Medicaid expansion and funding face threats in several states

Medicaid expansion and funding face serious political challenges in several Western and Great Plains states, following expansion ballot initiatives and legislative and gubernatorial elections in those states.

In two states, Republican elected officials have pushed to limit and delay expansions to low-income adults that were approved by voters in November. A third state where voters passed an expansion ballot initiative is moving to implement it. Meanwhile, existing Medicaid expansions in two other states are under threat from GOP leaders.

In Alaska, the new Republican governor not only is questioning the state's Medicaid expansion but is proposing draconian cuts in Medicaid spending.

The political uncertainty in these states grows out of the ambivalence among Republicans across the country to expanding coverage under the Affordable Care Act, even in states where voters demanded it and where polls show broad public support.

"It shows the real tension that still exists between those who see the benefits of expansion from a coverage and fiscal perspective for states, and those who want states to have more control over the terms of the expansion," said Patricia Boozang, senior managing director at Manatt Health.

Many GOP officials say their states can't afford their 10% share of the expansion cost, and that "guardrails" are needed to prevent those costs from growing out of control.

"We want to make sure Medicaid expansion is sustainable, and do it in a way that provides the benefit we're looking for without crowding out other important state obligations," said Paul Edwards, deputy chief of staff to Utah Republican Gov. Gary Herbert.

But healthcare providers and others in these states say Medicaid expansion more than pays for itself in terms of jobs and economic benefits, reduction in uncompensated care costs, and shifting of state costs to the federal government. In Montana, for instance, federal funding covered costs previously borne by the state, and led to a $700,000 state surplus in 2017, according to a new report from the Commonwealth Fund.

In Alaska, new Republican Gov. Mike Dunleavy has proposed to slash total Medicaid spending by nearly a third, and has not committed to maintaining the state's expansion of Medicaid to about 50,000 low-income adults. Providers warn his proposal would severely disrupt the state's healthcare system.

"The cuts would reshape the entire delivery system, hospitals would close, and providers would leave the state," said Becky Hultberg, CEO of the Alaska State Hospital and Nursing Association. "The governor also has said Medicaid expansion is a topic of future conversation, and we don't feel a great deal of confidence in that statement."

Idaho, where 61% of voters in November approved a Medicaid expansion to adults earning up to 138% of the federal poverty level, has sent the CMS a state plan amendment to implement the expansion to an estimated 91,000 people. But some Republican legislators have proposed conservative changes including a work requirement, co-pays, and lifetime benefit limits.

In Montana, where a ballot initiative to extend the state's Medicaid expansion with a large tobacco tax failed in November, some GOP lawmakers are backing a bill to add a work requirement and hike premiums for the state's 95,000 expansion enrollees. The state's Democratic governor, citing a new study estimating that as many as 43,000 Montanans would lose coverage as a result of those changes, wants to renew the expansion without them.

Utah Republicans passed a bill earlier this month to replace the voter-approved Medicaid expansion with a skinny expansion for people earning up to 100% of poverty, reducing the expansion population to an estimated 90,000 rather than 150,000. It also would set a per capita cap on federal Medicaid payments to the state.

Nebraska is the only one of the three states where voters passed a Medicaid expansion ballot initiative in November that is moving ahead to implement it. There, Republican Gov. Pete Ricketts, who strongly opposed the initiative, is preparing to file a state plan amendment, without changes to the initiative, to add coverage for an estimated 90,000 people.

Expansion advocates say they were pleasantly surprised that Republican lawmakers did not file any bills to add a work requirement by the deadline for new legislation. "No one got around to it, so we're still on track, thankfully," said Andy Hale, vice president of advocacy for the Nebraska Hospital Association.

"In Nebraska, it appears we actually respect the will of the people," said Sen. Adam Morfeld, a Democrat who spearheaded the expansion effort.

Meanwhile, Medicaid expansion opponents are gearing up to block expansion ballot initiatives in Florida and Missouri, where expansion advocates are considering launching fresh initiatives. Florida Republicans have filed a bill to increase the vote threshold for passing an initiative from 60% to two-thirds, while Missouri Republicans want to establish new files for filing petitions for ballot initiatives.

The issue in Alaska goes beyond Medicaid expansion to basic healthcare services provided to all 210,000 of the state's Medicaid beneficiaries.

To balance the budget in the face of reduced state oil revenues, Gov. Dunleavy has proposed $249 million in state Medicaid funding reductions, which would be accompanied by a $465 million reduction in federal funding, according to an analysis by the Alaska State Hospital and Nursing Home Association. That $714 million combined cut would comprise about a third of total Medicaid spending.

Dunleavy administration officials have said most of the spending reductions would come from cutting provider payment rates. Alaska rates are higher than in most states because they are set on a cost basis to support the healthcare infrastructure in the state's vast rural areas.

"We're taking a close look at that and then we're looking at different ways of treating and providing access to the expansion population," Mike Barnhill, the governor's budget policy director, said in a recent media briefing.

The governor's budget proposal also would zero out funding for the state's cooperative arrangement with the University of Washington to train medical students in Alaska, as well as cutting funding to substance abuse prevention and treatment programs, the Alaska Psychiatric Institute, and assisted living.

Dunleavy has ruled out any tax increases in a state with no income or sales tax. In addition, he's insisting on paying out the full $3,000 annual dividend to every Alaska resident from the $60 billion permanent fund drawn from oil revenues, rather than tapping that fund to pay for Medicaid and other state services.

Hultberg said a number of rural Alaska hospitals with less than 10 days of cash on hand likely would close if payment rates are cut. The potential elimination of optional Medicaid benefits, such as pharmacy, behavioral health, and dental, would affect all Alaska providers.

It's unlikely the GOP-controlled legislature will go along with the full extent of the governor's proposed cuts. But provider groups are worried Dunleavy will have a powerful say in the final budget negotiations because he has line-item veto authority. The governor's office did not return requests for comment.

"He's saying, 'We'll do everything in Medicaid better and reduce the budget by a third,'" Hultberg said. "We know that's not feasible. You can't cut rates and get to a third of the budget without having no providers."