Montana expands Medicaid through federal waiver; California extends its Medicaid program

Montana has become the 30th state to expand Medicaid, with federal officials on Monday signing off on a plan to expand coverage to low-income residents through a federal waiver that requires beneficiaries to pay premiums of up to 2 percent of their income.

Medicaid expansion is one of key components of the Affordable Care Act to insure low-income adults. It was seen as a way to shift the burden of uncompensated care borne by hospitals. The ACA originally mandated all states to expand Medicaid coverage but in 2012, the Supreme Court held that states could not be forced to participate under penalty of losing their current Medicaid funding.

[Also: CMS won't penalize hospitals in states slow to expand Medicaid]

As of earlier this year, 22 states had yet to adopt. Montana was among six states thinking about adoption including Alaska, Florida, Missouri, Tennessee and Utah.

Montana became the 30th state, along the District of Columbia, to adopt Medicaid expansion, after a lengthy battle in its state legislature.

In March Republican legislators in the state, who controlled both the House and Senate, turned down expansion, with one GOP lawmaker saying most people in Montana did not want to "grow our welfare state."

A compromise bill passed, but the state needed a federal waiver to charge premiums and to outsource the administration of the program, according to the Billings Gazette. The state has named Blue Cross and Blue Shield of Montana, the state's largest insurer, as the program's administrator, according to the published source.

[Also: North Carolina tests Medicaid overhaul to rein in costs]

States that have adopted Medicaid expansion have reported sharp declines in uninsured admissions and a drop in unpaid hospital bills.

For hospitals, being in a state with Medicaid expansion could make the difference between being profitable or being in the red, according to statements made earlier this year by Dan Diamond of the Advisory Board. He projected that states without Medicaid expansion would see a few percentage point drop in margins in six years.

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 report by the Department of Health and Human Services. More than two-thirds of the estimated reduction, or $5 billion, was in states opting to expand Medicaid, the report stated.

[Also: Medicaid spending spikes in expansion states, report says]

The bulk of the states that have accepted federal dollars to expand Medicaid are in the Northeast, Midwest and West Coast. Exceptions include Maine, Idaho and Wisconsin. The 16 states that haven't adopted expansion are generally Republican and conservative. The states include Alabama, Georgia, Idaho, Kansas, Louisiana, Maine, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Texas, Virginia, Wisconsin and Wyoming.

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.

"This agreement will bring much needed access to health care coverage to more than 70,000 low-income Montanans," said Health and Human Services Secretary Sylvia Burwell. "The administration looks forward to working with other states to expand Medicaid by designing programs that meet state's needs while providing needed services to residents and significant economic benefits to states."

"Today, Montana has chosen to put people over politics, and we hope that the remaining states will join Montana and the other 29 states that have designed programs to meet the needs of their residents who need health care," President Obama said in a White House statement.

Meanwhile California, which has already adopted Medicaid expansion, agreed in concept to a $6.2 billion deal on a Medicaid waiver to reform the program, according to Kaiser Health News.

A current five-year waiver was extended and is set to expire at the end of the year.

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The biggest share of the funds, at $3.3 billion, are aimed at public hospitals to cover the uninsured and to create pilot programs to keep high-need populations out of the emergency room.

While the deal provides less than the state requested, it includes all the key policies needed to help public hospitals continue the work they started under the last waiver agreement, according to Erica Murray, CEO of the California Association of Public Hospitals and Health Systems.

"We are now excited to roll up our sleeves, negotiate the details and get to work," Murray said.

The funds come from both the federal and state governments and ease the rules on how to run the Medicaid program, known as Medi-Cal in California.

Dr. Susan Ehrlich, CEO of San Mateo Medical Center in San Mateo, California, said under the new waiver public hospitals can keep improving access to primary care, integrating physical and mental health services and making other changes to help patients stay healthy and out of the hospital.

The waiver also fundamentally changes the way government covers the uninsured. Instead of only covering hospital-based care, public hospitals and clinics will have more flexibility and be able to focus more on outpatient and primary care.