February 25, 2013 7:12 pm

Medicaid expansion splits US conservatives

The decision by Republican governors in states such as Texas and Louisiana to forego a government-sponsored expansion of low-income health insurance is dividing conservatives and threatening to cost businesses billions of dollars.

The tensions between Republicans who see the expansion of Medicaid – as ordered by the 2010 Affordable Care Act – as a deficit-busting big government initiative by the White House, and businesses that could pay a heavy price for the political wrangling, has become so fraught that even the Chamber of Commerce has opted to stay out of the fight.

“It is a very tough issue and one that the US Chamber has not taken a formal position on. There are pluses and minuses with either route and it is a choice that should be made at the state level,” said Katie Mahoney, executive director of health policy at the conservative big business lobby group. Any move to accept the expansion of Medicaid would be seen as acquiescing to the White House after years of opposition to Barack Obama’s healthcare law.

Under the ACA, known colloquially as “Obamacare”, states were mandated to expand their Medicaid programmes, which provides health services to the poor, children and the disabled, to all individuals with incomes below 133 per cent of the poverty line, or about 16m new patients. The federal government promised to pay 100 per cent of the cost for three years, after which time the states would have to pay for up to 7 per cent of the new cost.

This provision was dealt a blow after the Supreme Court, which broadly upheld the constitutionality of the new law last year, ruled that the Medicaid portion was not legal. The Court found individual states had the right to either accept or deny the expansion of Medicaid and the influx of federal dollars.

During the election campaign last year, some Republican governors like Florida’s Rick Scott rejected the proposed expansion and vowed to turn away the money, even though many of these states had some of the highest rates of uninsured in the nation.

But many once-reluctant governors, from Mr Scott to Jan Brewer of Arizona and John Kasich of Ohio, have now said they would follow through with the expansion. Many argued that if they denied the programme, the citizens in their states would be paying federal taxes for citizens in other states to get insurance benefits.

“I cannot in good conscience deny Floridians that needed access to healthcare,” Mr Scott said last week.

Rightwing opponents to the healthcare law have lambasted those governors as sell-outs for accepting the Medicaid expansion money.

“In reality [the] expansion funding is an open-ended promise by the federal government, with each state that expands Medicaid increasing the total amount of new federal spending,” said one blogger at the conservative RedState.com.

There are still 16 states that oppose expansion and ten others, including New Jersey, that have yet to make a decision. Some states, like Virginia, could yet change course.

Tim Jost, a professor at the Washington and Lee law school, says there is a “humanitarian tragedy” occurring in those states where thousands who would otherwise get healthcare will not receive it. There will also be a huge impact on businesses – from the hospitals that will be forced to treat more uninsured patients in their emergency rooms (deferring those costs to insured patients), to the private insurance groups that are losing billions of dollars in potential revenue because in many states Medicaid is privately administered.

Experts say that big employers of low-wage workers will either have to offer coverage to those workers or risk a fine for not covering them, as mandated under the 2010 law. But in the states that expand their Medicaid programme to cover the “working poor”, those employers would not be forced to pay a penalty because their employees would be covered.

“Employers have a direct stake in whether states expand Medicaid or not. These are pretty low-wage workers, but you know there are certainly those work forces out there, particularly in retail and restaurants,” says Larry Levitt of the Kaiser Family Foundation.

Hospitals are among the most worried about the expansion of Medicaid funds.

“One of the biggest things every hospital is going to pay attention to is the expansion of Medicaid,” Steve Glass, chief financial officer of the Cleveland Clinic said. “Medicaid is the worst payer, because, it pays below cost but its still better than someone who doesn’t have any insurance at all.”

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