Blog Post

Who's saying no to the ACA? The states that might need it the most.

July 24, 2014

    Dan Diamond, Managing Editor

    Reformers hoped that the Affordable Care Act would empower the states to experiment with their health systems. And sure—there's a "private option" here, a coordinated care organization demo there.

    But rather than lend itself to 50 different laboratories, Obamacare is generally setting up a stark divide across the nation.

    (The "Two Americas," you might call it.)

    About half of the nation's Americans are living under the ACA's full coverage expansion.

    The other half is missing out, as their state's leaders have opted out.

    Two-dozen states have said no to Medicaid. Three dozen have decided not to run their own exchanges, which could become a much bigger deal pending the outcome of Halbig v. Burwell and this week's associated court cases.

    Like a funhouse mirror, where the states stand on Obamacare has led to two versions of American health care that increasingly look very different.

    • In the pro-ACA states, the uninsured rate is rapidly falling, even as the share of government reimbursement is quickly rising. 
    • In the states sitting out, uncompensated care remains a serious issue—and hospitals and doctors may be more rapidly pushed to try their own reforms as a result.

    Most media attention of this issue has focused on the politics of reform; some coverage has played up the finances, too. But remember: There's more at stake than just the optics of coverage expansion.

    Based on measures of mortality and other health outcomes, the states that are generally saying no to Medicaid—the ones that are resisting the ACA—are the states that might need it the most.

    ACA's effect on uninsured rate

    One of the most tangible impacts of the ACA has been the ever-falling number of uninsured Americans. Based on the latest batch of surveys, the national uninsured rate is down to 15% (or less), its lowest level in years.

    But focusing on the national figure overlooks the coverage gap between the nation's states, the Urban Institute's Genevieve Kenney told me on Tuesday—a pre-existing gap that's only widening.

    "We are finding that the uninsured are increasingly concentrated in states that have not expanded Medicaid," according to Kenney, noting that 60% of the nation's uninsured were in the non-Medicaid states as of June 2014, up from 50% in October 2013.

    That tracks with what other organizations are discovering, too. The Robert Wood Johnson Foundation and athenaResearch have teamed up on the ACAView project, which monitors the law's effect on the U.S. health care system, like whether it's changing doctors' share of uninsured and Medicaid patients.

    "There is a geographic pattern in the distribution of the uninsured that is becoming more pronounced," RWJF's Katherine Hempstead told me.

    "We are definitely seeing an increasing share of the uninsured that are both below 138% of the federal poverty level and living in states that did not expand Medicaid—meaning that there is practically speaking no real coverage options for them."

    Law also having impact on providers' fiscal health...

    That changing mix of patient reimbursement has had an immediate impact for providers, too.

    Hospital spending on uncompensated care in Arizona has fallen by 31% in 2014, the state's hospital association reported. (Arizona is a rare Republican-led state that's moved to expand Medicaid.) That's consistent with findings in other states, according to a June study from the Colorado Hospital Association.

    On the flip side, providers in states that said no to Medicaid are dealing with increased financial pressures, largely because the ACA's penalties and cuts are kicking in even as a big share of the law's added reimbursement is withheld.

    For example, North Carolina's decision to sit out of Medicaid has had immediate financial repercussions for the state's smallest providers—one rural hospital says it will close—as well as the state's largest system. In June, 35-hospital Carolinas HealthCare System reported a 53% drop in earnings in the first quarter of 2014 compared to 2013. 

    The pain might not let up: North Carolina hospitals would forgo about $4.1 billion over the next decade if the state stays out of Medicaid.

    "Where does that [Medicaid] money go? I don't know, but it's not coming to North Carolina," Michael Tarwater, CEO of Carolinas told the Charlotte Observer earlier this year. So “do I like ACA? It doesn’t matter whether I like it or not."

    Fitch Ratings last week warned that states' decisions to sit out of the Medicaid expansion was leading the agency to downgrade hospital bonds.

    "We expect providers in states that have chosen not to participate in expanded Medicaid eligibility to face increasing financial challenges in 2014 and beyond," the agency said. 

    ...and maybe patients' health, too

    States' split on Medicaid was thrown into new perspective in May, when Harvard's Ben Sommers, Kate Baicker, and colleagues demonstrated that expanding health coverage in Massachusetts appeared to improve health outcomes and even save lives.

    It's still too early to know if the ACA's having similar effects on Americans' health, Harvard's Baicker told me earlier this year. (And coverage expansion doesn't automatically lead to better outcomes, especially if there's insufficient access to providers.)

    But we can start to get a handle on the ACA's impact by seeking out "proxy measures" that indicate potential improvements—for example, if more patients start using blood pressure medication, or if the number of eye exams for diabetic patients goes up.

    "Those aren't the health outcomes we're [necessarily] looking for," Baicker said, "but they're highly likely to forecast improvements downstream."

    Urban's Kenney agrees. Her team is tracking metrics linked to related outcomes, like whether people have financial burdens related to meeting health care needs, as well as measures like mental and physical wellbeing.

    "These types of outcomes are typically measured over a longer time horizon," Kenney says—like a year. "We are not expecting them to move nearly as quickly as the point in time uninsured estimates."

    But much as the ACA may accelerate the coverage gap between the states, the law could contribute to a growing health gap, too.

    America's Health Rankings, an annual survey from UnitedHealthcare, ranks the states based on their health outcomes. And the states that are in favor of the ACA's coverage expansion are disproportionately healthier—the average Medicaid expansion state shook out at about 21st in this year's rankings—whereas the average non-expansion state tended to be ranked 30th or below.

    What comes next

    It's worth stressing: States that are hesitant about the ACA aren't necessarily resistant to health reform. They're just not keen on the ACA, whether because of the law's politics or its decision to expand a government entitlement program. (Some leaders are worried that Congress might pull the rug out from Obamacare funding in future deficit reduction negotiations, for example.)

    "There is definitely some reform-oriented thinking going on with Medicaid and the exchanges" in at least several Obamacare-resistant states, RWJF's Hempstead says. For instance, some states that have said no to the Medicaid expansion "are tiptoeing" into Medicaid reform by reimagining it "akin to a private insurance program."

    And if those states continue to opt out of Medicaid, there's a chance that providers in those states might be more quickly pushed to be reformers, too. For instance, they could move into accountable care organizations or even become health insurers, in hopes of stabilizing shaky revenue streams.

    "Trends in hospital finances already are on an unsustainable path," Eric Cragun notes. (Cragun's the Advisory Board's senior director of health policy, and points to research on how providers are learning to survive on Medicare margins.)

    "We anticipate that in the next ten years, hospital margins will decrease significantly unless they take some pretty dramatic steps," he added.

    "If you're a hospital executive in a state that opts out of Medicaid, that says no to exchange subsidies…you have to start looking at the options to keep your doors open," he added. "And I think that makes population health a more attractive option."

    Have ACA questions? We've got answers

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    Join us to break down the recent court rulings, get the latest on ACA enrollment, and understand the other challenges—and opportunities—that still lie ahead for the health law.


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