Finishing the Job of Medicaid Expansion
Deborah Bachrach, Kaylee O’Connor, and Patricia Boozang, Manatt Health
Much has been written on the benefits of expanding Medicaid eligibility to adults with incomes below 138 percent of the Federal Poverty Level (FPL). Today, as the country struggles to respond to and recover from the devastating fallout of the COVID-19 pandemic, the case for Medicaid expansion has never been stronger. The public health crisis has focused a spotlight on both the benefits of stable health coverage and the gaps in the nation’s system of coverage and care. It is in this context that we discuss what Medicaid expansion would mean in the 12 states that have not yet expanded.
Were these remaining states to expand, an estimated 4.4 million people (if not more due to the COVID-19 driven economic recession) would become eligible for Medicaid, nearly 60 percent of whom are people of color.[i] The experience of the 36 states that expanded Medicaid between 2014 and 2020 makes clear the health and economic benefits of expansion for newly insured individuals, their families, their communities, and the states in which they reside.[ii]
The Rationale for Expanding Medicaid in 2021
1. Significant Economic Benefits. The cost of expansion is often cited as a reason for states rejecting it. Although the federal government pays for 90 percent of expansion costs, non-expansion states point to the burden of the 10 percent state share. However, a review of the direct and indirect impact of expansion on state budgets demonstrates that expansion pays for itself. We need only look at the experience of the 36 states that have already expanded Medicaid, where federal dollars from Medicaid expansion have offset state spending and fueled economic growth.
Non-expansion states are today spending state general funds to underwrite the program costs of health care services for their uninsured residents. With expansion, many, if not most, of these residents would become eligible for Medicaid, permitting states to underwrite all but 10 percent of the cost of these services with federal dollars, rather than with state-only funds. Expansion states have realized savings on mental health and substance use disorder (SUD) services as well as inpatient hospital services for prisoners.[iii] Recently, several of these states have also begun to pursue Section 1115 waiver authority to use federal Medicaid funds for health care services and supports for prisoners prior to release and, more generally, to address underlying social factors, further reducing state spending, recidivism, and attendant financial and human costs.
Upon expansion, states are able to access enhanced match at 90 percent for several populations for whom they are currently receiving regular match by enrolling these individuals in the new adult group.[iv] This includes some pregnant women and adults who would otherwise have sought a disability determination, and individuals with limited coverage under Section 1115 waivers for whom states receive their regular federal match.
Where the savings are not sufficient to offset the costs (and at the outset they may not be), states have used assessments on providers, health plans, cigarettes, and alcohol to generate the state dollars needed to support expansion. In the case of provider and plan assessments or fees, these are often existing sources of tax revenue that increase as providers and plans realize increased revenue by serving more insured patients and enrollees.[v]
These points have all been made before and they remain true today. What is different now is the public health crisis pummeling state economies, their health care systems, and the health of their citizens. Expansion states have experienced significant savings, largely offsetting expansion costs, at the same time, increasing federal and state revenues, resulting in a higher gross domestic product (GDP), increased state tax revenue, jobs, and higher health care wages.[vi]
As we discuss below, Medicaid expansion helps sustain hospitals and other health care providers battered by COVID-19, and improves the health and finances of individuals and families who have had to face the pandemic without coverage or meaningful access to care.
2. Improves Coverage, Access, and Health. A substantial body of research has established the positive impacts of Medicaid coverage on health. Expanding Medicaid has been shown to decrease the number of uninsured and increase health coverage.[vii] In turn, gains in health coverage improve access to and use of health care services (including receipt of recommended screenings and care), and lead to better health outcomes.[viii] Because of the coverage, access, and health benefits of expansion, states that have expanded Medicaid are better equipped to respond to the COVID-19 pandemic than those 12 that have not.7
Indeed, more than 2 million uninsured adults in the “coverage gap”[ix] would gain health coverage and access to comprehensive care amid increased health risks during the pandemic, were the 12 remaining states to expand Medicaid.[x] As individuals continue to lose employer sponsored insurance due to unemployment, Medicaid expansion can prevent further widening of the gap and provide coverage to more than 650,000 uninsured essential workers who are particularly vulnerable to adverse outcomes related to COVID-19.7 Additionally, the uninsured have historically faced systemic barriers to vaccination even beyond the lack of insurance (e.g., awareness, access, trust), likely to translate to the uptake of the COVID-19 vaccine, despite the fact that it is available without charge.[xi] As the virus continues to surge, Medicaid is an essential weapon in the continued fight against COVID-19 and the underlying health conditions that increase vulnerability and the likelihood of worse outcomes and death.
3. Strengthens the Health Care System. COVID-19 is wreaking havoc on hospitals and health systems even beyond the immediate financial and operational challenges of treating growing numbers of COVID-19 patients. Rising unemployment has led to greater numbers of uninsured patients and increased uncompensated care costs at the same time hospitals are seeing revenue losses from a steep drop in their elective surgeries.[xii] Outpatient visits to hospitals and community clinics that had begun to rebound over the summer and early fall are expected to drop again with the recent surge in the pandemic. While targeted federal financial relief is critical to the nation’s providers, Medicaid expansion is a long-term tool available to states to support providers that today are on the frontline of the pandemic and in the future will continue to be the backbone of community health and economic wellbeing.
Research shows that hospitals in expansion states have seen greater decreases in uncompensated care – falling by 45 percent in expansion states, compared to only 2 percent in non-expansion states between 2015 and 2017. For safety net hospitals and rural hospitals that disproportionately rely on public payers, expansion has been especially important. Rural hospital uncompensated care costs fell 43 percent in expansion states between 2013 and 2015 compared to 16 percent in non-expansion states.[xiii] Rural hospitals in expansion states are 62 percent less likely to close than those in non-expansion states.[xiv] Like rural hospitals, safety net hospitals in expansion states saw their uncompensated care costs decrease and their Medicaid revenue increase to a greater extent than their counterparts in non-expansion states.[xv]
4. Promotes Health Equity. The pandemic has highlighted longstanding health inequities that have contributed to the disproportionate burden of illness and death on people of color. The COVID-19 related death rate for Black, Hispanic, and American Indian/Alaska Native Americans is over twice as high as the rate for white Americans, and these groups are significantly more likely to be hospitalized as a result of the virus.[xvi] Underlying these disturbing statistics is the disproportionately high rate of uninsurance, resulting in poorer health outcomes, among people of color.[xvii] Medicaid coverage makes a difference.
Medicaid expansion has been shown to reduce disparities in health coverage, access, and outcomes for people of color.[xviii] For example, from 2013 to 2018, the difference in uninsured rates between white and Black adults decreased by about 50 percent in Medicaid expansion states, compared to 33 percent in non-expansion states. More recent studies have found Medicaid expansion to be associated with reductions in end-stage renal disease mortality as well as maternal mortality among Black individuals. And individuals at high risk of severe COVID-19 due to underlying medical conditions (e.g., diabetes, asthma, heart disease) living in states without Medicaid expansion are 52 percent more likely to have inadequate insurance than those living in expansion states.[xix] States that have expanded Medicaid are therefore better positioned to respond to the COVID-19 pandemic and related-economic recession. While Medicaid alone cannot remedy systemic inequities that negatively impact the health status of communities of color, expansion has a critical role to play in addressing coverage at a time when individuals and families need it most.
5. It Enjoys Strong Popular Support. A majority of Americans now has a favorable view of Medicaid, and with the mounting evidence of the health and economic benefits of Medicaid expansion, here too the tide is changing. Since the original 26 states expanded in 2014, 12 additional states have moved to expand. In several states, expansion was effectuated by voters through ballot initiatives, all of which passed with meaningful majorities.[xx] Notably, a poll of residents of the 14 states that had not expanded by 2020 (since then both Oklahoma and Missouri passed referendums authorizing expansion) found that 61 percent of the states’ residents wanted their state to expand.[xxi] Finally, while states may legally end their expansions at any time, none has chosen to do so.
In the more than eight years since the Supreme Court made Medicaid expansion optional, 38 states have expanded. Expansion has endured and flourished to the benefit of over 12 million low- and modest-income families, providing greater access to care and better health and health outcomes and mitigating health disparities.7 State economies have likewise benefited. The progression of the pandemic and economic recession has created an urgent imperative for the 12 remaining states to take action to narrow the gap in coverage and prevent the further worsening of health disparities among people of color.
We are entering a new era, with a new federal administration and Democratic Congress committed to coverage and access for all. New federal leadership could make a compelling case even more appealing by providing additional federal funds to support Medicaid expansion, as was available in 2014. Regardless, with proof of the benefits of expansion, the tragedy of the COVID-19 pandemic, and the evidence of health inequities, expansion is a powerful tool to increase access to care.
[i]. Who could Medicaid reach with expansion in all states? Kaiser Family Foundation website. http://files.kff.org/attachment/fact-sheet-medicaid-expansion-US. Accessed January 14, 2021.
[ii] Michael Simpson. The implications of Medicaid expansion in the remaining states: 2020 update. Urban Institute. https://www.urban.org/sites/default/files/publication/102359/the-implications-of-medicaid-expansion-in-the-remaining-states-2020-update_0.pdf. Published June 2020. Accessed January 26, 2021.
[iii]. Ward B. The impact of Medicaid expansion on states’ budgets. The Commonwealth Fund. https://www.commonwealthfund.org/publications/issue-briefs/2020/may/impact-medicaid-expansion-states-budgets. Published May 5, 2020. Accessed January 21, 2021.
[iv]. Medicaid expansion: how it affects Montana’s state budget, economy, and residents. Manatt Health. https://mthcf.org/wp-content/uploads/2018/06/Manatt-MedEx_FINAL_6.1.18.pdf. Published June, 2018. Accessed January 13, 2021.
[v]. Bachrach D, Karl A. Provider donations and assessments: options for funding state costs of Medicaid expansion. State Health and Value Strategies. https://shvs.org/wp-content/uploads/2016/03/State-Network-Manatt-Provider-Donations-and-Assessments-March-2016.pdf. Published March, 2016. Accessed January 15, 2021.
[vi]. Hayes SK, Coleman A, Collins SR, Nuzum R. The fiscal case for Medicaid expansion. The Commonwealth Fund. https://www.commonwealthfund.org/blog/2019/fiscal-case-medicaid-expansion. Published February 15, 2019. Accessed January 18, 2021.
[vii]. Cross-Call J, Broaddus M. States that have expanded Medicaid are better positioned to address COVID-19 and recession. Center on Budget and Policy Priorities. https://www.cbpp.org/research/health/states-that-have-expanded-medicaid-are-better-positioned-to-address-covid-19-and. Published July 14, 2020. Accessed January 21, 2021.
[viii]. Guth M, Garfield R, Rudowitz R. The effects of Medicaid expansion under the ACA: updated findings from a literature review. Kaiser Family Foundation. https://www.kff.org/report-section/the-effects-of-medicaid-expansion-under-the-aca-updated-findings-from-a-literature-review-report/. Published March 17, 2002. Accessed January 18, 2021.
[ix]. The “coverage gap” refers to uninsured individuals in non-expansion states who have incomes exceeding Medicaid eligibility limits, but below the FPL, making them ineligible for Marketplace premium tax credits.
[x]. Garfield R, Orgera K, Damico A. The coverage gap: uninsured poor adults in states that do not expand Medicaid. Kaiser Family Foundation. https://www.kff.org/medicaid/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid/. Published January 21, 2021. Accessed January 22, 2021.
[xi]. Lu PJ, O’Halloran A, Williams W. Impact of health insurance status on vaccination coverage among adult populations. American Journal of Preventive Medicine. 2015; 48(6), 647–661. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5826635/. Published April 15, 2015. Accessed January 22, 2021.
[xii]. Hospitals and health systems face unprecedented financial pressures due to COVID-19. American Hospital Association. https://www.aha.org/guidesreports/2020-05-05-hospitals-and-health-systems-face-unprecedented-financial-pressures-due. Published May, 2020. Accessed January 24, 2021.
[xiii]. Chart book: the far-reaching benefits of the Affordable Care Act’s Medicaid expansion. Center on Budget and Policy Priorities. https://www.cbpp.org/research/health/chart-book-the-far-reaching-benefits-of-the-affordable-care-acts-medicaid. Updated October 21, 2020. Accessed January 11, 2021.
[xiv]. The rural health safety net under pressure: rural hospital vulnerability. The Chartis Group. https://www.ivantageindex.com/wp-content/uploads/2020/02/CCRH_Vulnerability-Research_FiNAL-02.14.20.pdf. Published February, 2020. Accessed January 13, 2021.
[xv]. Dranove D, Garthwaite C, Ody C. The impact of the ACA’s Medicaid expansion on hospitals’ uncompensated care burden and the potential effects of repeal. The Commonwealth Fund. https://www.commonwealthfund.org/publications/issue-briefs/2017/may/impact-acas-medicaid-expansion-hospitals-uncompensated-care?redirect_source=%2Fpublications%2Fissue-briefs%2F2017%2Fmay%2Faca-medicaid-expansion-hospital-uncompensated-care. Published May 3, 2017. Accessed January 7, 2021.
[xvi]. COVID-19 hospitalization and death by race/ethnicity. Centers for Disease Control and Prevention website. https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/hospitalization-death-by-race-ethnicity.html. Updated November 30, 2020. Accessed January 13, 2021.
[xvii]. Tolbert J, Orgera K, Damico A. Key facts about the uninsured population. Kaiser Family Foundation. https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/. Published November 6, 2020. Accessed January 20, 2021.
[xviii]. Cross-Call J. Medicaid expansion has helped narrow racial disparities in health coverage and access to care. Center on Budget and Policy Priorities. https://www.cbpp.org/research/health/medicaid-expansion-has-helped-narrow-racial-disparities-in-health-coverage-and. Published October 21, 2020. Accessed January 20, 2021.
[xix]. Gaffney AW, Hawks L, Bor DH, Woolhandler S, Himmelstein D, McCormick D. 18.2 million individuals at increased risk of severe COVID-19 illness are un-or underinsured. Journal of General Internal Medicine. 2020; 35(8): 2487–2489. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7286220/. Published June 10, 2020. Accessed January 19, 2021.
[xx]. Status of state Medicaid expansion decisions: interactive map. Kaiser Family Foundation website. https://www.kff.org/medicaid/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/. Published November 2, 2020. Accessed January 21, 2021.
[xxi]. Data note: 5 charts about public opinion on Medicaid. Kaiser Family Foundation website. https://www.kff.org/medicaid/poll-finding/data-note-5-charts-about-public-opinion-on-medicaid/. Published February 28, 2020. Accessed January 14, 2021.