Reform Update: Eligibility changes in four states could leave thousands without coverage

As many states prepare to add millions of new recipients to their Medicaid programs under the healthcare reform law, four states are planning to roll back eligibility in a move that could leave thousands of low-income people without insurance coverage.

Maine, Rhode Island, Wisconsin and Vermont are all expected to cut people from Medicaid coverage, though some will be eligible for federally subsidized private coverage through state insurance exchanges starting in January.

In Republican-led Maine and Wisconsin, which have not expanded Medicaid for people with incomes up to 138% of the federal poverty level, the changes will leave some people without either Medicaid or subsidized private coverage. In Maine, an estimated 10,000 childless adults are expected to lose Medicaid coverage and not receive subsidized coverage because their incomes are between 100% and 138% of the poverty level—too high for Medicaid and too low to meet the income threshold in the Patient Protection and Affordable Care Act to qualify for subsidized coverage in the exchange. The Maine Legislature voted to expand Medicaid but Republican Gov. Paul LePage vetoed the legislation.

Under the ACA, adults with incomes between 138% and 400% of the poverty level qualify for the federal subsidy. The ACA authors assumed that people earning less than 138% of the poverty level would receive Medicaid under the ACA's expansion of that program.

But in its ruling last year, the U.S. Supreme Court left expansion of the program to the discretion of the states. Thus far, 23 states have opted to expand their Medicaid coverage to include those with incomes up to 138% of the poverty level while 21 have rejected expansion and six states have yet to decide.

Many of states that have opted out of expansion have cited cost as a factor, despite the fact those expenses would be fully covered by the federal government for the first three years, with states eventually contributing 10% by 2020. Some officials in these states also have expressed concern that millions of very low-income people who already are eligible for Medicaid but haven't signed up would enroll in the program—the so-called woodwork effect—costing their states even more money.

Democratic-led Rhode Island is expanding its Medicaid program to add an estimated 45,000 people. But it's also reducing coverage for parents of Medicaid-eligible children from the current income threshold of 175% of the poverty level to 138%. That's expected to kick out more than 6,000 residents, who will be referred to the state exchange to buy private insurance.

In Vermont, the Medicaid cuts are the result of the termination of a pilot expansion program. An estimated 19,000 people who earn up to 300% of the poverty level are expected to lose coverage. Many of them also will be able to buy subsidized coverage through the state exchange.

The state with the largest number of people losing Medicaid is Wisconsin, where as many as 92,000 adults will be forced off Medicaid and referred to the exchange. The state will add about 100,000 adults with incomes below the poverty level to Medicaid.

In a visit to Texas Monday, HHS Secretary Kathleen Sebelius said it was up to state leaders to first come up with a plan to expand health coverage in Texas before any discussions with the federal government could take place.

Sebelius was in Houston visiting a health center to promote implementation of the healthcare reform law.

“We are eager to have those conversations, but I think they need to start with a Texas group coming together and talking to us,” Sebelius said.

Republican Gov. Rick Perry and the Republican-controlled Legislature have blocked efforts to expand Medicaid or set up a state-run insurance exchange.

“If Obamacare were sound healthcare policy, Secretary Sebelius wouldn't have to resort to video contests and prizes to tempt people to sign up,” Perry said in written statement. “Texans are already subject to too much costly and burdensome federal regulation, and Obamacare only makes the problem worse.”

Texas has the highest rate of uninsured residents in the U.S., with nearly 30% of the non-elderly population lacking coverage.

On Monday, a state legislative panel in Virginia convened to discuss how other states are dealing with the issue of whether to expand their own Medicaid programs. One Republican legislator said the panel was moving closer to a solution that would expand Medicaid while reforming it to reduce costs.

Virginia is one of a number of states with Republican governors pondering whether to expand Medicaid coverage under the ACA. The panel heard about similar debates going on in Michigan and Ohio, where the governors have advocated for expansion but have been blocked by Republican-led legislatures.

Talk of a possible Medicaid expansion was met by a protest by hundreds of conservative activists demonstrating against Obamacare.

Follow Steven Ross Johnson on Twitter: @MHSjohnson