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AHCA withdrawal brings state Medicaid expansion plans back to center stage

With the Affordable Care Act intact for the foreseeable future, some states are revisiting Medicaid expansion to close the insurance gap and stabilize markets.

The American Health Care Act, which was withdrawn from consideration in the House on March 24, proposed a per-capita funding model that was likely to put pressure on expansion states. Although those states would have received funds to cover the new bracket of Medicaid patients, the bill required that new enrollment be capped starting in 2020.

"In the states that did Medicaid expansion, everybody's breathing a little sigh of relief," Mike Fraser, executive director of the Association of State and Territorial Health Officials, a public health nonprofit, said in an interview.

For the other 19 states, the majority of which are in the South and Midwest, the future is up for debate. Kansas' governor is considering an expansion bill this week. North Carolina, Georgia, Idaho, Nebraska and South Dakota are all reported to be considering expansion, said Debra Miller, director of health policy at the Council of State Governments, a nonpartisan nonprofit organization.

"Expansion has been linked to job growth and reduced uncompensated care, according to studies in some expansion states," Miller said, noting that the current ACA funding matches — in which the federal government pays 90% of new Medicaid patient costs — could still be a draw for states.

On the other hand, Megan Neuburger, Fitch managing director of corporate finance, said it is unlikely that more states will expand eligibility, given the uncertainty of future funding.

Kansas jumps on expansion

Within days of AHCA's withdrawal, Kansas lawmakers voted to expand Medicaid. A 25-14 Senate vote March 28 followed an 81-44 House vote in February, moving the bill up to Republican Gov. Sam Brownback's desk. Both houses hold Republican majorities.

Rep. Jim Ward, a Democrat who sponsored the initial expansion bill nearly three years ago, said in an interview before the Senate decision that "it didn't hurt" that AHCA was withdrawn days before the vote. Legislators were also motivated by the healthcare sector being one of the largest job providers in the state, Ward said.

Uncertainty over Medicaid's future funding actually could have helped in the vote too, he said. In the event that Medicaid is moved to a block funding structure down the line, Kansas' expansion should be reflected in a more significant grant amount, he said.

Brownback will veto the bill, Ward said, but there is a "good chance" the two houses will have enough votes to override the veto.

Following AHCA's withdrawal, President Donald Trump said in a news conference that the best thing to do was to "let Obamacare explode."

Substantial criticism of ACA pointed to the limited options sometimes only one insurer in some marketplaces. Uncertainty over the law's future only exacerbated this, with some major insurers dropping out of this year's exchange while the "repeal and replace" debate waged on.

According to data collected by the National Conference of State Legislatures, Blue Cross Blue Shield is the sole provider for both individuals and small businesses in Alabama, South Carolina and Wyoming, and the sole small-business provider in Arizona. Several more states have just two providers in either space.

Rising pressure from uninsured

Fitch's Neuburger said there is little optimism that a political will exists to "fix the ACA and make the exchanges functional." She predicted that this year's enrollment dip will likely carry into the next year, meaning that hospital companies — whose stocks rallied after AHCA's failure — are likely to feel the pressure from a rising uninsured population.

The AHCA would have compensated for that by giving back some of the government funding cuts that the ACA put in place for hospitals, according to Neuburger. "But now those funding cuts will remain so you'll have higher levels of uncompensated care, but you're not going to get relief on the ACA-related funding cuts," she said.

Still, Neuburger said that in the overall scheme of things, "the AHCA not moving forward was really positive just with respect to the general future of the Medicaid program."

For Sara Collins, vice president of healthcare coverage and access at the Commonwealth Fund, a private foundation to improve health systems, the possibility of uncompensated care is likely to drive more states toward expansion. Not closing this gap could put safety-net institutions at risk, she said.

The week before AHCA was due for vote, the Commonwealth Fund released a report on healthcare access and coverage in the four largest states, New York, California, Florida and Texas. New York and California, left-leaning states, had adopted Medicaid expansion; Florida and Texas had not.

The research found that uninsured rates were 7% in New York, 10% in California, 16% in Florida and 25% in Texas. The number of survey respondents reporting cost barriers to care was also lower in California and New York than in the other two states.

"The marketplaces aren't going to explode," Collins said, referring to Trump's comments and adding that according to the Congressional Budget Office, the individual insurance markets were likely to be stable under either the ACA or the AHCA.