Medicaid heat is put on 4 states

MIAMI -- President Barack Obama's administration is dialing up the pressure on four states that have resisted expanding Medicaid coverage for their low-income residents under the federal health care overhaul.

The leverage comes from a little-known federal fund that helps states and hospitals recoup some of the cost of caring for uninsured patients. If the states expand Medicaid, as the health care law provides, then they won't need as much extra help with costs for the uninsured, the administration has said.

The Patient Protection and Affordable Care Act promised federal funds to cover the whole cost of newly qualified Medicaid patients for three years, until 2016, and at least 90 percent of the costs thereafter. Nevertheless, 20 states have refused to ease access to their Medicaid rolls, with many arguing that the added costs would still be a strain on their budgets.

But because of special arrangements that predate the health care law, four states that haven't expanded Medicaid have been getting billions each year in extra funding to pay for the care of people who are uninsured.

Federal health officials publicly said for the first time last week that Medicaid expansion should be linked to any discussion on extending those funds. The hospital funds are an optional program, not an entitlement program like Medicaid, meaning the federal government has broad discretion whether to grant them, experts said.

The two top targets so far are Florida and Texas, with a combined 1.6 million people who could qualify for Medicaid under the wider eligibility criteria, according to estimates from the Kaiser Family Foundation. Both states have received several billion dollars in recent years from Washington under the so-called low-income pool.

On April 14, the Centers for Medicare and Medicaid Services, which manages federal funding to the states for health programs, alerted Florida officials that it plans to let the state's $1.3 billion in low-income-pool funding lapse at the end of June.

"Uncompensated care pool funding should not pay for costs that would be covered in a Medicaid expansion," the letter says.

In all, nine states -- including Tennessee, California, Massachusetts, Arizona, Hawaii, Kansas and New Mexico -- struck deals with the federal government for the extra money to help hospitals, which are legally bound to provide care whether or not patients can pay. Of those, only Kansas and Tennessee have joined Florida and Texas in continuing to resist Medicaid expansion.

Florida's is the first deal to come up for renewal since the Affordable Care Act went into force.

"There's no doubt that other states that haven't expanded Medicaid are watching this," said Joan Alker, executive director of the Georgetown University Center for Children and Families.

Alker said she didn't think the federal government would immediately drop funding to zero, even for states that don't expand Medicaid. But the political standoff between some GOP states and the federal government has left hospitals anxious.

Many hospitals have said that even the low-income-pool funds don't cover all of their costs for caring for the uninsured or for Medicaid patients. Several hospitals said they would be forced to cut services or shut down without the funding.

The Centers for Medicare and Medicaid Services won't say whether states that decide to expand Medicaid will get to keep their low-income pools.

Spokesman Aaron Albright said the letter the agency sent Florida officials detailed "key principles" the agency will use in considering the low-income-pool programs in the states.

"Discussions with each state will also take into account state-specific circumstances," he said.

Negotiations are playing out much the same as the rest of the Affordable Care Act, with Republicans crying federal overreach and threatening lawsuits as the Obama administration pursues its goal of getting health insurance to more Americans.

Florida Gov. Rick Scott compared the administration to something out of the fictional TV mobster drama The Sopranos. He said last week that he plans to file a lawsuit, alleging the government is using the federal funds to coerce him into expanding Medicaid.

The governor said the threat proved that the Obama administration couldn't be trusted to fulfill its promise to cover most of the cost of a Medicaid expansion, either.

"Why would we put state taxpayers on the hook for something when we can't trust the federal government to fulfill a program they already started?" he said.

Texas Gov. Greg Abbott backed Scott.

"Texas will support Florida in its litigation against the federal government. Medicaid expansion is wrong for Texas. Florida's approach should be determined by Floridians, not coerced by federal bureaucrats," Abbott said.

Federal health officials have warned states for more than a year that the low-income-pool program was ending. But a Supreme Court decision allowing states to decide whether to expand Medicaid has complicated the issue.

"The federal government is trying to use the [low-income-pool] money to encourage states to expand. Whether you feel like that's coercion or that's encouragement is in the eye of the beholder," said Dan Mendelson, chief executive officer of the market research firm Avalere Health.

Terms of the agreements between the federal government and the states vary widely, including when they expire and how much funding each state receives.

Florida received about $1 billion last year from the U.S. Its arrangement stems from a deal reached under former Gov. Jeb Bush while his brother George W. Bush was president.

Florida, Kansas and Texas received their hospital funding when the federal government allowed them to privatize their Medicaid programs; the added federal dollars were another way for hospitals to get on board with managed care.

The demand for health insurance is clear in Florida, where 1.6 million signed up for coverage on the federal exchange. But the nearly 1 million Floridians who don't qualify for a tax credit on the exchange could get coverage through an expanded Medicaid program and are affected by the legislative standoff.

In Tennessee, Gov. Bill Haslam has pushed for Medicaid expansion, but fellow Republicans in the Legislature have refused. Tennessee's hospital funding agreement expires in December.

Kansas Republican Gov. Sam Brownback, who has long opposed the Affordable Care Act, recently signaled that he might be willing to change his position on the Medicaid expansion in the face of a $400 million budget gap.

Texas' existing five-year, nearly $30 billion Medicaid waiver -- which includes the hospital funds -- is set to expire in September 2016.

Unlike most of his GOP colleagues, Texas state Rep. John Zerwas, an anesthesiologist, supports an alternative to Medicaid expansion that would offer coverage to low-income people. But he doesn't like the coercive approach he says the federal government is taking, and he doesn't think it will change Texas lawmakers' stance on Medicaid.

"It's inappropriate for the federal government to try to be holding states hostage to expand Medicaid," Zerwas said.

Information for this article was contributed by Kelli Kennedy and Ricardo Alonso-Zaldivar of The Associated Press and by John Tozzi of Bloomberg News.

A Section on 04/25/2015

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