High court ruling could leave 290K Hoosiers uncovered

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After last week's U.S. Supreme Court ruling gave Indiana the option not to expand its Medicaid program and some state legislators promised to do exactly that, Indiana hospitals started to worry.

That’s because a decision by Indiana to leave its Medicaid program unchanged could leave as many as 290,000 Hoosier adults, who would have been newly eligible for Medicaid coverage, with no good options.

“That’s very worrisome to us,” said Doug Leonard, CEO of the Indiana Hospital Association, about the possibility of Indiana not expanding its Medicaid program. “That was really the heart of the bill for us.”

The 290,000 represents the number of Hoosier adults, under age 65, whose family incomes place them below the federal poverty limit and who are not already on Medicaid or commercial insurance. Not all of those adults would have signed up for Medicaid even if the program had been expanded, but experts predict that at least 80 percent would have, or nearly 250,000.

The Patient Protection & Affordable Care Act, a.k.a. health care reform, demanded that all states expand their Medicaid programs to include citizens making up to 138 percent of the federal poverty limit.

The law also will raise various taxes to fund subsidies for low- and moderate-income families to buy private health insurance. Those subsidies kick in for Hoosiers with incomes equal to or greater than the federal poverty limit, which is $23,050 per year for a family of four.

The beneficiaries of the Medicaid expansion would have been adults, since Indiana Medicaid already covers children whose families earn incomes up to at least the federal poverty limit, and sometimes higher.

But Indiana Medicaid only covers adults if they have children and their household income is only 24 percent of the federal poverty limit, or about $5,800 per year for a family of four. Childless adults are not eligible at all under existing Indiana Medicaid programs.

Under the Affordable Care Act, however, all low-income adults, no matter their family status, would be eligible to get Medicaid coverage. Their family incomes could be nearly $32,000 for a family of four and still qualify.

The health reform law pledged Congress to pay the entire cost of the Medicaid expansion from 2014 to 2016, and then relied on states to ramp up to pay 10 percent of the program by 2020.

If Indiana refuses to expand its Medicaid program as called for under the law, all adults and children with household incomes above the federal poverty limit but not higher than 138 percent of the poverty limit will still be eligible for government subsidies to buy private health insurance.

But it is parents with incomes below 100 percent of the poverty limit and above 24 percent of the limit—as well as all childless adults below the poverty limit—that would be left out if Indiana did not expand its Medicaid program.

For hospitals, those 290,000 Hoosiers are the most likely patients to not pay their bills. And while Medicaid’s payments aren’t great—only about 60 percent of hospitals’ costs—getting 60 cents on the dollar is far better for hospitals than the 10 cents or less hospitals typically collect on unpaid bills, known as bad debt.

Also, most hospitals would write off care provided to patients in poverty as charity care, collecting nothing.

“Clearly, for our industry, we would rather see the coverage in Medicaid,” Leonard said.

That’s what hospitals have been banking on since the start of the health reform debate in 2009. The American Hospital Association struck a deal then with the Obama administration to support $155 billion in reimbursement cuts in the federal Medicare program—in exchange for additional revenue they would gain by having more insured (read: paying) patients.

“We couldn’t sustain those cuts without that extra revenue,” Leonard said.

Slightly more than half of the newly insured patients under the Patient Protection & Affordable Care Act were going to be covered by the federal-state Medicaid program.

In Indiana, that meant roughly 400,000 new Medicaid patients, according to estimates by the California-based Kaiser Family Foundation and the Washington-based actuarial firm Milliman Inc., respectively.

But after the Supreme Court on June 28 struck down the law’s vow to withhold all Medicaid funding for any state that did not agree to expand its Medicaid programs, the extent of the Medicaid expansion is now in doubt.

The Milliman study, commissioned by Gov. Mitch Daniels, estimated the additional coverage by itself would cost Indiana about $951 million over the years 2014 to 2020. Additional costs, such as increasing reimbursement to doctors in order to entice enough of them to accept Medicaid patients, could have pushed the bill to $2 billion over those seven years.

Because of those costs, the president pro tem of the Indiana Senate, Sen. David Long, R-Fort Wayne, said Indiana would “certainly” not expand its Medicaid program.

“Now, Hoosiers can avoid such a tax increase by the state opting out of Obamacare's Medicaid mandate, which we will certainly do," Long said in a statement after the Supreme Court handed down its ruling.

Daniels said the decision would fall not to him, but to the man that replaces him as governor in January and to the next Legislature.

John Gregg, the Democrat candidate for governor, issued a statement that did not address the Medicaid expansion issue.

Mike Pence, the Republican candidate to replace Daniels, stopped short of saying Indiana would not expand its Medicaid program, talking more about the flexibility that might be had under the new ruling.

Indeed, many hope the Obama administration, in an effort to keep the Medicaid expansion alive, gives states flexibility to design other programs to cover low-income residents up to 138 percent of the poverty limit. Some even hope the administration allows states to expand Medicaid but to a lower income threshold.

Daniels still has a request pending to use his Healthy Indiana Plan as the vehicle for expanding Medicaid. That program, which uses personal health savings accounts, has about 60,000 enrollees.

The Supreme Court ruling certainly gives states like Indiana a better position to bargain from, noted Leonard, the hospital association executive. That could take the form of greater flexibility, he said, or perhaps the federal government might promise to bear the full costs of the expansion for more years.

“It sounds like the federal government is going to make it very attractive to the states to say yes,” said Leonard, hopefully.

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