Other states likely to follow Utah's partial Medicaid expansion

The Utah Legislature on Monday passed a bill to replace the voter-approved Medicaid expansion with a skinny expansion, a move that may encourage other states to seek similar scaled-back expansions with full federal funding.

The Republican-controlled Utah Senate approved legislation passed by the state House of Representatives Friday that replaces the voter-passed expansion to adults with incomes up to 138% of the federal poverty level with an expansion only to 100% of the poverty level. It passed on a near party-line vote, with one Republican joining all Democrats in opposition.

The bill would cover an estimated 90,000 people, compared with 150,000 under Proposition 3 approved by 53% of voters in November. Under the ballot initiative, expanded coverage would have started April 1.

S.B. 96, which Republican Gov. Gary Herbert is expected to sign Monday, also would establish a per capita cap on federal Medicaid payments to the state. That's in line with the Trump administration's reported desire to encourage states to experiment with a capped federal payment system to constrain Medicaid spending growth.

"I think we're doing the long-term responsible thing," said state Sen. Allen Christensen, the bill's lead sponsor, who had stressed the need to limit the state's costs for Medicaid expansion, warning that the ballot initiative's 0.15% sales tax would not adequately fund it.

Advocates of full Medicaid expansion, who strongly opposed the bill, said they would work to improve it, including axing the work requirement. "Today's vote is simultaneously a painful loss, and a step forward toward finally putting Medicaid expansion into action and getting low-income people the healthcare they need," said Stacy Stanford, a health policy analyst at Utah Health Policy Project.

The bill requires the state to seek a Medicaid Section 1115 waiver from the CMS seeking 90% Affordable Care Act funding for the partial expansion, rather than the state's usual 70% match. It also must seek waivers for the bill's provision that beneficiaries work or meet community engagement requirements to receive Medicaid coverage, which was not in the voter-passed law.

If the CMS does not grant the waiver for a partial expansion, the bill requires the state to establish a full expansion to people up to 138% of the federal poverty level starting in January 2020.

The state legislative budget office's projection shows that the partial expansion initially will cost the state much more than a full expansion due to the reduced federal matching contribution before any waiver is granted.

But Utah's legislative Republican leaders, who opposed the ballot initiative, have expressed confidence that the CMS will approve the state's waiver requests, even though the CMS has said it can't forecast the outcome of any waiver proposals.

Experts said if the CMS grants Utah's request for full funding of a partial expansion, other states are sure to want the same. Republican leaders in Georgia are already discussing that. The Trump administration previously rebuffed partial expansion waiver requests from Arkansas and Massachusetts.

"Other states that have not expanded may seek something like a partial expansion if Utah's is approved," said Robin Rudowitz, a Medicaid analyst at the Kaiser Family Foundation. "There's also a risk that states that have already expanded would seek to roll back coverage by adopting a partial expansion."

Under Utah's partial expansion, adults with incomes between 100% to 138% of poverty could continue to buy subsidized coverage through the Affordable Care Act exchange. But Rudowitz said that population has difficulty affording premiums and out-of-pocket costs, and private plan benefits are not as comprehensive as Medicaid's.

Perhaps as a result, thousands of Utah residents in that income band currently are uninsured, state figures show.

Under S.B. 96, Utah also will have to seek a waiver to shift to a system of capped federal payments, a major change from the current system of federal payments rising to cover the costs of all eligible beneficiaries.

The bill said the per capita cap would include an annual inflation adjustment, account for differences in cost between categories of Medicaid expansion enrollees, and provide greater flexibility to the state than the current Medicaid payment model.

S.B. 96 envisions that if the state runs out of money for the expansion, it would limit enrollment.

Efforts by congressional Republicans to establish a capped federal Medicaid payment system as part of their ACA repeal efforts in 2017 ran into a wall of opposition from state officials, hospital and other provider groups and patient advocates. Critics warned it would lead to payment, benefit and eligibility cuts.

"It is hard to fathom why a state would want to impose a per capita cap on itself," said Matt Fiedler, an economist at the Brookings Institution's Center for Health Policy. "All a cap does is reduce the amount of federal funding the state receives in the event costs exceed the cap. On its own, it does not expand the state's flexibility in any way."

The Trump administration has not previously received any waiver requests to establish per capita federal payment caps, although the CMS reportedly is drafting guidelines for states interested in pursuing this approach.

Both the requests for a partial expansion and capped payment system may trigger legal challenges if they are granted, experts say.

The CMS waiver approvals for Medicaid work requirements in Arkansas and Kentucky are already facing lawsuits. Last year a federal judge blocked the Kentucky program from going forward on the grounds that the CMS didn't adequately consider how it would affect coverage.

It's not clear that the CMS has statutory authority to allow a coverage expansion only up to 100% of the poverty line. The Affordable Care Act authorizes enhanced funding for expansions up to 138% of the federal poverty level, said Jane Perkins, legal director of the National Health Law Program, which helped bring the Arkansas and Kentucky suits.

In addition, only Congress has the power to revise the federal matching formula for Medicaid, she added.

The Utah Hospital Association has expressed wariness about S.B. 96's per capita cap provision. "We've shared our concerns, and (the legislative sponsors) understand they need to be very careful when they negotiate with the federal government so it benefits the citizens of Utah," said Dave Gessel, the association's executive vice president.

Joan Alker, a research professor at Georgetown University who studies Medicaid, predicted many other states will follow Utah if it receives a CMS waiver for a partial Medicaid expansion. But she's not sure how many states will ask for a capped federal payment system.

"Something has to give when you cap funding," she said. "There's no way to cap the program without not covering people or not covering things they need."