US Ruling Casts Doubt on Expanding Healthcare for the Poor

29.06.2012 -

While the Supreme Court upheld a U.S. healthcare overhaul on Thursday, its decision cast doubt on whether the plan to extend health coverage to more than 30 million uninsured people will reach some of the poorest Americans.

In its ruling, the court allows states to opt out of an expansion of Medicaid benefits for low-income earners with household incomes of up to 133% of the federal poverty line, or about $30,000. The current Medicaid threshold varies geographically but in 33 states is under the definition of poverty of $22,000 per household.

Government officials in states that opposed President Barack Obama's health law, such as Texas and Virginia, said they were studying the ruling and had yet to decide how to proceed on the Medicaid provision. Wisconsin Governor Scott Walker said the state would not take any action to implement the law, and hoped elections in November would put in power Republican candidates who would repeal it.

Others said they were leaning toward limiting any expansion, a move that could deny insurance to a significant percentage of the estimated 16 million people who would have been newly eligible for Medicaid.

But senior administration officials said they were not at all concerned that states would opt out of the Medicaid expansion, saying that nearly all the states joined Medicaid within a few years of its launch a generation ago despite resistance from some governors.

The administration officials pointed out that the federal government would fund the entire Medicaid expansion in the first three years and 90% of it thereafter, calling it a good deal for states.

But the prospect of federal support did not diminish governors' worries about matters close to home.

"An expanded Medicaid program would add almost 400,000 new enrollees and cost the state an estimated $1.7 billion over the next ten years," Mississippi Lieutenant Governor Tate Reeves said in a statement. "Mississippi taxpayers simply cannot afford that cost, so our state is not inclined to drastically expand Medicaid."

Florida Governor Rick Scott said the expansion would be devastating to the state's economy.

"If you look at every government program in the world, they overpromise, they run out of money, they underpay providers and that rations care," he told reporters. "As bad as it is for patients, it's going to be just as bad for taxpayers. We're not going to be able to afford this."

Medicaid is jointly funded by the federal government and state governments and represents the biggest spending item in most state budgets.

Eligibility differs widely from state to state, with some states limiting coverage largely to adults with children and pregnant women while others extend coverage to everyone living near the poverty line.

States under pressure

Millions of people turned to Medicaid during the 2007-2009 recession due to job losses and drastic drops in income, pushing spending on the program up by an average of 6.6% per year, according to the nonprofit Kaiser Foundation.

Medicaid and similar programs are over budget in 10 states this fiscal year, which for most states ends in two days, according to the National Conference of State Legislatures.

"I don't think there's any doubt that some states will say thank you very much but no thanks. Others will eagerly take the deal," said Dr. Arthur Kellermann of the think tank RAND Health.

Americans with low incomes who do not qualify for Medicaid under their states' policies may now be squeezed by the health law's requirement that every individual purchase healthcare coverage or face a penalty.

"It means lots of folks will be caught in between the mandate to have insurance and the fact they may not be able to afford it," said Billy Tauzin, a former member of the House of Representatives who was an early supporter of healthcare reform as head of the U.S. pharmaceutical industry lobby.

Other experts dismissed the Medicaid decision as minor, saying federal subsidies that would cover 90% to 100% of the cost would largely guarantee its success. The federal government was expected to spend about $430 billion on the Medicaid expansion over the next decade, according to the nonpartisan Congressional Budget Office.

"The incentives to participate are so strong that most people don't expect any of them to opt out unless they were ideologically driven," said Wharton School health economist Mark Pauly.

Other challenges to implementation remain.

On the political front, the law faces the real possibility of repeal if Republicans win control of the White House and the Senate in the Nov. 6 elections. But political analysts said control of the Senate would have to swing decidedly in Republican favor to ensure the law's elimination.

Regardless of who wins in November, analysts say healthcare reform could also come under pressure from efforts to reduce a ballooning national deficit.

Some say Obama will face renewed Republican efforts to delay implementation of the state insurance exchanges to save money on federal subsidies that are expected to total about $350 billion over 10 years.