Reform Update: Hospitals in Iowa help break Medicaid expansion impasse

Iowa hospitals were key players in a last-minute “hybrid” deal to expand Medicaid, the second such legislatively approved deal in the country.

The Iowa Medicaid expansion compromise, dubbed the Iowa Health and Wellness Plan, passed the Legislature on May 23—its final day—and awaits the signature of Republican Gov. Terry Branstad.

The deal overcame a legislative impasse between Senate Democrats—who wanted a standard expansion to add more than 150,000 residents to the state's Medicaid program—and House Republicans and Branstad—who favored a smaller expansion of a more limited state-funded health program.

Branstad's objections to the standard expansion centered on concerns that the promised federal funding of 90% of the expansion's costs could disappear in the face of the federal government's budget woes. Under the Patient Protection and Affordable Care Act, the federal government from 2014-2017 will pay 100% of the costs for expanding Medicaid to all Americans under 138% of the federal poverty level. But each state must decide whether to go ahead with the expansion, the U.S. Supreme Court ruled last year.

The Iowa deal required hospitals, if the federal government reduced its contribution below 90%, to cover the first 5% of Medicaid expansion costs below that level, according to a summary provided by Branstad's office. It's expected to provide coverage for about 150,000 more Iowans.

“We knew with a split Legislature that it would probably end up being some type of hybrid type of agreement, but we stuck by our guns in terms of what we thought was important for providers and patients,” Scott McIntyre, a spokesman for the Iowa Hospital Association, said in an interview.

Hospitals backed the deal, according to McIntyre, in part because it included the same size coverage expansion as a standard expansion under provisions of the Patient Protection and Affordable Care Act. However, instead of automatically enrolling the expansion beneficiaries in the standard Medicaid program, the Iowa expansion would help fund their premiums in either a new state employee insurance plan or a private plan offered through Iowa's new state health insurance exchange.

The Iowa legislation differs from the premium assistance approach of the Arkansas Medicaid expansion deal by requiring beneficiaries to contribute to their premiums, according to the governor's office. That premium payment, which will be required instead of the usual Medicaid copays, will be based on income, and will be mandatory for enrollees with incomes more than 50% of the federal poverty level. The legislation would waive premium contributions, however, for enrollees who participate in certain health and wellness programs.

The Iowa plan will require a waiver from the CMS, which supporters are confident it will receive. But outside Medicaid experts are cautious about whether Iowa or other states such as Arkansas will gain approval. The CMS has yet to officially green light any state hybrid expansion plan.

“The concept they agree on, then you have to make the numbers work,” said Joy Wilson, health policy director for the National Conference of State Legislature, said in an interview. She said CMS officials will only clear alternative state Medicaid expansion plans that demonstrate budget neutrality and—in the case of premium assistance approaches—cost effectiveness.

Illinois lawmakers advanced the state's expansion of Medicaid on Monday, according to the Associated Press.

The House passed an expansion in eligibility that would add up to 500,000 uninsured, low-income Illinoisans to the program. The state estimated 342,000 people would enroll by 2017. The bill, backed by Democratic Gov. Pat Quinn, is headed back to the Senate after the House made technical changes.

New Hampshire's governor plans to appoint a commission to advise her on how to move forward with expansion in that state, according to the AP.

Democratic Gov. Maggie Hassan plans to appoint the panel in the face of a deadlock between the Democratic-controlled House, which favors expanding the program, and the Republican-controlled Senate, which opposes expansion over concerns about the future of federal funding. Republicans favor studying the issue before expanding.

Follow Rich Daly on Twitter: @MHrdaly