ACA redistribution via Medicaid: what it means for future reform

The self imposed redistribution from mostly poor (mostly red) states, to mostly rich (mostly blue) states via the ACA Medicaid expansion is a direct result of the June 2012 Supreme Court ruling that made it voluntary.

That 7-2 court decision, and the subsequent state decisions, mean that the primary liberal/progressive health reform goal of expanding insurance coverage is being thwarted in some of the most needy states. Liberals/progressives have two choices: fight out the state-by-state Medicaid expansion decisions, or seek a health reform deal with conservatives that would be more likely to expand coverage in the non-expanding, poorest states, sooner. The first is not a pleasing outcome, and the second seems like a political impossibility.

This result was likely inevitable given the SCOTUS decision coupled with the re-election of President Obama; as I said in my post the day the decision was released:

…in the Medicaid aspect of the ruling the court identified the penalty of losing all of your states’ Medicaid funding if you don’t undertake the prescribed Medicaid expansion, to be something that the Federal Government could not do because it would be coercive to states. While this may seem to Conservatives a bit like the question “other than that Mrs. Lincoln, how was the play?” in the long run I suspect this precedent will be important going forward in policy debates.

Leaving the Medicaid expansion in place, while allowing states to not undertake the expansion without losing all medicaid funding has set up a fascinating test of ideology v. financial self interest for Conservative states. People’s lives are at stake here and I don’t mean to minimize that, but again, elections are important and I suspect what State politicians plan to do about the Medicaid expansions will be a key question in some states this Fall.

Reihan Salam has persuasively noted that a default insurance option is needed for health reform, motivated at least in part by the difficulties of healthcare.gov. I agree with him–if I could do just one thing to the ACA, it would be to add such a default option.

However, I have long felt that a political deal on health reform was needed, and such a deal was at the heart of a book I put out in September 2011 that claimed to identify a health reform deal between Democrats and Republicans, that had at its heart replacing the individual mandate with a default insurance option in the form of universal catastrophic health insurance implemented via the Medicare program. My overriding political point in Fall 2011 was that a Super Committee deal that made the SCOTUS case go away could have removed the doomsday outcome for both sides. We didn’t get such a deal, and also got a mixed SCOTUS decision, that has lead directly to an uneven Medicaid expansion.

My proposed deal is not a liberal/progressive dream, but then neither is the uneven Medicaid expansion.

Paradoxically, a SCOTUS ruling that had struck down the individual mandate as unconstitutional and invalidated premium supported private insurance sold in exchanges but that left the Medicaid expansion untouched would have produced what would have seemed like a bigger loss for Democrats at the time, but that would have at least resulted in all persons up to 133% of the poverty level being guaranteed health insurance. From such a base, the parties could fight another day and the red states, especially in the South, could have continued their tradition of saying they hated the federal government (all the way to the bank). But that is not where we are, so where do we go from here?

I think Liberal/Progressive reformers need a health reform deal because of the uneven Medicaid expansion, but we are in a difficult position because we have no control over the the biggest block to a health reform deal: the fact that elected Republicans do not hold any coherent health reform position(s) for which they are willing to vote (old posts here, here, here, here, here, etc)

It takes two sides to make a deal. This doesn’t mean there aren’t conservative intellectuals with reform ideas–Capretta, Moffit, Ponnuru, Roy, Levin, Salam, Douthat and others–these are thoughtful people with ideas that I think are reasonable to differing degrees. But whatever I think of them, some amalgamation of their ideas desperately needs to meet the Republican-controlled Commerce Committee in the House of Representatives, ground zero for any actual health reform effort; and then the CBO.

I think that all of these intellectuals realize that the Republican party is the only way for their ideas to reach legislative fruition, and they know that eventually the Party will have to be for something in health reform. And I believe they are quietly working towards making this case within the Republican Party. The entire country, but especially Liberals/Progressives who know that more must be done on health reform, should be rooting for them to succeed.

cross posted at freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

11 thoughts on “ACA redistribution via Medicaid: what it means for future reform”

  1. It’s frustrating especially for those shut out of the system, but time also does its work. Arizona took till the ’80s to join Medicaid the first time around.

    Did the Medicaid system change at all at the time? Or did the hospitals and doctors just finally lean on conservative lawmakers and persuade them getting paid for services was good for business?

    1. Yes, this. Which allows for a third option: the “keep calm and carry on” strategy for liberals/progressives. Continue working to make the ACA work as well as it can. Continue applying pressure to persuade the remaining states to expand Medicaid, using, if necessary, the examples of conservative Republicans like Govs. Brewer and Kasich.

      1. I think that the “keep calm and carry on” strategy suggested by massappeal will work for the following reasons: As a result of the ACA, Medicare reimbursements to hospitals were reduced. The calculus was that due to (i) an increased number of insureds and (ii) increased Medicaid coverage, hospitals would still receive, net/net, greater reimbursement overall. Now, thanks to the Republicans, these hospitals are hurting. However, there’s something that most of them have in common: Well-heeled and well-connected individuals on their Boards of Directors and working as executives and doctors. Sooner or later, these individuals, most of whom are powerful members of the business elite in their communities, will pull local Republicans aside and tell them, in no uncertain terms, to stop the idiocy.

  2. Given where we are, we need at least one Democratic gubernatorial candidate in a refusenik state to run on a platform of “Let’s take federal money to give healthcare to our poorest.” Oh, and win. Probably a high turnout 2016 race is most likely to have the desired outcome.

    If this happens, it would be instructional to the politicians in other refusenik states.

    1. I suspect the lessons that those politicians would most likely draw relate to how to restrict voting and reshape the electorate (e.g., NC in recent months).

    2. Isn’t this happening just now in the Virginia gubernatorial election? Which the uninspiring Terry McAuliffe is going to win by a landslide. But Medicaid expansion is only one of many issues that will doom Cuccinelli, so the political message to sane Republicans elsewhere is blurred.

  3. I don’t think any of the above named “wonks” have any reasonable health plan. The problems have been pointed out with everything that they have offered and you know this as well as I do.

    Just some of them:

    Flat tax credits do nothing to compensate for healthstatus and end up screwing the sick especially those with private illness (This is the big one and is a component of all of the above plans)
    Due to the concentration of medical spending high deductible accounts are unlikely to bend the cost curve in the long run
    High risk pools are perpetually underfunded and to bring the premiums in them down to the level of ACA would cost just as much as ACA
    Consumerism doesn’t work in healthcare due to inelasticity in the demand curve

    Why continue to give them the benefit of the doubt?

  4. Also Don (and I don’t mean to be critical) but many of your proposed reforms, when added together, amount it seems to me to cosmetic changes on the actual structure of the ACA. Particularly:

    Replace the individual mandate with federally-guaranteed, universal catastrophic insurance coverage and sell private “gap” insurance in state-based exchanges

    Since the gap insurance is third payer how is it different from what we have now except adding profit skimming middlemen?

    End/modify the tax preference of employer paid health insurance

    Already in progress with caddilac tax

    End the Medicaid program by transitioning responsibility for dual eligible Medicaid costs to Medicare, while moving non-elderly low income persons into subsidized private gap insurance

    See above

    Enable Medicare to become an active health care purchaser (?)

    Enact comprehensive medical malpractice reform

    Ok you’re right here.

    1. Simon
      only so many ways to do it, but a fair point. The most consequential points are 1. default option to get to ease of at least basic cover and 2. Medicare as active purchaser. Here I mean reference pricing (don’t pay more if something doesn’t work much better but costs lots more), and taking coverage decisions more seriously….this would be spectacularly controversial, but very important to addressing costs. I wouldn’t start at expensive stuff, but start at stuff that doesn’t work [of course there is variance]…all very hard.

  5. It occurs to me that maybe the poorest states are poor because they have made political and social choices. Perhaps it is time for liberals to stop enabling conservatives. The easiest, cheapest and fairest way to deliver high quality health care to all at a reasonable price is to expand Medicare. If the people in red states want insurance but are being denied high quality insurance at lower prices because conservatives don’t like “socialized medicine,” maybe the people need to tell the clown show that it’s time for them to leave town instead of waiting for liberals in wealthier states to save them.

  6. I’m with Mitch, ^above^, we should cxampaign in the Red States on how the lowere economic classes in those states are being screwed by the people they have elected – Republicans. Let the other states start getting better and point out their losses – and WHY!

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