NEJM: Partial Medicaid Expansions Under the ACA

Nick Bagley, Allan Joseph, and I have a new perspective piece up at the New England Journal of Medicine evaluating implications of Arkansas’s latest waiver application. Among other proposals, the state has requested to move to a “partial expansion” model, shifting the population with incomes between 100 and 138% FPL from Medicaid into the exchanges.

Multiple states proposed partial (or phased-in) expansions before the ACA’s coverage provisions took effect, but the Obama administration rebuffed these efforts.

Why were states interested in these partial expansions? Starting in 2020, states are responsible for covering 10% of the costs associated with the Medicaid expansion. Because of a drafting mistake, however, the ACA says that the 100-to-138 population can receive subsidies to purchase a private health plan on the exchanges — but only if they are ineligible for Medicaid. For those people, the federal government bears the entire cost of subsidizing private coverage, with no contribution from the states. As a result, the states save money for every beneficiary whom they can move from Medicaid into their exchanges.

Though the justification against partial expansion was legal in nature—CMS contended at the time that the ACA “does not provide for” limited or phased-in expansions—the current administration might perceive broader flexibility.

Now that repeal of the ACA’s Medicaid expansion seems unlikely, will the Trump administration allow partial expansions? Arkansas’s waiver request will force an answer to that question. Because Arkansas is already operating under a unique waiver that allows it to enroll Medicaid beneficiaries in exchange plans, partial expansion would have relatively muted effects in the state: it would just rejigger state–federal financing arrangements. Nonetheless, acceding to Arkansas’s request would set a precedent with extraordinary practical, budgetary, and political consequences.

The budget-gimmicky nature of partial expansion is laid bare in the special case of Arkansas, which already enrolls its expansion population in exchange plans, using Medicaid dollars. Moving the enrollees more formally into the exchange primarily serves to remove state dollars from the funding equation. And in service of this goal, partial expansion imposes greater cost-sharing on beneficiaries while eliminating certain Medicaid-specific protections, like presumptive and retrospective eligibility. If the administration approves Arkansas’s request, they will be hard-pressed to reject similar waivers from other states, who will see the same budgetary appeal.

You can read the whole thing here.

Waivers are a matter of administrative discretion, but widely-implemented partial expansions could prove harder to unwind than other changes sought by states. Though they were beyond the scope of our piece, Arkansas’s waiver application—as well as applications from other states—would limit Medicaid enrollment in other ways, by imposing work requirements and strictly narrowing or eliminating presumptive and retrospective eligibility. Absent further congressional action, Medicaid waiver decisions will be among the most consequential health policy developments in the coming months.

I would like to acknowledge and thank Dave Anderson of Duke University and the Balloon Juice blog, who helped me navigate 2017 premium data (from which I was able to extract cost-sharing information for plans with cost-sharing reductions). Also, for completeness: due to editorial constraints, we weren’t able to include a sixth citation for the analysis comparing exchange premiums in expansion and non-expansion states, which was published by ASPE in 2016. 

Adrianna (@onceuponA)

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