Trump Administration reaches right decision for wrong reasons on partial Medicaid expansion (Guest Post: Jessica Schubel)

Jessica Schubel is a Senior Policy Analyst with the Center on Budget and Policy Priorities.  Her work focuses on Medicaid  and other state health policy issues. This post originally appeared on the Center’s Off the  Charts blog.

The Trump Administration is rejecting Utah’s request to receive the Affordable Care Act’s (ACA) enhanced federal funding to provide Medicaid coverage for only part of the population of poor and near-poor adults that states can cover by expanding their Medicaid programs under the ACA. The Administration made its decision for the wrong reason — namely, that it didn’t want to approve a new approach to expanding Medicaid as it seeks to overturn the entire ACA in court. Nonetheless, it’s the right decision because it will protect coverage and access to care for millions of people. It should also be a wake-up call for states that haven’t yet expanded Medicaid to adopt a full expansion, rather than continuing to debate alternatives that would cover fewer people and that the Administration may not approve.

Under the ACA, states can expand Medicaid coverage to adults with incomes up to 138 percent of the poverty line ($16,753 for a single person). The federal government pays at least 90 percent of the cost of expansion coverage, considerably higher than states’ regular federal matching rates, which range from 50 to 76 percent. Some states, most recently Utah, have sought federal approval to expand coverage only to people with incomes below the poverty line, while still receiving the 90 percent enhanced match. Under that “partial expansion” approach, near-poor people — those with incomes between 100 and 138 percent of the poverty line —would remain eligible for subsidized coverage through the ACA marketplaces since they’re in states that have not expanded Medicaid.

As we’ve written, letting states receive the ACA’s enhanced federal match for partial expansion would likely mean higher uninsured rates and worse access to care for many people with incomes between 100 and 138 percent of poverty. That’s because Medicaid better meets the needs of this group than marketplace coverage does, and letting states receive the enhanced match for partial expansion would create a strong financial incentive for states to roll back their existing expansions.

States pay a small share (10 percent or less) of the cost of covering near-poor adults through Medicaid, but none of the cost of covering them through the marketplace. So states could shift substantial costs to the federal government if they receive the enhanced federal match rate for expansion without covering near-poor adults. In fact, both Arkansas and Massachusetts have sought permission to roll back their existing expansions while retaining the enhanced match.

Replacing full expansions with partial expansions would lead to a significant loss of coverage and deterioration in access to care. Compared to the marketplace coverage available to near-poor adults, Medicaid offers significantly lower premiums and cost sharing, coverage of non-emergency medical transportation (an important benefit for near-poor adults, who often face transportation barriers), and the option to enroll at any time during the year, instead of only during open enrollment season. (See Table 1 below.)

Due at least in part to these factors, the uninsured rate for near-poor adults in non-expansion states is twice that of expansion states: 34 percent versus 17 percent. Meanwhile, per-enrollee costs are lower in Medicaid than in commercial coverage, making Medicaid expansion the more cost-effective approach to covering this group.

Rather than acknowledging the harm to near-poor adults under partial expansion, the Trump Administration reportedly reached its decision because it didn’t want to approve a new approach to expansion while arguing in court that the entire ACA should be overturned. That’s a terrible reason. The Administration’s stance in court would cause tremendous harm if it prevailed, and the legal reasoning behind it is so weak that even some committed opponents of the ACA predict that higher courts will ultimately reject it.

Nonetheless, the Administration’s decision to deny enhanced federal funding for partial expansion will protect coverage for millions of people who have it. It should also spur more states that have been considering partial expansion or other alternatives, such as Georgia and Oklahoma, to move forward with full expansion instead. While the Administration has discretion to deny partial expansion requests, it has no choice but to approve full expansions that extend coverage to all eligible adults.

Now that the Administration has made its views clear, states that haven’t expanded Medicaid yet should move forward with full expansion, rather than continuing to propose harmful alternatives that may never be approved.