Corporate Communications Director, eQHealth Solutions
Federal Waiver to redesign state plan will make Obamacare palatable
Ever since the Affordable Care Act became law in 2010, Louisiana governor Bobby Jindal has been one of many Republican governors who have opposed the law. Nationally, the most visible fight against what has become known as Obamacare was the effort to have the Supreme Court rule the law to be unconstitutional.
Of course, that did not occur, with the Robert’s Court ruling this summer in favor of most provisions of the law. But, one part of the court ruling has allowed Louisiana and some other states to continue to resist its full implementation. This is the Medicaid expansion component. Here, the court ruled that each state could decide for itself whether or not to expand their Medicaid program to provide coverage to uninsured low-income citizens. In Louisiana, this is estimated to be about 400,000 people.
Gov. Jindal has been steadfast in his declaration not to expand Medicaid. He argues there are two compelling reasons not to, even if the federal government will pay almost the full cost to cover these currently uninsured citizens.
Reason one is cost. Jindal says even though the feds will pay for the full cost of the expansion for the first three years, then about 95% of the cost each year thereafter, it is too costly. He estimates it will cost Louisiana $3.7 billion over the next 10 years, an amount he says, that is too much for a poor state such as his to absorb.
Others say Jindal’s estimate is too high. In a recent report, the Kaiser Family Foundation estimates the cost to be about $1 billion over 10 years. It is important to remember that Louisiana today spends upwards of $1.5 billion annually to care for these uninsured citizens (uncompensated care and additional payments to public hospitals). Much of these costs would disappear if the 400,000 uninsured people had coverage.
Reason two for not expanding is Gov. Jindal is concerned that, fundamentally, Medicaid is an antiquated program. He and his health czar, Bruce Greenstein, have each stated that more states have designed their programs via waivers. In essence, a waiver is permission from the federal government that allows a state to make fundamental changes to the original Medicaid law. Jindal says it is foolhardy to expand a program that he believes is already broken.
In spite of the case that he makes for not expanding, there are several dynamics at work that make me believe the Governor might (soon?) drop his opposition.
First, recent budget cuts to the state’s public hospital system will soon create extreme limits to the number of patients they can treat as more beds and staff are cut. Although the Jindal administration has announced some partnerships in which the LSU public hospitals will contract with private hospitals, details are scarce. Also, it is unlikely that significant savings will materialize for several years, if at all.
Second, there will be fewer dollars (in the form of uncompensated care payments) to use to entice private hospitals to contract with the State. Just recently, the National Association of Public Hospitals and Health Systems, a safety-net hospital advocacy group, projected a dire outlook for hospitals in states that fail to expand their Medicaid program. This is due to the expected reduction in federal indigent care payments.
As reported by the American Medical News, data compiled from the Congressional Budget Office, the U.S. Census Bureau and the American Hospital Association estimate that all hospitals, including safety-net facilities, by 2019 will face $53.3 billion in cumulative costs beyond what they would have expected to absorb under original projections for the Affordable Care Act.
Paul Van de Water, senior fellow with the Center on Budget and Policy Priorities in Washington, said the report shows that by not expanding Medicaid, states will have more uninsured people and less funding to care for them.
“This is why hospitals have been encouraging states to adopt the full Medicaid expansion,” he said. “Otherwise they’re left with more uncompensated care,” he said.
Third, Obamacare was passed with the support of some large provider groups, including doctors and hospitals. This support was premised on the understanding that they could absorb lower reimbursements for Medicare and Medicaid patients in return for having to treat fewer uninsured patients. This scenario won’t play out in states that don’t expand Medicaid, and the financial squeeze will only tighten on these providers.
As these three forces collide, the impact will be felt hardest on hospitals. And with the former patients of Louisiana’s shrinking public hospitals still needing care, they will quickly fill the emergency rooms of private hospitals.
This tidal wave of none-paying patients and no visible payer source will have huge impacts on hospitals’ financial viability. To compensate, they will seek more robust contracts with private insures. Then, these costs will be passed on to businesses that provide employer-based coverage. At the end of the food chain, employees will quickly see their benefits cut, co-pays increase and premiums rise.
It is at this point, as the private market reacts, so too will Gov. Jindal.
I expect his position to soften. This will probably be reflected in a greater urgency to submit additional waiver requests to the feds to further revise Louisiana’s Medicaid program. Specifically, I would look for requests that seek changes in how long term care is financed.
If he and Greenstein are successful at getting the feds to approve waivers that make the “broken” Medicaid program more palatable, Jindal can expand Medicaid while still claiming victory.