The economics of taking federal dollars for MaineCare (and why LePage will do it)

Posted Wednesday, July 11, 2012 in Analysis

The economics of taking federal dollars for MaineCare (and why LePage will do it)

by Gina Hamilton

In the wake of the Supreme Court decision that verified that The Affordable Care Act  (ACA) (also known as Obamacare) is constitutional, several Republican governors took advantage of the fact that the High Court had also ruled that the feds had to continue to provide existing Medicaid dollars, even if the states refused to expand Medicaid services to new patients.

Gov. Rick Perry of Texas was the latest GOP governor to say that his state would not accept new federal dollars. 

Despite Maine's governor's bluster and missteps about the ACA, including referring to the IRS as the Gestapo last weekend, there's one thing he hasn't said.  He hasn't said that he will not take federal monies to expand MaineCare here.

Instead of joining Republican governors of six other states in announcing he will refuse to participate in the expansion of Medicaid, LePage is lying low.

The likely reason for LePage's refusal to commit to the tea party stampede is that the MaineCare expansion won't cost Maine a nickel.  In fact, it should save the state somewhere between $65 million and $118 million over six years, according to the Kaiser Family Foundation.  The full report can be read here.

Maine already offers MaineCare to many of the people who are set to get it under the new law's expansion. So, Maine won't be enrolling as many new members as in other states, and it will start getting a more generous federal match for the people it already covers.

Maine expanded MaineCare of its own free will during the Baldacci administration.  LePage has proposed scaling it back, but it's a difficult sell, politically, especially in a state where the average income is low and insurance costs are relatively high.  MaineCare is a popular program.  Even though LePage currently has a Republican majority, it is a narrow majority at best, and many Republican leaders are justifiably concerned about their own political futures in November.  Indeed, the odds are that LePage may not have a majority in either house come January.

Last spring, the LePage administration was informed that rescinding MaineCare for many citizens would likely not get a Health and Human Services waiver, which would be necessary to cut the MaineCare rolls significantly.  Just Monday, Rep. Chellie Pingree wrote to Department of Health and Human Services Secretary Kathleen Sebelius asking her to reaffirm federal regulations prohibiting big cuts in the Medicaid program in Maine.  The health care reform law contains a maintenance of effort (MOE) provision that requires states to maintain their Medicaid programs through 2014 at the same level that was in place when the law was passed.

“As you continue to examine the potential implications of the Supreme Court’s decision, and develop guidance for states on the current and future implementation of the ACA, I strongly hope that you will reaffirm your commitment to the MOE requirement. It is clear to me that the Governor’s proposed elimination of Medicaid coverage would not only adversely affect the health and wellbeing of Maine residents and upset Maine’s local economies, it would also be in direct violation of the MOE requirement, even in the wake of the Supreme Court’s ruling,” Pingree wrote.

At issue are Governor LePage’s proposed cuts to Medicaid (MaineCare) that would eliminate coverage for three groups of people:  Seniors and people with disabilities in the Medicare Savings Program, 19 and 20 year olds, and parents with incomes between 100% and 133% of the Federal Poverty Level.  The proposed cuts would result in a loss of coverage for roughly 27,000 Maine residents.

Some patients have already challenged these proposals and others in federal court, and no decisions can be made until they have worked their way through the system in any case.

Under the health care reform law, states are required to maintain existing Medicaid programs until the new health insurance exchanges open in 2014.  The LePage administration had suggested that the recent Supreme Court decision upholding the health care law undoes that requirement, because the ruling limited Congressional power when it comes to expanding Medicaid.

 Pingree disagreed with that assessment and wrote to Sebelius to urge her to issue clear guidance to that effect.

**Update**

On Tuesday afternoon, Secretary Sebelius responded by letter to all the governors.  Sebelius wrote that while the Supreme Court said if states don’t expand Medicaid after 2014 they can’t be penalized, “the Court’s decision did not affect other provisions of the law.”  In short, the MOE provision isn't affected, and Maine can't dismantle its MaineCare system within the law.

Earlier this year, Pingree got involved when the LePage administration asked the Maine Legislature to make those cuts without getting a waiver from HHS that would exempt Maine from the law’s requirements.  In that case, Sebelius made it clear that Maine would most likely not qualify for the proposed waiver.

Whether Sebelius says Maine qualifies for the waiver or not, LePage likely understands that he will have no choice but to take the MaineCare expansion funds.  Even though the six states where the GOP governors have said they won't take the money will end up spending a little money ... less than eight percent of the costs of the expanded program ... eventually those states will end up on board, too.  The terms are just too favorable to pass up, and the decision not to provide health care coverage to lower middle class families ... who vote ... is a political third rail.

Governor Rick Perry of Texas, for instance, has said he plans to turn down the Medicaid expansion funds. But even using greater than expected assumptions about participation, the federal government can be expected to pay 93.2 percent of the cost of expanded Medicaid in Texas through 2019. That means Texas would be turning down $66.6 billion in federal aid in order to save $4.5 billion over six years.

Doctors, hospitals and patients will eventually force the politicians' hands, and ideology will fade in time, just as it did with Medicare back in the sixties.  

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