Urban Institute estimates say millions could lose chance at Medicaid access

Nearly 13 million uninsured people who would be eligible for Medicaid enrollment under the federal healthcare overhaul live in the 27 states that sued to overturn it, according to new enrollment estimates.

The estimates followed the Supreme Court's decision to strike down penalties for states that reject the law's Medicaid expansion for all residents with incomes of up to 133% of the federal poverty level.

Several governors subsequently indicated they may not implement that expansion. If all of the states that opposed the law took that course, much of the estimated 16 million-person expansion in insurance coverage the law was expected to provide through Medicaid could be in jeopardy.

Further illustrating the precarious situation of the Medicaid insurance expansion is that more than 10 million of the 13 million currently uninsured low-income people living in those states also have incomes of less than 100% of the federal poverty level, according to the enrollment estimates released late Friday (PDF) by the Urban Institute. That income would leave them ineligible to receive federal subsidies for the purchase of insurance on insurance exchanges set to launch in 2014.

“As a consequence, the uninsured above poverty could receive help, but those below poverty would not,” the authors of the Urban Institute estimates wrote about the law's income-related subsidy restriction. “In states that do not implement the Medicaid expansion, many poor people will remain uninsured.”

If the estimates prove accurate and the opposing states refuse to expand a program many already struggle afford, then a large part of the law's promised expansion of insurance to 32 million people could be threatened.

Supporters of the law downplayed the likelihood that states would opt not to expand their Medicaid enrollments because of the relatively low cost to them. Before enactment of the law, the cost of Medicaid was split between states and federal government. The federal government covered an average of 57% of the cost, according to the Center for Medicaid and CHIP Services.

The Patient Protection and Affordable Care Act expanded the federal share for new beneficiaries enrolled under the new income-related requirement to the full cost from 2014-2016. After that, the federal share will decline gradually to 90% in 2020 and thereafter.

“On the one hand, states will have to spend some additional money if they implement this Medicaid expansion,” Stan Dorn, a senior fellow at the Urban Institute—but not an author of the new estimates—said in an interview. “On the other hand, states could save money at the same time by bringing in federal Medicaid dollars to substitute for things like mental health services provided at entirely state expense today to the uninsured.”

Doug Holtz-Eakin, president of the American Action Forum and a critic of the law, wrote in an email statement that even if exchanges are used to cover the lack of state Medicaid expansions, the higher costs for those subsidies—compared to the cost of Medicaid coverage—could balloon the overall cost of the law.

“Interestingly, the court opened up the possibility that governors could refuse the Medicaid expansion,” he wrote. “Those same individuals would then be eligible for subsidies in the exchanges. If all the governors refused the expansion, and if individuals take up subsidized insurance the federal cost heads even farther north.”