Supreme Court ruling adds incentive for Medicaid expansion, experts say

Uncertainty created by allowing the providers to go to court on reimbursement rates rather than petition the Center for Medicare and Medicaid Services would have been enough for states to block Medicaid expansion.

The recent Supreme Court ruling that blocks states from being sued by healthcare providers over Medicaid opens the door for states that have not expanded the federal program.

Had the Justices come down on the side of hospitals in Armstrong v. Exceptional Child Center, the uncertainty created by allowing the providers to go to court on reimbursement rates rather than petition the Center for Medicare and Medicaid Services would have been enough for states to block Medicaid expansion, said Kip Piper, a consultant with Philadelphia-based Sellers Dorsey.

[Also: Court rules providers can't sue states over Medicaid]

Currently, 22 states have yet to adopt Medicaid expansion. The 28 states and District of Columbia that have adopted expansion report sharp declines in uninsured admissions and a drop in unpaid hospital bills.

“There’s real consequences to providers if a state chooses to sit this out,” Dan Diamond said on the Advisory Board Company’s website. “Hospitals in states that don’t expand Medicaid will see a few percentage point drop in margins (in six years). For many organizations, this is the difference from being profitable to being in the red.”

Twenty-eight states and the District of Columbia have accepted federal dollars to expand Medicaid. The bulk are concentrated in the Northeast, Midwest and West Coast.

Exceptions include Maine, Idaho and Wisconsin, which are not adopting Medicaid expansion at this time.

[Map: See detailed info on each state's Medicaid status]

The 16 states that haven’t adopted expansion, and the six currently discussion expansion, are generally Republican and conservative, according to Piper.

The states include Alabama, Georgia, Idaho, Kansas, Louisiana, Maine, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Texas, Virginia, Wisconsin and Wyoming.

The six states thinking about adoption include Alaska, Florida, Missouri, Montana, Tennessee and Utah.

All six, and all but one state -- Idaho -- which are not adopting Medicaid expansion at this time, have set health insurance exchanges through a federally facilitated marketplace.

Putting focus on another Supreme court case, states that have healthcare exchanges through a federally facilitated marketplace would see the federal exchanges dismantled in their state and possibly nationwide, if a decision comes down for the plaintiff in King v. Burwell. The U.S. Supreme Court is expected to rule on the case by late June.

[Also: Highlights from King v. Burwell hearing]

Only 16 states run their own exchanges to receive federal tax credits; 34 states go through the federally facilitated marketplace.

Should the Supreme Court rule that subsidies through the federal marketplace violate the law, millions of people in 34 states would lose their subsidies and probably their coverage.

Such a decision “would push Medicaid off the front burner,” Piper said.

Should the subsidies remain intact in a decision for U.S. Department for Health and Human Services Secretary Sylvia Burwell, states that again take up Medicaid expansion would do so by federal waiver, as some states have already done, according to Piper.

Waivers have allowed states to eliminate the employer mandate in the Affordable Care Act or have federal Medicaid dollars spent to buy private insurance.

The waiver is a bargaining chip for conservatives to get federal compromises. It allows elected officials who opposed the ACA to distance themselves from Obamacare, Piper said.

Hospitals have become players in discussions, as starting in 2017, states need to come up with 5 to 10 percent of the money to fund the expansion.

The federal government is covering  the full cost through 2016. Starting Jan. 1, 2017, the federal match declines to 95 percent, and by 2020, to 90 percent.

In Indiana, hospitals agreed to pay more than $80 million in 2017 because they believe the money will be made up by having fewer uninsured patients, according to MaryBeth Musumeci, associate director at the Kaiser Commission on Medicaid and the Uninsured. Hospitals in Arizona and Colorado have also agreed to fund part of state share of Medicaid expansion, she said.

Hospital taxes, or provider assessment, have long been part of the Medicaid program, according to Laura Snyder, senior policy analyst at the Kaiser Commission on Medicaid and the Uninsured.

“All states except for Alaska have a provider tax,” she said.

The ACA originally mandated all states to expand Medicaid coverage to residents making less than 138 percent of the federal poverty level, but in June 2012, the Supreme Court held that states could not be forced to participate under penalty of losing their current Medicaid funding.

The Supreme Court decision making Medicaid expansion optional put hospitals in the crosshairs of that decision.

Hospital uncompensated care costs were about 21 percent, or $7.4 billion, lower in 2014 due to gains in health insurance coverage under the ACA, according to a recent report by HHS. More than two-thirds of the estimated reduction, or $5 billion, was in states opting to expand Medicaid, the report stated.

Twitter: @SusanMorseHFN