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Are the dominos finally falling in favor of Medicaid expansion?

December 17, 2014

    Juliette Mullin, Senior Editor

    Tennessee Gov. Bill Haslam made national headlines this week when he became the second Republican governor—after Wyoming's Matt Mead—to propose a plan to expand Medicaid in his state in the wake of the midterm elections.

    The governors' proposals weren't wholly unexpected; the Washington Post had flagged both states as candidates to follow Pennsylvania, the 27th state to expand the program using funds from the Affordable Care Act. What's more surprising is this week's news out of Alabama, where Gov. Robert Bentley explained for the first time this week that he would consider an expansion plan. It's a notable reversal, considering Bentley once said, "Now they are telling us we’ll get ‘free money’ to expand Medicaid. Ladies and gentlemen, nothing is free."

    In light of these reversals, one can't help but wonder: Are we finally seeing the dominos falling on expansion?

    More states consider expanding Medicaid

    From the beginning, health policy experts have predicted that most governors would eventually decide to participate in the expansion. More than a dozen governors announced that their states would not expand Medicaid shortly after the Supreme Court ruling on the ACA gave them the option to do so.

    Here's a look at our first map of the Medicaid expansion:

    But as former CMS Administrator Gail Wilensky said in November 2012, "Historically, when the match is high enough, the states come in."

    The states have come in much slower than observers expected. About two-and-a-half years after the ruling, only 27 states and the District of Columbia have opted into expansion, with many red states holding a hard line much longer than observers had expected.

    Since the midterm elections, some states appear to be making moves toward expansion. "We're starting to see more Republican governors propose coverage expansion plans because there's a little more definition and experience with alternative approaches, which are more palatable for these governors from both policy and political perspectives," says Eric Cragun, senior director of the Advisory Board's health policy team. He adds, "As more and more states roll out alternative models—and to the extent that some of those models are seen as successful—it's likely more Republican governors will pursue some type of expansion."

    In three states, governors are actively moving to expand Medicaid, having reached verbal agreements with HHS on plans to expand:

    • Tennessee: Tennessee Gov. Bill Haslam (R) this week announced an alternative plan to expand the state's Medicaid program under the Affordable Care Act (ACA). The plan still needs legislative and formal federal approval.

    • Utah: Gov. Gary Herbert (R) in early December outlined his plan to expand Medicaid in his state. However, his plan still needs the approval of the state Legislature and formal federal approval.

    • Wyoming: The Wyoming Department of Health in late November proposed an alternative Medicaid expansion plan that would extend the program to about 18,000 state residents with incomes up to 138% of the federal poverty level. The plan must still be approved by the state Legislature, and it must then obtain formal approval the Obama administration.

    In addition, Indiana has submitted a proposal to expand coverage through its Healthy Indiana Plan to CMS, but months later, the agency has not yet decided whether to approve that plan.

    But that's not it; Alabama is not the only state where a governor that previously opposed expansion has expressed openness to it in recent months.

    In North Carolina, Gov. Pat McCrory (R) in October said that he would consider expanding Medicaid. Specifically, he said, "I'm also trying to figure out what to do with Medicaid and whether to expand that or not, because the feds are offering all this money, and yet I’ve got to be concerned with the bureaucracy that could be grown because of that."

    Meanwhile, the newly elected governor of Alaska, Bill Walker (I), is hoping to expand Medicaid, an issue that he had campaigned on. However, he will have to go up against a Republican Legislature that has refused to consider it.

    In Florida, businesses are hoping to re-introduce the possibility of expansion, which the governor supports but the Legislature has opposed. Earlier this month, a group of businesses and private citizens, including well-known Republicans, proposed a plan that would allow the state to expand coverage to low-income residents.

    See where the other non-expansion states stand

    Hospitals drive push for expansion

    One of the key groups driving the push for expansion in non-expansion states is hospitals.

    "Hospitals tend to be the provider group most engaged on this issue because they saw their payments cut as part of the ACA with the expectation of national Medicaid expansion," Cragun says. Advisory Board research suggests that a 338-bed hospital in a state that opted out of Medicaid could expect to write off an additional $500,000 in bad debt and $2.4 million in charity discounts as a result of the state's decision on expansion.

    In Tennessee, hospitals were a "driving factor" behind the decision to expand, according to Cragun. In fact, the state's hospitals have agreed to help fund part of the state's expansion. Cragun explains, "The hospitals stand to benefit from increased coverage, even if it requires them to pay a small portion for the coverage in exchange for getting the federal funding into the state."

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