The Coverage Gap: The Real Failure of Obamacare

Right now, the corporate media are focused like a laser on the “scandal” of the malfunctioning of the national health insurance exchange website. Although these glitches reflect negatively on the Obama administration, they are technical problems that will be fixed. They have nothing to do with the substance of the law. A more important failure is the number of people, particularly poor people, who will remain uninsured after the Affordable Care Act (ACA) is implemented. This is not the fault of the act as written, but is the result of the Supreme Court decision on its constitutionality and intractable opposition from Republican politicians.

An October study by the Kaiser Family Foundation (KFF) estimates that 5.2 million non-elderly adults living below the federal poverty level (FPL) will remain uninsured in 2014 because they live in the 26 states that—at the time of the study—had declined to participate in the Medicaid expansion. These states are concentrated in the South and West and are controlled largely by Republican governors and legislatures. About half of Americans, but 58% of America's uninsured working poor, live in those states. Pennsylvania is among them. Our Medicaid expansion status is uncertain, but even if the Corbett administration reaches agreement with the federal government on an expansion plan, it is unlikely to be implemented in 2014.

To review, of the approximately 30 million people who were expected to be insured for the first time under the ACA, fully half of them—the poorest half—were to be insured through Medicaid expansion. Traditional Medicaid is jointly administered by the state and federal governments. Federal law requires that all children be covered if their family makes less than the FPL. Children under six are covered up to 133% of FPL. The eligibility rules for adults are determined by the states. In most states, adults without children don't qualify no matter how poor they are. The income level at which parents with dependent children qualify for Medicaid varies from a low of about 20% of FPL in the least generous states to a high of 133% is the most generous states. (In Pennsylvania, it is 46%.)

The ACA expanded Medicaid by making everyone—children and adults—eligible for Medicaid if their family income is 138% of FPL or less. Since this is expensive, the feds agreed to pay most of the cost: 100% in 2014, dropping to 95% in 2017 and 90% in 2020. The ACA required states to implement Medicaid expansion. If they refused, the federal government threatened to withhold its contribution to traditional Medicare—about 57% of the cost. However, this clashed with the conservative majority of the Supreme Court's long-term goal of rolling back federal regulation of the states. In National Federation of Independent Business v. Sibelius, the Supremes decided that the Medicaid expansion rules were coercive and that states may opt out. This denies medical care to many of the Americans who need it most, people who fall into the coverage gap.

The ACA provides subsidies, on a sliding scale, for people individuals and families whose income is between 100% and 400% of FPL. The coverage gap consists of those people, living in states that do not expand Medicaid, who are not poor enough to qualify for Medicaid in their state, but whose income is below 100% of FPL, the level at which the subsidies kick in. This is illustrated in the chart below.

As noted, poor and uninsured Americans tend to be concentrated in the “red states” that are not expanding Medicaid. Twenty percent of the people in the coverage gap live in Texas, and another 15% live in Florida, followed by Georgia with 8% and North Carolina with 6%. At present, 6.8% of the residents of states that are participating Medicaid expansion are poor and uninsured, but 9.1% of the residents of the refusing states are poor and uninsured. The chart below shows the breakdown of the poor and uninsured by race, and shows that Medicaid expansion has a discriminatory impact.

	Live in States Expanding	Live in States Not Expanding
White	40%	60%
Black	32%	68%
Hispanic	51%	49%
Asian	70%	30%
Total	42%	58%

These are America's working poor. By occupation, the folks most likely to be poor and uninsured are (1) cashiers, (2) construction laborers, (3) housekeepers, (4) cooks, and (5) waiters and waitresses.

At the time the ACA was passed, single payer advocates noted that the ACA provided less than universal coverage. The largest excluded group is undocumented immigrants, but the ACA also excludes native Americans and people who are incarcerated, have a religious objection, or can prove financial hardship. To that we must now add 5.2 million working poor Americans, a target group that the ACA was clearly intended to help. These people are being left to die for lack of health care. It will be interesting to see whether they respond at the ballot box when they realize what their state politicians have done to them.

Single payer health insurance is needed now more than ever.

You may also be interested in reading:

A Clouded Vision, Part 1: The Stick  (See both parts)

Tom Corbett to PA's Working Poor: "Drop Dead!"  Part 1  (See all four parts)

The Friday Morning Quarterback

Tom Corbett to PA's Working Poor: "Drop Dead!" Pt. 3

Part 3. What Medicaid Expansion Would Mean to Pennsylvania

On Tuesday, PA Governor Tom Corbett stated that at this time he cannot recommend accepting $38 billion in federal funding to expand Medicaid, thereby denying medical assistance to more than 700,000 Pennsylvanians. This series of posts will consider the implications of that decision. My first post presented evidence that Medicaid improves health and saves lives. The second examined the costs and benefits of Medicaid expansion under the Affordable Care Act (ACA). This time, I'll look at how these costs and benefits apply to Pennsylvania.

I attended a webinar on Corbett's budget sponsored by the Pennsylvania Budget and Policy Center on February 6. Some of the figures in this post come from that discussion.  If it becomes available on the web, I will add a reference to it.

First of all, let's look at the 719,000 Pennsylvanians who will be denied coverage. Pennsylvania is one of the least generous states in the country when it comes to providing Medicaid coverage for adults. To qualify for coverage you must make 46% of the federal poverty level or less. For a family of three, that's less than $8781 per year. (You'll recall that children under six are covered up to 133% of the poverty line, and older children up to 100%.) If the governor had agreed to Medicaid expansion, all adults (and children) would have been eligible for Medicaid if they made up to 133% of the poverty level—$25,390 for a family of three.

This is where it gets complicated. Under the ACA, people who make between 100% of the poverty level ($19,090 for a family of three) and 133% are eligible for subsidized health insurance purchased through the federal exchange. (Pennsylvanians will be using the federal exchange because Corbett has refused to implement a state exchange.) This subsidy should, in theory, reduce the cost of private insurance to approximately what they would pay in Medicaid premiums and co-payments. However, this leaves a huge coverage gap for Pennsylvanians making between 46% and 100% of the federal poverty level. They will not be eligible for either Medicaid or subsidized private insurance.

These are the 719,000 adult Pennsylvanians who will be denied health care coverage as a result of Corbett's decision. In effect, Corbett has created a new “doughnut hole” for Pennsylvanians making between 46% and 100% of the poverty level. Most of them fall into the category of the working poor. These are the people who work at Walmart or McDonald's. The graph below illustrates this problem.  (You can click on it to expand it.)

The Kaiser Family Foundation has estimated that Medicaid expansion is worth $37.8 billion in health care coverage for Pennsylvanians to be paid by the federal government between 2014 and 2022. The governor gave as his main reason for refusing the coverage that it will cost Pennsylvania $4.1 billion to implement the program between now and 2022. Most of this is backloaded, when the state is required to cover 5% (in 2017) or 10% (in 2020) of Medicaid costs. This $4.1 billion figure is contested. Kaiser puts it at $2.8 billion. The governor has not realeased any data to show how he arrived at his figure. However, even if it turns out to be accurate, the governor is turning down $38 billion in order to save $4 billion.

Furthermore, this neglects other costs to Pennsylvania if it rejects Medicaid expansion. For example, it is estimated that, if Medicaid is not expanded, Pennsylvania hospitals will be faced with $1 billion per year in uncompensated costs for the care of uninsured people. Some of these costs are shifted to people with insurance through higher premiums, or are paid for by state and local taxes.

In Governor Corbett's letter to Health and Human Services Secretary Kathleen Sibelius, he gives two other reasons for rejecting Medicaid expansion in addition to the alleged $4.1 billion cost.

He refers to the current Medicare as a “broken system” plagued by waste and fraud, and states that it makes no sense to expand such a system. He claims that in 2009, $43 billion “could not be traced directly back to Medicaid beneficiaries.” He does not cite a source and I'm unable to evaluate this claim.

He also calls for granting states greater flexibility “to successfully reform and build a system that works for them.” He calls for aligning benefits “to meet individual needs and closer (sic) resemble coverage provided by employers.” He calls for a Medicaid program that “promotes personal responsibility” and provides “appropriate incentives for participants to seek and retain employment.” This is vague, but bear in mind that Pennsylvania is already one of the country's stingiest Medicaid states. It appears that Corbett wants the flexibility to reduce coverage below the amounts specified in the ACA, or to place some time limit on Medicaid enrollment.

Next time, I'll speculate a bit about the politics of Medicaid expansion in Pennsylvania, and what health care activists can (and cannot) do to persuade the governor to change his mind.

States of Confusion

Medicaid expansion is a critical part of the Affordable Care Act (ACA). Of the approximately 30 million people who are currently uninsured, but will be if the ACA is fully implemented, fully half of them—the poorest half—will be insured through the Medicaid expansion.

Traditional Medicaid is jointly administered by the state and federal governments. The Feds set some basic rules. All children are covered if their family makes less than the federal poverty level. Children under six are covered up to 133% of the poverty line. But the states set the eligibility rules for adults. In most states, if you don't have children, you can't qualify for Medicaid no matter how poor you are. In states like Texas and Louisiana, parents only qualify for Medicaid if they make less than 40% of the federal poverty level—$4850 a year for two parents with a single child. Other states are more generous. Massachusetts, thanks to Romneycare, covers all adults up to 133% of the poverty line. But on the whole, Medicaid as currently implemented is not much of a safety net for the poor. Right now, the federal government pays on average 57% of the cost of traditional Medicaid—between 50% and 75%, depending state eligibility rules.

The ACA expands Medicaid by making everyone—children and adults—eligible for Medicaid if their family income is 133% of the poverty level or lower. This is expensive, so the Feds agreed to pay most of the cost. In 2014, they will pay 100%. This drops to 95% in 2017, and to 90% in 2020. Notice that states that whose current Medicaid eligibility rules are relatively stingy—which tend to be the states with the highest percentage of uninsured citizens—stand to gain more money per capita when from the Medicaid expansion than states whose eligibility rules are generous. Texans will make out like bandits if they accept the money, while Massachusetts residents will get nothing, since they are already covered up to 133% of the poverty line.

This is another example of a little-known source of inequality in our national politics. As I previously pointed out, conservative states—states that are more rural, have a lower median income, and tend to vote Republican—receive more money back from the federal government than they pay in taxes. Liberal states get shortchanged. In fact, you could argue that much of U. S. domestic policy involves a redistribution of income in which the “blue states” subsidize the “red states.” (Note: They're not grateful.)

Enter the Supremes. The ACA required states to implement the Medicaid expansion. If they refused, the federal government threatened to withhold its contribution to traditional Medicare. Chief Justice John Roberts, in National Federation of Independent Business v. Sebelius, ruled that this was coercive, and that the states may opt out of Medicaid expansion. Six Republican governors have already said that they will refuse to comply, and several others are threatening to do so. Here is the map. The chart below it shows that, with the exception of Wisconsin, the states that plan to refuse the Medicaid expansion have a higher percentage of uninsured citizens, or in other words, have more to gain from it. This will not only frustrate the intent of the ACA, but will deny medical help to many of the Americans who need it most.

To make matters worse, some Republican governors have announced that they are exploring the possibility of dropping out of traditional Medicaid as well. They interpret the Supremes' decision to mean that they can opt out of any federal program that requires the states to pay part of the cost. The states' reaction to Medicaid expansion makes it very clear that attempting to implement health care reform at the state level is an exercise in futility.

The usual reason given for why conservatives refuse to expand Medicaid is said to be conservative ideology. This is most charitably described as opposition to big government, but when applied to health care, it sounds suspiciously like an unwillingness to help one's fellow citizens who can't afford medical care, either because they are poor or because their family is struck by catastrophic illness. Are there rational reasons for refusing to expand Medicaid?

• The 5% (in 2017) to 10% (in 2020) of the cost of Medicaid expansion is not exactly pocket change. States may be justifiably worried about the cost.
• The “woodwork effect.” Many Americans who are eligible for Medicaid in their state don't apply for it. They may think it's not worth the trouble. However, the publicity surrounding the Medicaid expansion and the threat of a fine for violating the individual mandate may persuade more eligible people to sign up. The states will then be on the hook for whatever part of the cost they would have had to cover under traditional Medicare.

Many health care policy experts, however, think that the financial logic of expanding Medicaid is strong enough to overcome any resistance due to ideology. Here are some of the points they make.

• Not only will it be difficult for states to turn down “free money,” the citizens of those states that turn down the Medicaid expansion will be paying for it anyway through their federal taxes. Their money will go to other states that have accepted the deal (partially reversing the flow of money from blue states to red).
• As noted above, the states whose governors have been most vocal about opting out of Medicaid expansion are the ones that stand to gain the most from it, since they have a higher percentage of uninsured citizens.
• Uninsured citizens in these states will continue to show up at hospital emergency rooms. Their care will be paid for through cost shifting. Costs are shifted in several ways.
• Some of the cost is paid by those who have health insurance. Their premiums are higher in order to pay the cost of treating people without insurance.
• Part of the cost is paid for through federal, state and local taxes, which provide emergency health care for the poor. The Urban Institute estimated that in 2008, state and local governments spent $10.6 billion dollars providing emergency care for the uninsured. However, beginning in 2014, the federal government will no longer subsidize emergency care, so the burden will fall more heavily on state and local government. This cost alone will probably be greater than the cost to the states of Medicaid expansion.
• Finally, part of the cost is shifted to hospitals through what is called “forced charity”—uncompensated medical care for the uninsured. (Of course, they get some of this money back by charging you or your insurance company $28 for a box of tissues while you're in the hospital.)
• Low income citizens and the public interest groups that represent them will protest the denial of coverage to hundreds of thousands of poor and sick people. However, research at the federal level shows that the attitudes of poor people have either no influence, or a slight negative effect, on public policy. This is probably true at the state level as well, but this remains to be demonstrated.
• Most importantly, hospitals and doctors were expecting to have many more customers due to Medicaid expansion. They've already agreed to reduce their reimbursement rates under the ACA, in anticipation of these higher profits. They're also not happy about forced charity. Health care providers are powerful lobbying groups who spend a lot of money paying off governors and state legislators. They won't take this loss of revenue lying down.

What will happen? Nothing, until after the election. Given how unpopular the ACA is, anything the Republicans can do to resist it now will probably help them in November. If Romney defeats Obama and the Elephants gain control of the Senate, it's probably all over for health care reform for at least a decade.

If that doesn't happen and the ACA survives, it seems inevitable that all the states will eventually agree to expand Medicaid. However, that will take a long time and a lot of people will die while they're waiting for it to happen.

The Supreme Pennsylvania Medicaid Decision

Little noticed in all of the celebrating over the Supreme Court's decision was the part of it that said that the federal government cannot take away federal funding for states that refuse to implement the Medicaid expansion that is contained in the Affordable Care Act.  States will be reimbursed for the expansion 100% in 2014 with decreasing amounts to 95% in 2017 and 90% in 2020 according to the Pittsburgh Post-Gazette.  Pennsylvania Governor Tom Corbett(R) hasn't said if he will participate the expansion which could cover about an additional 800,000 of the state's estimated 1.4 million uninsured in 2009.  So far the governors of Florida, Louisiana, and South Carolina have said that their states will not participate in the expansion even though about 900,000 and 300,000 would become eligible in each state respectively.

Can past behavior on Medicaid in Pennsylvania be an indication of how Gov. Corbett will act?  In January I did a post on how about 88,000 children were dropped from the Medicaid rolls due to a bureaucratic backlog.  Greg Kaufman in The Nation magazine reports that number to be 89,000 and they still have not been reinstated and were not picked up by the CHIP program. Corbett's decision to end Adult Basic coverage for 45,000 Pennsylvania adults may provide an indication as well.


Right after the Supreme Court announced its decision on Thursday David Cole at The Nation said on Democracy Now! that "we shouldn't let the perfect be the enemy of the good."  I say we shouldn't let the lousy be the enemy of the good either.  A system that mandates care for all is what is needed as Walter Tsou points out in Common Dreams.

 

**Update**

The Facebook page Stop Obamacare in PA (111 likes) is circulating a petition urging Gov. Corbett not to implement any of the Affordable Care Act which can be seen here.  I do not know how many signatures they have and am not going to sign it but this could also be a good test case for how much leverage does the Tea Party have with the Governor. 

**Related Posts**

The Friday Morning Quarterback 

Protecting the Parasites: The Irony of Obamacare

The Pennsylvania Medicaid Budgetary Squeeze

States as Laboratories and Lavatories of Democracy

New Interactive Map on County Poverty Rates

Slate.com has produced an interactive map showing how poverty rates have changed in each US county from 2007 to 2010 to show the impact of the recession.  Only Bradford County in the northeast has shown a significant decrease for Pennsylvania from 14% in 2007 to 10.9% in 2010.  The other 66 counties in PA either increased or stayed the same.  Crawford County had the largest increase for PA from 14.1% to 19.7% with the other largest increases in the western border counties Mercer and Beaver. 

You can see the profile for Pennsylvania by placing the arrow over PA on the map, dragging it to the center, and enlarging it by clicking on the plus sign in the upper left hand corner.  By moving the arrow over each county you will see a window with the name of it on the right and the poverty trend from 2007 to 2010.

**Related Posts**

County Health Rankings

 

Correlating PA County % Uninsured Rates with Other County Level Measures

 

Overall Health System Performance - The Commonwealth Fund

 

 

Theresa Chalich's Letter to the Editor on Single Payer

Long Time PUSH volunteer (and fellow Bishop McCort HS alum) Theresa Chalich wrote the letter below to the Pittsburgh Post-Gazette on March 18.  From her writing it sounds like she would make a good blogger :)
 

Our cruel system

This letter is written in response to the March 11 editorial "Profiles in Poverty." An essential solution to one of the economic problems for people in poverty, the ruinous expenses caused by a medical emergency, was glaringly omitted.

There needs to be recognition that when people do get the opportunity to get off public assistance by securing a job, there is a good chance that there are no work-related health care benefits. Part-time employment and low-wage jobs generally do not offer individual and family plans. And people cannot afford to pay for a private plan. Just look at what happened to adultBasic in this state.

What a quandary for a parent to have to choose between staying on welfare for the medical assistance for a sickly child and her family and being employed. What a cruel system we endure. We continue to blame the victim rather than seek systemic change.

The glaring solution is health care coverage that is not tied to a job. This means that we expand the Medicare program to all people. The newly hired worker will contribute payroll taxes into this single-payer system. Thus the community mutual obligation that you mention in the editorial will be a healthy step to lifting people out of poverty.

THERESA CHALICH, R.N.
Squirrel Hill