When the Supreme Court ruled on the constitutionality of the Patient Protection and Affordable Care Act (ACA), also known as Obamacare, all eyes were on the individual mandate. When it survived the challenge, the law’s liberal supporters declared victory. Under the Court’s decision, however, mandated expansion of Medicaid eligibility was made optional. The states split: some opted to expand their Medicaid program immediately, while other states refused. This represents a significant change from the original policy that required state Medicaid programs to cover citizens under 138% of the Federal Poverty Line.
Today, a small but growing number of state legislators and governors are pursuing Medicaid expansion through a federal demonstration waiver. Under Section 1115 of the Social Security Act, the Secretary of Health and Human Services can give a state permission to operate some portion of its Medicaid program outside of traditional federal regulations. States pursuing this option are choosing to not expand traditional Medicaid, instead seeking permission to offer a new, more conservative Medicaid program, with features such as mandatory premiums. The Center for Medicare and Medicaid Services (CMS) has approved waivers for Arkansas, Iowa, Indiana, Michigan, and Pennsylvania, while New Hampshire, Tennessee, and Utah are currently considering the option.
The most recently approved waiver, and the most conservative yet, is the “HIP 2.0” waiver from Indiana. This expands the standards of its current Medicaid program for non-disabled adults, the Healthy Indiana Plan (HIP). There are two main coverage options under this waiver: HIP Basic, essential health benefits including copayments, and HIP Plus, a high-deductible health plan including vision and dental. Individuals below the poverty line can chose either plan, but individuals above the poverty line must enroll in HIP Plus. Enrollees in HIP Plus must contribute monthly to a POWER account, which functions like a health savings account, but without copayments, or risk being locked out of the Medicaid program for six months. Governor Pence argues that these contributions will create more judicious consumers, encouraging personal responsibility and accountability. While some liberals are wary — especially of the requirement for low-income individuals to contribute to their POWER account — there are two reasons why they should celebrate the approval of this plan. First, the ACA’s Medicaid expansion makes it a true safety net program, rather than one based on categorical eligibility. This is especially important since the CMS did not approve Indiana’s proposed work requirement. Furthermore, state Medicaid plans have always varied immensely from more to less conservative. The more states that pursue more conservative expansion options, the more political cover other states will have to expand also.
Medicaid originally arose as the health insurance counterpart to other welfare programs. For example, people eligible for SSI disability were also eligible for Medicaid. Before the ACA, Medicaid was not targeted at the poor, but at specific disadvantaged groups, like the aged, blind, and disabled, poor children, pregnant women, and adults with dependent children. To cover poor, childless adults, states needed a demonstration waiver — the same waivers now being used for more conservative expansions. Due to the ACA, federal Medicaid funds are easily available for any state to cover all impoverished adults, even able-bodied non-parents. This allows Medicaid to function as a true safety net for any American in hard times, rather than a program reserved only for specific disadvantaged groups. By contrast, Indiana’s original expansion waiver proposal sought to make eligibility dependent on employment or participation in a work search program. This component of the plan would have added another eligibility category, making Medicaid a limited safety net program. Without it, Indiana’s Medicaid program is much more liberal than it was before.
The history of Medicaid reveals a trend of states choosing to expand their Medicaid programs only through more conservative waivers. In fact, the last state to establish a Medicaid program, Arizona, only did so under a demonstration waiver that allowed a more conservative program. State Medicaid plans have always varied from conservative to liberal, but it is likely that every state will eventually expand their Medicaid programs. It might take time, but there is simply too much federal money on the table for states to resist Medicaid expansion, and that should be good news for all Medicaid supporters.