefully against the expansion when the law was being debated and just after it passed in March 2010. His office did not issue a response to the Supreme Court’s ruling Thursday before IBJ Daily’s deadline.

But Daniels is on his way out of office and will be replaced by Republican Mike Pence or Democrat John Gregg in January. So the decision might ultimately fall to the winner of that contest.

The Medicaid expansion would raise elgibility for the program to people with incomes up to 133 percent of the federal poverty limit. Currently, adults in Indiana can only qualify for Medicaid coverage if their incomes are no more than 26 percent of the federal poverty level, although the income thresholds are higher for children and mothers with children.

Dr. David Orentlicher, a law professor and former state legislator, said he does not expect Indiana to opt out entirely from the Medicaid expansion.

“I think we’ll see few people opt out of the Medicaid expansion,” said Orentlicher, who is co-director of the Hall Center for Law and Health at the Indiana University McKinney School of Law in Indianapolis. “The new Medicaid costs to the states really don’t kick in for a while. What they’re really worried about is the impact of the individual mandate on the Medicaid expansion.”

Orentlicher was referring to the likelihood that the health law’s requirement for all Americans to obtain health insurance coverage—the individual mandate—would lead more Hoosiers who are currently eligible for the Medicaid program to sign up, thereby driving up the state of Indiana’s costs.

Indiana will have no new federal aid to help pay for such an occurrence. However, for Hoosiers that qualify for Medicaid under the new, higher income thresholds, the federal government will pay for all of their Medicaid coverage.

Still, an analysis of the law commissioned by the Daniels administration found that expanding Medicaid to 133 percent of the federal poverty limit could, by itself, cost the state an extra $95 million per year.

"This is going to be an immorally—and I choose that word carefully—immorally huge burden we're about to place on our children,” Daniels said in a speech to the Economic Club of Indiana shortly after the health care law passed.

Otherwise, the Supreme Court ruling left the rest of the Patient Protection and Affordable Care Act in place by ruling that the controversial individual mandate can be enfored under Congress’ powers to tax.

Chief Justice John Roberts joined the Court’s four liberal justices in affirming that view. Roberts, however, also agreed with the four conservative justices who dissented from the ruling in their finding that the individual mandate could not be justified under Cogress’ power to regulate interstate commerce.

Lawyers for the Obama administration had advanced both arguments in their defense of the law in March.

The ruling had wild effects on health care stocks. Indianapolis-based WellPoint Inc. saw its share price plunge nearly 8 percent right as the court starting reading decisions Thursday morning—but before the substance of the health care ruling was known.

The New York Stock Exchange halted trading of the health insurance giant’s shares until after the ruling, and WellPoint’s shares recovered some of their losses.

In a statement, WellPoint spokeswoman Kristin Binns said, “The road to implementing health care reform will be a challenge; however, we look forward to working constructively with policymakers and other key stakeholders to build a health care delivery system that provides security and affordability to all Americans.”

Some hospital stocks spiked on the news—since the law’s attempts to insure 30 million more people should bring them more paying customers.

The same will likely be the case for medical device and drug firms, such as Indianapolis-based Eli Lilly and Co.

“Even with today’s decision, we expect that the debate about health care and health coverage will continue, and that further reforms and changes are likely in the years ahead,” Lilly CEO John Lechleiter said in a statement.

That’s largely because government budgets are already crimping payments to hospitals, drug companies and medical device firms. Belt-tightening by private employers is adding to the effect.

That is why many predicted that the trend of health care reform would have continued even if the Supreme Court had struck down the law. Thursday’s ruling just makes the coming changes a certainty, noted Ken Weixel, a senior advisor at the Deloitte Center for Health Solutions.

“It’s kind of, here we go,” Weixel said.

 

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  • More Taxation
    ck and Bill, whether it's 3% or 4% is quibbling. What I see is that if I'm married, I get a bigger break than if I'm not. How is that fair? These marriage tax breaks are prevalent in the tax code. Yes, 500G/2 is the same as 250G/1 but two people living in the same house and married can be exempt up to 500G. That is, they can accumulate more wealth faster than not being married and be exempt from the Obama sales tax. The tax code was written by married people to discriminate against single people living together (in sin of course)... why I auta sue!
  • Bill??
    So Bill you didn't read it, but you are quoting anyway? Get the facts, it is 3.8% and it will affect very few. The 1st $250,000 in profit from the sales of a personal residence won't be taxed or the 1st $500,000 in the case of a married couple. http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/
  • Posts
    Does anyone know how to find previous posts. I tried to find ???SueBlu and can't find a 'next' button for the other comments.
  • The Mandate and the Price if you don't
    To ???SueBlu What CNBC Article says, "The individual mandate was the law's most contentious provision, requiring most Americans to obtain health coverage by 2014, when the legislation was due to take full effect. Those who do not comply would be forced to pay a financial penalty to be phased in through 2016. In 2014, the penalty for individuals was set at $95, or 1 percent of taxable income, whichever was greater. By 2016, it was set at $695, or 2.5 percent of income. The law exempted illegal immigrants, the very poor, Native Americans, certain religious groups and prison inmates."
  • i hear you Bill
    the path we're on in America is depressing. I'm not sure who's more to blame, obama or the uneducated left who vote for him.
  • More taxation
    If you read the Plan and not many of us have, you will find how they will pay for part of the costs by charging everyone who sells a home a 3% national Sales tax on the sale of your home whihc I bleive takes place in 2013. If the Supreme court finds this as a legal foundation for additional taxation, then here we go again with more and more of those working to support those not working, those not wanting to work. the illegal 8,000 who now have escaped under executive order ( our new dictator) and encouraging more welfare sucking from those who do. This is another travesty for free enterprise and another blow to democracy. Its just more and more of a government not by the people or for the people but for the governments lousy screwed up method of administering anything they touch and more opportunity for wasteful spending and fraud. Sure am gladd I'm about done wiht this life.What do I get after working for 65 years and still having to work due to all the declines.
  • come on IBJ
    This is breaking news and while I sometimes mispell words with my comments - you should clearly spell words correctly in your articles!! (enfored - cogress) - jsut saying the poitn was driven home, how professionally I dont know?????
  • fiscal responsible party
    i wish that the republican party could transform itself into the fiscal responsible party and focus on small government and the economy and leave out the personal issues of gay marriage, abortion, and legalization of marijuana. Leave these issues up to the states and lets focus on getting America back on track. Too many so called liberals have one agenda, to legalize gay marriage and they'll vote democrat all day just because of this issue. same goes for abortion. smaller government means that the federal government shouldn't decide whether to ladies get married. let them make that decision based on their beliefs and if you don't believe that is moral then so be it, it doesn't affect you. What does effect everyone is the liberal and democrat socialist policies. America is going down the tubes if Obama keeps redistributing the wealth. People forget how America got to be great and the current white house is killing the freedoms and capitalist market.
  • thank you SCJ
    Well thank you Supreme Court Justices for making Indiana the first state in the United States to opt out of Medicaid completely! This is a great opportunity for Indiana to step out of the shadow of big government and use the money our state collects to help our needy as WE see fit! So all you at planned womb scraping better get to cracking on some funding because it’s not going to be coming from our tax dollars for much longer.
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  • Hurt those that its supposed to help
    isn't this whole thing just going to hurt the poor which it is intended to help. If the state opts out the working class will pay increased premiums and be provided coverage while the poor will need medicaid which is paid for by the state. States have a choice to go further in debt or opt out from providing this coverage. I could be wrong just trying to wrap my head around this nonsense. i love liberals who think all of a sudden everyone gets free health care. sure, it sounds great to provide everyone with care, but the money has to come from somewhere. another tax to the working class preventing job growth and deepening the debt of government.

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