Millions of Medicaid beneficiaries could lose their benefits if the Supreme Court rules against the Obama administration in the King v. Burwell premium subsidies case, some legal experts and state Medicaid officials say. On the other hand, the ruling might force states that have reduced Medicaid benefits to restore them.
While it's widely known that millions of Americans likely would have to drop their private insurance if the high court invalidates the subsidies in states using the federal exchange, the potential impact on Medicaid beneficiaries has been little discussed. Experts say the fallout would affect both beneficiaries who are newly eligible for Medicaid under the Affordable Care Act's expansion of the program and those who previously were eligible.
The heart of the King case is whether the ACA's language allows consumers to receive premium subsidies in states that have not established their own insurance exchanges and instead are relying on the federal exchange. But if the justices find that the federal exchange operating in a state is not legally equivalent to a state-established exchange, there could be a cascading fallout on Medicaid beneficiaries. That's because there are at least two provisions in the ACA that tie federal Medicaid funding to state-established exchanges.
The first is a section of the law that says federal Medicaid funding is contingent on a state ensuring coordination and secure communication between its Medicaid program, its Children's Health Insurance Program, and “an exchange established by the state.”
“The Medicaid and CHIP programs in all 34 states relying on the federal exchange would be at risk if the court buys the (King challengers') argument,” said Tim Jost, a law professor at Washington and Lee University and supporter of the law. “This demonstrates how crazy and how dangerous their argument is.”
The government has pointed this out in court filings as a potential consequence if the government loses, noting that the Medicaid and CHIP agencies in every state with a federally run exchange have entered into coordination agreements with that exchange, meeting the requirements of the ACA.
Another issue is an ACA provision known as the Maintenance of Effort. That part of the law dictates states must maintain the eligibility and enrollment policies and procedures that were in effect on March 23, 2010, until an exchange established by the state is up and operational. Since, HHS reportedly has allowed some reduction in eligibility in Illinois, Indiana, Louisiana, Maine, Nebraska, Ohio, Oklahoma, South Dakota and Wisconsin. Those states have not established their own exchanges.
“If the government loses and Congress does not revise the ACA, HHS might tell the states that they have to return to their former eligibility rules or lose future federal funding for their Medicaid programs,” said Jesse Witten, a partner at Drinker Biddle in Washington.
Thomas Miller, a fellow at the conservative American Enterprise Institute, which backs the challengers in the King case, said if the Supreme Court sides with the plaintiffs, it would bring the Medicaid maintenance of effort provision into play. That could spur more lawsuits against the government. “The states would certainly have an argument that was an unconstitutional coercion by jeopardizing that much (money) indefinitely," he said. "But that's a little bit further down the road."
Whether the Obama administration would try to enforce Maintenance of Effort, especially in Indiana or Ohio, which have expanded Medicaid under the ACA, is unclear, said Paul Keckley, managing director of Navigant, a consulting firm. “It's likely to boil down to a state-by-state negotiation with CMS rather than an across-the-board clampdown on funding,” he said.
Oklahoma officials say they aren't worried about the financial implications of restoring coverage. “The only reduction that has been made to any of Oklahoma's eligibility guidelines was scaling back full coverage benefits for pregnant women from 185% (of poverty) to 133%," said Jo Kilgore, a spokeswoman for the Oklahoma Health Care Authority. “This reduction only effected about 2,300 women in a program that served more than 1 million Oklahomans in 2014.” She added that women in this income range still get coverage for pregnancy-related services.
For now, state Medicaid directors across the country aren't too worried about the potential Medicaid implications of the pending King v. Burwell ruling. “It's way too early to be war-gaming that out because we simply have no indication of how the court will rule,” said Matt Salo, executive director of the National Association of Medicaid Directors.
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