National Journal
July 19, 2012
By Margot Sanger-Katz
When they thought a big Medicaid expansion was mandatory, governors who opposed the health care law planned to grumble but go along. Now that Chief Justice John Roberts has essentially made the program optional, many are weighing their choices. A few are in the hell-no or hell-yes camps. Several of the undecided governors, however, hope they can leverage the Obama administration’s desire to bring them in to obtain concessions from the Health and Human Services Department. A handful want specific, major modifications to their existing Medicaid programs—or the option to implement some elements of the federally funded expansion, but not others.
In a letter to governors last week, HHS Secretary Kathleen Sebelius, a former governor, gave the would-be negotiators reason for hope. Although she and other Obama administration officials have been saying publicly that they expect all 50 states to expand Medicaid, she told state executives, “We are committed to providing states with as much flexibility as we can.” Perhaps governors would be able to insure fewer people, cover fewer conditions, or exchange federal matching dollars for a lump sum to implement their own plans.
But in truth, Sebelius can’t do much to accommodate governors. Although Medicaid is flexible in certain areas, it isn’t in others. “There are certain nonnegotiables, because there’s only so much the statute will allow you to do,” says Sarah Somers, the managing attorney at the National Health Law Program. To get what they want, the governors really need new legislation, not a deal-oriented HHS.
At the National Governors Association meeting last week, several Republicans named their prices for expanding Medicaid. Gov. Gary Herbert of Utah said he might expand the program if his state could administer it as a block grant. Dave Heinemann of Nebraska said he wanted beneficiaries to pay more. “I’d like to see co-pays exist under our Medicaid system so you see a little skin in the game,” he said. A letter to President Obama from the Republican Governors Association asked whether states could expand their programs partway and still get all of the federal funds attached to the expansion.
The original Medicaid statute, passed in 1965, gives the HHS secretary wide latitude in some areas and almost none elsewhere. The 2010 law makes changes that build on this underlying legal structure. Congress established clear rules on how the federal government finances the program—states get a set federal “match” for every dollar they spend on care. The law spelled out minimum benefits that states must cover, and which populations must be included. It limited how much states can ask individuals to pay for their care. (Research shows that co-payments and deductibles discourage beneficiaries from seeking care, so lawmakers didn’t want anything standing between poor people and the treatments they need.)
On nearly everything else, the HHS secretary can waive the rules under a provision that permits her to approve experiments and demonstration projects to further the goals of the statute. One-third of federal Medicaid spending goes to waivers in 34 states, according to data from the Office of Management and Budget and the Kaiser Family Foundation. Oregon is allowed to pay doctors for outcomes instead of procedures, Florida uses managed-care plans to limit provider networks, and California lets counties decide whether to cover optional populations. Several Medicaid experts say that, while waiver policies vary between administrations, Sebelius has been expansive in her grants of discretion.
But there are limits. Although Republican state leaders (and even some Democratic governors) want block grants, Sebelius couldn’t offer them if she wanted to, because Congress designed Medicaid as a matching program. “What most of them would like is a big bag full of money and a pat on the back,” says Timothy Jost, a law professor at Washington and Lee University. “And that isn’t what the Affordable Care Act provides.” Block grants require new legislation—which Mitt Romney and House Republicans have promised to pass if they win in November’s elections.
The secretary is similarly hobbled when it comes to cost-sharing. Governors across the political spectrum have requested that beneficiaries pay higher co-payments, premiums, and deductibles. Most of those proposals have been shot down, especially when they involve children. “For the lowest-income children, the law is pretty tight on no co-pays or premiums,” says Joan Alkers, the deputy executive director of the Georgetown University Center for Children and Families. That constraint doesn’t disappear just because the secretary wants buy-in for the expansion.
The Affordable Care Act also appears to limit the secretary’s ability to permit states to expand partway. Some states may want to use the generous federal match—100 percent for the first three years—to cover more people than they do now but still fewer than required under the 2010 law. This question is less certain, but it doesn’t look good for the states, several lawyers say. “There’s nothing in the 2014 expansion group that would give the secretary the ability to cut it up into pieces,” says Sara Rosenbaum, a professor of health policy at the George Washington University School of Law.
The Obama administration is motivated to secure state cooperation on a key pillar of its signature achievement, but that fact doesn’t help governors much so long as current laws stay on the books. Without congressional action, Medicaid constraints will limit flexibility on those concessions that governors most desire. And that’s true even if a Republican replaces Sebelius as secretary next year.