Taking a Pass on Key Aspects of Health Care Reform

Some states are declining to expand Medicaid and leaving insurance exchanges to the federal government.

    • February 19, 2013

With key provisions of the Patient Protection and Affordable Care Act—health care reform—set to take effect by 2014, much attention is now focused on the states, where governors and state legislatures are deciding whether and how to participate in the two reform elements intended to bring health insurance to millions of currently uninsured Americans: the expansion of Medicaid coverage, and the creation of state health insurance exchanges. Some states, such as New York, are embracing the programs. Others are not.

Under the law, states can choose to create exchanges—government-organized marketplaces for buying and selling health insurance to residents not already covered—or leave the task to the federal government.

In addition, the Supreme Court decision upholding the law rendered its expansion of Medicaid, the federal-state program providing insurance to the lowest income Americans, optional for the states. Those that expand Medicaid will do so largely with the federal government paying the entire cost for three years, and 90 percent thereafter.

As of mid-February, 24 states and the District of Columbia were on their way to forming exchanges, either on their own or in partnership with the federal government, and 26 states were leaving the task to the federal government. Similarly, 22 states and the District of Columbia had announced plans to expand Medicaid, while 15 had declined. The remaining states are officially undecided, with no deadline for a decision, meaning that some could decide later to expand.

Behind States' Decisions

While bipartisan support for expanding Medicaid has emerged in some states, there are deep differences with respect to exchanges, with numerous state leaders expressing concerns about the cost of creating their own exchanges. With some exceptions, states with Republican leadership are generally opting against building exchanges, as is the case in Texas, Oklahoma, Louisiana, Mississippi, Alabama, Georgia, South Carolina, Pennsylvania, South Dakota and Idaho. "It's not unexpected that Texas didn't set up an exchange or expand Medicaid, given that the governor ran for president against 'Obamacare,'" said Larry Jacobs, PhD, a 1993 recipient of a Robert Wood Johnson Foundation (RWJF) Investigator Award in Health Policy Research. "Still, in Arizona and Ohio, conservative Republican governors and legislatures are moving ahead on Medicaid. Those states give us insight into how things are going to play out in the future, because of the dynamics forming among the stakeholders—hospitals, doctors’ associations, and patient groups. If Medicaid isn't expanded, that's a lot of money that hospitals in those states won't get."

Colleen Grogan, PhD, a 1997 RWJF Investigator Award recipient, worries about the systemic impact in states that do not expand Medicaid. "When states decide not to expand Medicaid, the people suffer, but the safety net suffers, too," she says. "A small percent of providers take care of the majority of Medicaid patients, and that’s the safety net. When states don’t expand Medicaid, patients will still go to the safety net but the net will be strained, operating under a more constrained budget."

The Future

Since states that choose not to expand Medicaid at the outset can still opt in later, "it's useful to consider the experience with the original Medicaid program," says Frank J. Thompson, PhD, a 2007 RWJF Investigator Award recipient. "Medicaid passed in 1965, and by 1968 about three-quarters of the states had come on board. By 1970, all but two were committed. But the last state to participate, Arizona, waited until 1982…. Eventually, they saw it in their interest."

Similarly, Elizabeth Rigby, PhD, an RWJF Health & Society Scholar (2005-2007), sees "fluid state movement" on the exchanges over the next several years. "My best guess," Rigby says, "is that the majority of states end up in something that looks more like a state-federal partnership, where the federal government and the states each take the lead on pieces that are important to them."

For patients, Rigby sees little initial difference between federal and state exchanges, partly because the federal government sets minimum standards regardless of who runs the exchange. At first, variation from state to state will result more from "insurance market differences than from which entity sets up the exchange," she says. "Who runs the exchange won't be that noticeable to the patient in the short run." By contrast, Rigby says, "the states' decisions on Medicaid make a huge difference to people. Millions of people will either have insurance or they won't."

Read about New York State’s Medicaid re-design and implementation of the Affordable Care Act, led by a three-time RWJF grantee.
Learn more about the RWJF Investigators Award in Health Policy Research.
Learn more about the RWJF Health & Society Scholars.
For an overview of RWJF scholar and fellow opportunities,
visit www.RWJFLeaders.org.

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