Democrats’ Push to Expand Medicaid Depends on Red States Taking the Bait

Every week, Shellie Fry carefully plans out each meal she, her 81-year-old father, and her 30-year-old son will eat. She buys the least amount of food she thinks they can manage because money has been tight since her father lost his job cleaning charter buses in March, after the pandemic hit. Without health insurance, she pays out of pocket for the medications she needs for her bipolar disorder, heartburn and blood pressure, and by the time the family pays its other bills, as well as her father’s Medicare contribution and medications, there is little money left. “I’ve had a few times where I just didn’t know how we’re gonna pay for groceries,” she says. Still, she knows she can’t skip her medications, thinking, “Who’s going to take care of these people when I’m gone?”

Because Florida did not expand its Medicaid program in 2014 when the Affordable Care Act (ACA) first allowed states the option, Floridian adults without children are not eligible regardless of how little they make. While Fry’s son is autistic and can’t be left alone for more than a few hours, Fry says, his age means that she does not qualify for public health coverage. When she looked into buying coverage through the ACA marketplace, she didn’t make enough to qualify for any assistance there either, and the plans were far too expensive.

Fry’s story, while unique in the details, is familiar to millions of low-income Americans who remain uninsured, caught in a coverage gap that leaves no affordable option for health insurance—even during a pandemic when access to health care is more important than ever. Now Democrats are trying to use their proposed $1.9 trillion COVID-19 relief package to address the problem by expanding Medicaid access and increasing ACA subsidies nationwide.

This week, the House Energy and Commerce Committee presented a provision, which it advanced on Friday, that would offer states that have not yet expanded Medicaid significant financial incentives to do so. The House Ways and Means Committee also approved legislation this week that would boost ACA subsidies, resulting in cheaper insurance plans to many middle class people and those who have lost jobs during the pandemic. The Biden Administration will also reopen enrollment on the ACA marketplaces starting Feb. 15. If they pass the House and Senate, these combined efforts could help a significant number of Americans access more affordable health coverage.

But they also only go so far. While the ACA subsidies and the special enrollment period and can be implemented by the federal government, conservative states must choose to accept federal funding and expand Medicaid for the lowest-income Americans to get this help. Republicans control the governments in most states that have not expanded Medicaid, and even the three states with Democratic governors have to contend with Republican-led legislatures.

This political reality is at odds with both President Joe Biden’s ambitious plans for expanding health care coverage and with some Democrats’ high hopes of meaningful reform. On the campaign trail, Biden proposed creating a “public option” health insurance plan that would automatically enroll people in the Medicaid coverage gap. Now that he’s in office, saddled with a razor-thin Democratic majority and many urgent priorities, a host of procedural and political hurdles make those big plans difficult to deliver.

The most obvious hurdle is that Democrats need 60 votes in the Senate to pass most legislation. That means they must either secure support from ten Republican lawmakers, or use a wonky process called budget reconciliation, which allows lawmakers to pass budget-related legislation with just a simple majority. Health policy experts say creating a new public option plan through reconciliation would be difficult because it would likely involve measures beyond the process’s budget-related scope, and many lawmakers are worried about bogging down the COVID-19 relief package with more controversial health reform debates. The House’s current approach—offering states financial incentives to expand Medicaid—is an attempt to avoid these procedural and political pitfalls.

Still, Democratic efforts to expand Medicaid have also become highly politicized in recent years. When the ACA first passed in 2010, Congress designed it so that Medicaid would provide health insurance to people in or near poverty, and the federal government would cover most of that cost. But Republican states sued in 2012, arguing the federal government could not force them to expand their Medicaid programs, and the Supreme Court agreed. Since then, most states have moved to expand Medicaid and accept the federal funding, but 12 have not.

Because the ACA was written with the expectation that very low-income people would receive coverage through Medicaid, it did not make that population eligible for subsidies on the ACA marketplace. The result is that those whose incomes are below the federal poverty level—about $12,880 for an individual and $26,500 for a family of four—and who live in states that did not expand Medicaid are caught in a trap: they qualify for neither Medicaid nor subsidies to buy health insurance on the ACA marketplace. This has left about 2.2 million people in poverty and uninsured, according to estimates from the Kaiser Family Foundation (KFF).

“These are the most vulnerable among us. And it’s absolutely critical to be thinking about how to get their needs addressed,” says Joan Alker, executive director of the Center for Children and Families at Georgetown University.

Congressional Democrats hope to address this problem by giving the conservative states that have not expanded Medicaid more money if they agree to do so. Under the existing system, the federal government shares Medicaid costs with states and covers 90% of the costs for each state’s expansion group. The proposal put forth by the Energy and Commerce Committee makes that more generous: it proposes that for any state that newly expands Medicaid, the federal government would increase what it pays for all non-expansion Medicaid enrollees by 5 percentage points for two years. That’s in addition to still covering 90% of the costs for expansion and on top of a 6.2 percentage point bump in federal Medicaid matching funds that Congress allocated last spring in response to COVID-19. The new money would be available to the 12 states that have not expanded Medicaid, and to Missouri and Oklahoma, which voted to expand Medicaid last year and are expected to implement the programs this summer.

That’s a pretty enormous financial incentive, experts say. Because the traditional Medicaid population, which includes many seniors and people with disabilities, is where states spend the bulk of their Medicaid budgets, that extra 5% in federal funds would more than cover the states’ cost of expanding Medicaid, according to a new analysis from the Center on Budget and Policy Priorities. “It’s to the point where I think what you see in the provision is saying, we need to just do whatever we can so we can get these people covered,” says Judy Solomon, a senior fellow for health care at CBPP and a co-author of the analysis.

The new federal money on offer also comes at a time when many states face intense budget crunches as a result of the coronavirus pandemic. “States are seeing really difficult budget choices. So if you say to them, Listen, you can expand Medicaid, and it will reduce state costs, that could be pretty attractive,” says Matthew Fiedler, a health economist at the Brookings Institution. “At the same time, these states have been willing to turn down huge amounts of federal money for seven years now.”

The political winds are also shifting. While many Republican-led state legislatures and governors have been reluctant to expand Medicaid, public polling indicates that voters of both parties largely support the idea. The red states that have voted to expand Medicaid in recent years have largely done so as a result of ballot measures. But there are only three states left—Florida, Mississippi and South Dakota—where ballot measures are constitutionally allowed. In the rest, elected officials will have to be persuaded. In North Carolina and Kansas, the state’s Democratic governors have been pushing efforts to expand Medicaid, and Democrats and health care advocates in other states have waged years-long campaigns without much progress.

But health care activists hope the pandemic and the extra money could move the needle. A survey conducted by the Commonwealth Fund in October, just before the 2020 election, found that three quarters of likely voters in swing states that had not expanded Medicaid—Florida, Georgia, North Carolina, Texas, and Wisconsin—supported the idea. In Texas, some Republican state legislators have said they are open to considering expansion, and in Alabama, a new poll coming out later this month shows that 64% of likely Republican voters favor expanding Medicaid in their state when told about arguments for and against the idea, according to Cover Alabama, a coalition of groups advocating for Medicaid expansion.

“Governor Ivey has said for many years that the question is not about whether to expand Medicaid. It’s about how do we pay for it,” says Jane Adams, director of Cover Alabama. Her state would get an estimated $940 million in new federal funding if the House Democrats’ provision becomes law, according to CBPP. “It’s just too good of a deal to not take,” Adams says.

If all the remaining states took Congress up on this offer and expanded Medicaid, KFF estimates that at least 4 million uninsured people could gain coverage: the 2.2 million caught in the coverage gap and another 1.8 million who are currently eligible for ACA marketplace subsidies but would get more comprehensive and cheaper plans under Medicaid. This is particularly important during the pandemic. About 60% of this group are people of color, and at least 640,000 are essential workers, all of whom are at greater risk of getting sick from the coronavirus. It’s not just helpful during the pandemic. Research has shown that expanding Medicaid is linked to a range of better health outcomes, increased access to primary care and preventive health services, and lower out-of-pocket spending.

Take Fry, for example. In Florida, she has found primary care through the St. Petersburg Free Clinic, an organization that serves uninsured Floridians, but if she has an issue the health center can’t handle, she typically waits it out and hopes she can avoid going to the hospital, she says. This is not only dangerous for her health, but it also costs states money. By contrast, many states have found that expanding Medicaid actually saves them money by reducing spending on uncompensated care from people without insurance, as well as by getting federal support for programs such as mental health care.

In addition to offering states these expansion incentives, the Energy and Commerce Committee’s portion of the relief bill also includes other Medicaid-related provisions that would take aim at drug costs, cover COVID-19 vaccines and treatment through Medicaid and the Children’s Health Insurance Program and allow states for five years to grant Medicaid coverage to women for 12 months after they give birth, among other areas. The package also provides funding to bolster the nation’s public health system, allocating $14 billion for vaccines and $46 billion for testing, contact tracing and mitigation, for example.

The Medicaid provisions are popular among Democrats and are expected to make their way through the House and then the Senate reconciliation process without issue. But ultimately, the current plan means people like Fry will need to wait to see whether her state takes the federal government up on its offer.

“It could be huge for people in those states,” Solomon says. “But here’s where we have to just hope that states see the the benefit of these added dollars along with the overall lasting benefit that expansion would have.”