The Medicaid Coverage Gap – a Look at Six States
Francis Secada
AbstractAn evaluation of six states, and their choices regarding whether to expand Medicaid for
their poor populations or not.
ContentsExecutive Summary.....................................................................................................................................2
Topic............................................................................................................................................................4
Policy.......................................................................................................................................................4
Organization............................................................................................................................................5
Question..................................................................................................................................................5
Policy Network........................................................................................................................................6
Hypothesis/Claim....................................................................................................................................6
Literature Review........................................................................................................................................7
Private Health Care Market Failures: An Overview..................................................................................8
Insurance Failures................................................................................................................................8
Government Involvement with Health Market Failures........................................................................10
Medicaid before the Affordable Care Act: State/Federal Partnerships.............................................12
Contrasting Views on Health Care.........................................................................................................14
Medicaid expansion as a Drain on State Economies..........................................................................14
In support of restructuring the Health Markets Nationally...............................................................16
Research....................................................................................................................................................20
Research Frame + Selection...................................................................................................................20
The Data................................................................................................................................................22
Conclusion.................................................................................................................................................25
Notes on Research and Analysis................................................................................................................27
References.................................................................................................................................................30
Appendix: Dataset and Graphs....................................................................................................................0
Compiled data from US Census Bureau’s Community Population Survey (CPS), via Kaiser Family Foundation..............................................................................................................................................0
Graphs.....................................................................................................................................................1
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Executive SummaryThis capstone paper evaluates the consequences of the National Federation of Independent
Business v. Sebelius Supreme Court Decision in 2012. Specifically, the ruling on the
Medicaid expansion resulted in states being able to choose between opting in or out of the
public insurance expansion, resulting in the emergence of a “Coverage Gap.” This gap is
defined as the number of people who are excluded from having health insurance, who
would otherwise qualify under the new federal guidelines. The review of surrounding
literature will detail the circumstances that led to the need for the legislation of the
Affordable Care Act, and how the Individual Mandate and the Medicaid expansion were
designed to work together towards addressing market failures related to adverse selection
and Death Spirals of insurance risk pools.
A comparative view for addressing concerns with promoting health insurance participation
seeks to weigh the merits of promoting private insurance coverage capacities by
diminishing Medicaid’s supposed crowding-out effect against the need for a stronger
regulatory approach for promoting insurance participation. The opposing sides can be best
simplified by the competing rhetoric of emphasizing private insurance over Medicaid, and
the need to expand insurance participation with both private insurance and Medicaid, and
the need for regulatory mechanisms to facilitate this.
Data analysis on a sample of six US states demonstrates how states that do not opt into the
Medicaid expansion artificially inflate their number and rates of uninsurance among their
vulnerable populations. Modeling a scenario in which the two treatment states expand
Medicaid results in the treatment group lowering the number of uninsured significantly.
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TopicThe topic of this paper is about The Patient Protection and Affordable Care Act (PPACA) of
2010, known colloquially as The Affordable Care Act or Obamacare. This act changed the
national landscape of healthcare for all citizens within the United States, by mandating
individual coverage for all qualified adults through various mechanisms that are
administered on the state level. Individuals must buy qualified health insurance policies
under penalty of a fine/tax that is collected by the IRS during federal filing season.
Individuals who are not able to bear the full burden of obtaining private insurance are able
to qualify for federal subsidies that offset monthly premium costs. Individuals who earn
under 138% of the Federal Poverty Level (FPL) would qualify for Medicaid. However, due
to the decision of National Federation of Independent Business v. Sebelius in 2012, states
are able to choose whether to opt into the new Medicaid agreement with Centers for
Medicare & Medicaid (CMS) or to remain with their previous contract. Because eligibility
levels for Medicaid vary across state lines, this court decision introduces fragmentation
within the federal framework of the law. Therefore, achieving full insurance rates while
lowering the rate of the uninsured is complicated
PolicyThe specific policy that will be evaluated will be the Medicaid expansion component of the
Affordable Care Act. Specifically, this law simplified eligibility for Medicaid insurance by
removing most categories, and expanding the insurance to most individuals who earn
below 138% of the federal poverty level. States who accepted this Medicaid expansion
component of the law were able to provide insurance to the impoverished while also
receiving sizeable assistance from the federal government. In regards to new Medicaid
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Spending, the federal government provided scaled financing, covering 100% of initial costs
of Medicaid spending in the first three years, then reducing funding until achieving a 90%
funding rate by 2020. Within a time horizon from 2010 to 2020, states can potentially
achieve a 10:1 match of Medicaid spending.
Because of the NFIB v. Sebelius, SCOTUS decision, states are not obligated to enroll in the
new federal Medicaid program. Therefore, there is a research opportunity to draw
comparisons between states that have opted into participation with the new Medicaid
provisions, and states that have opted out of the new arrangement.
OrganizationThe organizations that will be covered within this research paper will be six states within
the United States of America. Those states will be California, Illinois, Mississippi, Missouri,
New York and Ohio. They will be grouped according to the kind of state exchanges they
have (federally-facilitated state exchanges, state partnership exchanges, and state-based
exchanges). These states will also be grouped according to whether they have opted in or
out of the Medicaid expansion.
QuestionThe question that will be addressed in this research paper is: Do states that opt out of the
Medicaid expansion cause people, who would have been newly qualified for Medicaid, to be
pushed out of insurance participation? This will be gauged with federally reported figures
on a selection of variables, such as total population, numbers of those insured and
uninsured, uninsurance percentage, and number of people who may fall into the new
coverage gap.
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Policy NetworkThe audience for this paper will include a variety of non-partisan and left-leaning think
tanks, non-profit care organizations that have been impacted by the law, and various
governmental agencies and stakeholders that have an acute interest in a state’s decision to
participate in the Medicaid expansion.
Hypothesis/ClaimI hypothesize that the states that choose to opt out of the Medicaid expansion create
coverage gaps for their lower-income citizenry. Specifically, because the Medicaid
expansion was a significant component for reducing the number of uninsured individuals,
federal subsidies for private insurance options within state exchanges were capped at
above 138% of the Federal Poverty Level. Therefore, those who would qualify for Medicaid
are not qualified for federal subsidies to purchase private insurance options within state
exchanges. Consequently, states that opt out of the expansion expose otherwise qualified
citizens to continued lack of insurance, despite federal dollars being available to provide
coverage at no expense to states at the initial stage.
Because states can opt in and out of the Medicaid expansion, a natural experiment can be
observed in regards to evaluating 1) the number of people who could be left out of
insurance pools from the larger uninsured population; and 2) the percentage of overall
uninsured populations that coverage-gap individuals comprise.
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Literature ReviewThe Affordable Care Act is a wide-ranging piece of legislation that seeks to address the
various gaps and inefficiencies that pervade in the healthcare system. The “three-stool”
approach to healthcare policy focuses on issues related to insurance coverage, access to
care, and quality of care. Insurance coverage prior to the law was largely left to self-
regulation, in that health insurance policy options were sold and managed in accordance to
what the market allowed. The insurance market functioned on the principle of actuarially
fair market value, in which individuals with a specific risk rating would pay the cost to
insurance against the possibility of entering an adverse state. Therefore, if an individual
who is predisposed to Diabetes due to family history seeks insurance to protect against
health costs associated with that condition, the insurance rate would have to reflect that
increased probability. Access to care, too, was ultimately left to market forces, where
hospitals and medical practices emerged based on need. Primary and Secondary Care
physicians practiced medicine in either individual or group practices, or part of larger
health care or hospital networks. Private hospitals developed from community care
centers that treated the sickest to non-profit or for-profit facilities that provide wide
swaths of medical services, addressing the secondary, tertiary, and long-term needs of
patients. Care was typically compensated through a variety of pay schedules, but the
predominant fee schedules were fee-for-service or Diagnosis-Related-Group billing. In the
former payment scheme, providers were paid according to the services they provided,
while in the latter, a bulk reimbursement rate that is pre-determined is set aside for the
hospital or group practice.
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Private Health Care Market Failures: An OverviewInefficiencies that were present in the health care infrastructure were related to
weaknesses in the market’s ability to self-regulate. By this, the three aspects of health care
were impacted by market failures.
Insurance FailuresPrivate sale of insurance policy options contained a variety of perverse incentives that
affected the exchange between insurance firms and individuals. To begin, information
asymmetry between firms and buyers prevented each from operating with full information
(and some have argued that consumers of health insurance and health services lack
meaningful understanding of their own health and body). People are more aware of their
family history than firms are of them, while firms may have a better understanding of
community and global trends in health costs, spending, research, and availability of
providers. Additionally (and consequentially), people with a variety of risk factors and
probabilities of needing care attempt to purchase insurance at the same price, which
negatively impacts healthier or more risk-averse individuals, while subsidizing sicker or
risk-tolerant individuals. Because people do not pay the actuarially fair price for insuring
themselves against adverse states, insurers are at risk of exposure to financial losses. As a
result, insurers resort to a variety of categorization techniques to have people either self-
select themselves into appropriate insurance levels or engage in individual risk
assessments to underwrite one’s insurance policy. The result of this was that individuals
with greater need for health insurance (in order to secure access to health) ended up
paying increasing rates for insurance coverage (as healthier people opted out for more
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cost-effective options) while individuals with a statistical probability of becoming sick
ended up being priced out of individual insurance policy options1.
The only true means of obtaining meaningful insurance coverage was through group
policies, which were mostly concentrated within large companies that had the necessary
negotiating power to obtain a generous policy rate (or have enough money and resources
to self-insure their employees).
Upon the publication of the Health Insurance Experiment by the RAND Corporation in the
1980s, health insurance companies began experimenting with new co-insurance schemes.
Instead of providing full insurance for a monthly fee, insurers started to provide coverage
with a variety of cost-sharing mechanisms, including deductibles (what one pays before the
insurance takes effect), co-pays (what one pays upon accessing care), and premiums.
Additionally, insurers could opt to force providers either to absorb costs from
uncompensated care or to pass it onto the patient. So if a patient is covered for Neurology
appointments, but only 80% of the fee schedule, then a $75 visit could end up costing a
patient $44.60 if the schedule price is $38 per visit with a coinsurance rate of 80% (or
$75.00 – [$38 X .80] = $75-$30.40 = $44.60). With patients taking on more of the burden of
health care costs, new concerns emerged for populations that could not effectively access
primary or secondary care due to inability to shoulder those cost burdens.
As insurance became the preferred fringe benefit for employees by employers, so did the
solidification of health insurance and health services being a prominent component of the
national economy.
1 (Cutler & Zeckhauser, Adverse Selection in Health Insurance, 1997)
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The evolution of health insurance formats from pure indemnity insurance to Health
Maintenance Organization (HMO) insurance options to Approved Plan Provider Networks
(or Plan Provider Organizations or Exclusive Provider Organizations) failed to successful
control spending by health providers; rather, these plans progressively shifted the costs of
care from insurers onto individuals. Furthermore, attempts by insurers to control costs
may have triggered the ongoing competition between insurers and medical providers to
gain dominance in negotiating annual contracts. Throughout the 1990s, medical groups
and hospitals began merging into larger entities in order to create competitive
organizations and alliances, leading to the proliferation of large care networks. Insurers
have also merged with other firms in order to gain prominence in the health care sector,
while also staving off the dominant positioning of health organizations2. While these
dominance behaviors have occurred prior to the 90s, it had proliferated to a tipping point.
Traditional reimbursement was provided on a fee-for-service basis, in which one service
was billed at one rate, while another service was billed on another. As this incentivized
physicians to provide as much services as possible, insurers sought a better method for
compensating care. A significant development was the emergence of the Diagnosis-Related
Group fee schedule. Within this reimbursement scheme, hospitals and physicians would be
compensated a set amount for the expected care needed to treat a diagnosis. Any care
above what was needed would be uncompensated, and the health firm would absorb those
costs. While this sought to bundle related services under one rate, it also encouraged
medical providers to render care in accordance to diagnoses.
2 (Conflict and Change in America's Health Care System, 2012)
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Government Involvement with Health Market FailuresThe seeming absence of talking about social insurance programs and government’s role in
regulating healthcare is not a means of dismissing its impact or its importance. It is to
signify that healthcare in the United States is a result of piecemeal legislation. Pathways
towards insuring and compensating for care are obfuscated by variances in insurance
schemes, stakeholders, and government involvement with addresses failures. As a result,
there is robust policy and implementation of social insurance programs across federal and
state governments, but no platform to put forth a unifying national health insurance
framework prior to the Affordable Care Act.
The variety of pre-existing social insurance programs that address market failures through
intervention and regulation. Germane to this paper are the programs that affect health
care and health insurance for vulnerable populations. Medicare and Medicaid, for example,
are insurance programs designed to provide affordable and equitable insurance coverage
for people who were effectively priced out of private insurance markets. Medicare
accomplishes this by using dedicated tax dollars to fund insurance trusts that then pay for
medical services. Medicaid is provided through federal allocations to state governments
through block grants. Other public insurance options like Veteran’s Affairs Insurance,
Children’s Health Insurance Plan (CHIP) and so forth provide coverage according to
categorical eligibility (e.g.: VA for veterans, CHIP for vulnerable children etc.).
Social insurance programs are effective in fulfilling their mission, which is to provide for
vulnerable populations through redistributive means. However, these social programs do
not address issues related to access of care and quality of care completely. What can be
accomplished is only done so in piecemeal, and not as part of a more comprehensive
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attempt to address the structural inefficiencies of the market. Medicaid and Medicaid
dollars go to states, who then pay hospitals for all the charity care that is provided. So
rather than insuring vulnerable demographics from adverse health events, it is paying
hospitals who treat patients in inpatient settings. All the while, those who are insured via
Medicare have received varying levels of care from participating providers, but without
clear indications as to the optimal levels of care. Succinctly, individuals living across high
and low-yielding areas can largely achieve similar health outcomes, regardless of the
spending amounts3.
While these insurance programs may be successful in fulfilling their missions (to protect
vulnerable populations), they do not address the larger concerns of the total healthcare
market. They promote socially optimal levels of care, but they do not address causes for
health disparities or ensure provider choice for patients. They protect vulnerable
populations from suffering long-term health effects from prolonged lack of insurance, but
they do not address erosion of coverage from the general health insurance market. They
help expand access to care, but they do not address deficits in efficiencies and efficacies of
health care. Simply, these programs inject federal dollars into a growing health insurance
market, while failing to address the structural issues that cause prolonged instability.
Medicaid before the Affordable Care Act: State/Federal PartnershipsMedicaid is a federal health insurance program specifically targeted for vulnerable
populations. While mostly inclusive, it is geared towards helping those in poverty. People
who have incomes in proximity to the Federal Poverty Level (FPL) can be eligible for
coverage, providing meaningful relief when being priced out of the private market.
3 (Cutler, Walking the Tightrope on Medicare Reform, 2000)
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However, this federal program is administered by each state, with their own levels of
participation. Medicaid was initially treated as an opt-in program for states, where the
federal government provided a 1-for-1 spending ratio for those looking to provide care for
the impoverished. Requirement for participation was to accept minimal categorizations for
eligibility, but left additional levels optional to states. Arizona became the last state to
enter into agreement with CMS in 1982 to form the Arizona Health Care Cost Containment
System (AHCCCS)4. Since then, states have been largely left with the option and incentive
to operate their own programs.
While this level of flexibility provided states the opportunity to construct public insurance
to match their own specific needs, the minimum requirements only covered vulnerable
populations based on specific categories. For example, states must provide coverage for
pregnant mothers, children, and the disabled. They do not have to provide insurance to
single men or women who live below the federal poverty level. Most states opt to provide
some kind of coverage for these individuals, but median percentage of federal poverty level
is roughly 44%. This kind of variance in the categorical qualifications for Medicaid creates
a porous safety net program, where many individuals in need pass through because they do
not qualify. Furthermore, individuals that actually qualify for Medicaid may end up not
enrolling or accessing the entitlement.
4 (National Health Policy Forum, 2000)
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Contrasting Views on Health CareMedicaid expansion as a Drain on State EconomiesConservative perspectives on the Medicaid expansion are specific to a central theme. This
theme is the crowding out of private insurance options for low-income patients while
exacerbating clinical outcomes of patients. Medicaid is the lowest-paying insurance
provider of all other insurance programs in the United States, as it attempts to be the
provider of lowest costs. Much is this is attributed to federal contribution rates being
determined by the Federal Medical Assistance Percentage (FMAP), which is done through a
methodology that incorporates variables like income-per-capita5. States can choose their
level of participation or their generosity rate, depending on whether they can demonstrate
that they can cover their share of all state Medicaid expenses. That being said, Medicaid’s
reimbursement rate is often measured as a percentage of Medicare’s established rates for a
given year, although there is wide variability across states. For example, Rhode Island’s
rate reflects the national average of 58% while Alaska had a Medicaid rate that was 242%
of Medicare’s6. For a significant number of states, the lower reimbursement rates
contribute to the systemic weaknesses in access to care and quality of care metrics. This is
reflected in research by Avik Roy of the Manhattan Institute7, in which Chapin White’s
study on the formation of Children’s Health Insurance Program’s Program yielded results
that demonstrates quality of services and access to care being chiefly determined by
provider payment rates8.
5 (Centers for Medicare and Medicaid, n.d.)6 (How Much Will Medicaid Physician Fees for Primary Care RIse in 2013? Evidence from a 2012 Survey of Medcaid Physician Fees, 2012, p. 1)7 (The Medicaid Mess: How Obamacare Makes it Worse, 2012)8 (A Comparison of Two Approaches to Increasing Access to Care: Expanding Coverage versus Increasing Physician Fees, 2012)
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The reported crowding out of private-insurance enrollees for public insurance9 introduces
concerns that Medicaid recipients will end up suffering in health outcomes as compared to
private insurance recipients. Less physicians accept Medicaid due to its low
reimbursement rates, and more Medicaid patients experience higher incidences their
insurance not being accepted, of physicians declining to take them on as new patients, and
die more often than private insurance recipients when receiving the same care (Herrick,
2010). This is conjoined with the concern that the cuts to the Disproportionate Hospital
Payments over the decade will erode states’ abilities to provide needed hospital care to the
very sick (and the impoverished)10.
With these factors working in confluence, Medicaid recipients end up having to use
services more often, creating bigger costs to the state and federal government, and achieve
poorer outcomes than private insurance recipients achieve. Bureaucracies and
infrastructure considerations also come into play, as states would have to adapt to the
increased demand from Medicaid recipients to accommodate the demand surge. As most
non-Medicaid expansion participating states demonstrate, they have a significant
uninsurance rate that would lead to additional expenditures. Furthermore, with a
significant percentage of Medicaid recipients being individuals who had qualified under the
previous categorical requirements but did not enroll, they would add notable expenses, as
the federal government would provide funding under the old Medicaid agreement.
Alternative proposals have been made in response to these concerns. First, states can
request additional federal funding, but to have the monies be directed towards increasing
9 (Crowd-out Ten Years Later: Have Recent Public Insurance Expansions Crowded out Private Health Insurance?)10 (Medicaid Expansion will Bankrupt the States, 2010)
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reimbursement rates. Second, Medicaid recipients should be allowed to participate in the
state exchanges, and purchase their own insurance through it, similar to how Arkansas is
implementing the Medicaid expansion. Finally, states can request block grants to make
changes to state Medicaid programs, much like with the Welfare Reform movement of
199611. These separate proposals seek to encourage participation in achieving insurance
coverage while subsidizing private plans through federal subsidies.
It is worth noting that conservative arguments against the Medicaid expansion (and the
Affordable Care Act in general) do not necessarily argue against the existence of a health
insurance coverage gap. However, within the provided framework, the solution towards
addressing gaps in coverage is purported to be found through private insurance
mechanisms that bumps up the starting positions of low-income individuals. In Florida, for
example, the drafting of the Florida Health Choice Plus (FHCP) as an alternative towards
the Medicaid expansion would promote participation by providing subsidies in a $2,000
annual grant, plus a $25 monthly subsidy for the purchasing of health services and
insurance12. The idea is that subsidizes low-income individuals through a voucher-like
system will lower health costs, although this option does not address the cause of the
Coverage Gap (i.e.: the state’s refusal to expand Medicaid).
In support of restructuring the Health Markets NationallyGovernment insurance options have been traditionally been crafted as a responsive to
failures in private markets. What this means is that these interventions are definitively
reactive. This is because governments do not necessarily have to intervene with markets
via regulatory routes, but can effectively induce change by entering the market themselves.
11 (The Medicaid Mess: How Obamacare Makes it Worse, 2012, p. 5)12 (Bragdon, 2013)
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Medicare, for example, competes with other private insurance options for enrollees.
Because the target demographics for this insurance are the elderly and the formerly
working disabled, the actuarially fair market price for insuring against related conditions
may be beyond what many individuals can afford. Medicare is able to provide meaningful
insurance to these demographics for a significantly lower price than what can be provided
privately. CMS does not institute regulations for private insurance markets, so the impact
of the Medicare and Medicaid are observed by their effectiveness in improving health
outcomes as insurer providers. However, government participation as a providing firm in a
market place does not necessarily address the true market failures of the health care
system.
Comparisons between public and private insurance options may invite false equivalencies
because of the different types of customers that are treated. Private insurance options on
average may provide more generous payments to providers for care, but they also contain
coinsurance schemes and associated costs. Additionally, private insurance options are
most utilized through employee-based insurance, where individuals are insured via group
policies. Employers may be motivated to reduce healthcare costs to their employees by
offering various insurance plans, which would result in employees self-selecting into
appropriate risk pools. However, those in need of health care can end up experiencing
increasing annual premiums and deductibles if healthier people continuously opt out of
policies that are more generous and into more affordable options. In this way, healthier
people benefit from private insurance options while sicker people are at greater risk of
being priced out of coverage.
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Individuals who opt into public insurance programs can gain meaningful insurance
coverage while avoiding increasing cost-sharing. These individuals, because of their needs
and preferences, are typically sicker and in greater need of services. People who are sicker
typically are in greater need of healthcare services than those who are healthy. People who
must bear greater shares of healthcare costs for receiving medical and clinical care are
more likely to ration the utilization of care, and will likely forego care until their needs
become urgent or emergent. It can then be presumed that people who are priced out of
private insurance tend to be poorer, and those who are poorer are most likely to also be
sicker than those who can maintain private insurance. The RAND Corporation released a
major study on health insurance in 1984 that demonstrates this point. Individuals who
have established needs for ongoing therapeutic care or has a well-established diagnosis
benefitted most from receiving free care (i.e.: having no cost-sharing for their insurance)13.
With this consideration, the accusation of public insurance crowding out private insurance
may be exaggerated. Individuals who may end up benefitting the most from Medicaid
expansion are childless adults and disabled adults. Of disabled adults, it is possible for the
newly eligible Medicaid beneficiaries to be less expensive in terms of risk factor and
projected costs than the previously qualified disabled who receive Supplemental Security
Income (SSI) from Social Security14.
By removing categorical eligibility requirements, the poor uninsured can achieve insurance
coverage by verifying their income levels. With a push to provide state funding to remove
barriers to applying, as well as checking eligibility through health exchange web portals,
13 (Brook, et al., 1984)14 (Medicaid Expansions for the working age disabled; Revisting the crowd-out of private health insurance, 2014, p. 79)
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individuals who fulfill their obligation to obtain insurance may find themselves fully
eligible for insurance free of coinsurance charges. Individuals who earn between 139%
and 400% of FPL can qualify federal subsidies to offset the costs of their health insurance
plans. By instituting regulatory requirements on insurers to drop Experience Rating
practices for individuals and to discriminate against policyholders based on pre-existing
medical conditions no longer, people who were previously priced out of private insurance
can now achieve insurance coverage.
While Medicaid payment rates vary across states, long-term medical costs can be managed
and ultimately controlled through mechanisms of the Affordable Care Act. What is integral
is facilitating access to care, by both ensuring that insurance allows for continuous
coverage for individuals, and by encouraging preventative care services through reducing
coinsurance for annual visits. Promoting Preventative Care would reduce costs by
facilitating earlier detection of health conditions, with consistent screening and provision
of resources to engage in health maintenance behaviors. Promoting insurance rates and
preventative care would help reduce costs associated with emergency care and increases in
charitable care. Consequentially, Disproportionate Share Hospital payments by Medicaid
would be reduced because of the number of indigent populations would decrease through
the state exchange and the Medicaid expansions15.
15 (The Evolution of Support for Safety-Net Hospitals, 1997)
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ResearchResearch Frame + SelectionThis paper will evaluate the relationship between the independent variable of Medicaid
Option status, and the dependent variable of the number of people who exist within the
ACA Coverage Gap. Other variables to be evaluated include a state’s marketplace type, the
number of those insured, the number of those uninsured, total state population, the
Uninsured Percentage Rate, 2015 figure for Adults in Coverage Gap, and the Uninsured
Rate if the Medicaid expansion were to be universally applied across states. Information
was obtained by the Community Population Survey via the US Census Bureau. Information
was cross-referenced by the Kaiser Family Foundation’s State Health facts database.
The following states are being evaluated.
California : the most populated state in the union, home to a significant immigration
population. California is one of the handful of states that opted in at the beginning of
the Affordable Care Act’s expansion. Because the Affordable Care Act limits
undocumented immigrants from being eligible for both the Medicaid expansion and
federal subsidy funds for the state exchange.
Illinois : the fifth most populated state in the union, with a significant low-income
population. Illinois is one of the handful of states that opted in at the beginning of
the Affordable Care Act’s expansion.
Mississippi : the 31st most populated state in the union, with a significant number of
individuals who live at or below the Federal Poverty Level. It is one of the handful
of states that have opted out after the NFIB v. Sebelius SCOTUS decision.
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Missouri : the 28th most populated state in the union. Despite having a Democratic
governor, the state has chosen to opt out after the outcome of NFIB v. Sebelius.
New York : the third most populated state in the union, with a significant
undocumented immigration population. The state is known for being among the
most generous in terms of providing Medicaid benefits as part of its agreement with
Centers for Medicare and Medicaid. It is among the handful of states that opted in at
the beginning of the Affordable Care Act’s expansion.
Ohio : the seventh most populated state in the union. Despite having a Republican
governor, the state opted to opt in at the beginning of the Affordable Care Act’s
expansion.
Out of the selected six states, two states have decided to opt out of the expansion.
California and New York have state-based Marketplaces for their exchanges, Illinois has a
state-partnership marketplace, and Missouri, Mississippi an Ohio have federally-facilitated
marketplaces. States Exchanges that are not state-based have systems and digital
information filtered through the healthcare.gov website.
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The Data
Of the chosen six states, California and Mississippi have the highest percentage of
uninsured population, at 17%. Illinois and Missouri have a 13% uninsured population rate,
and Ohio and New York have 11%. Among the highest percentage states, California has
over 6.5 million people without insurance, while Mississippi has just shy of 500,000 people
without insurance. Illinois has 1.6 million people without insurance, and Missouri has
close to 773,000 people without insurance. New York has close to 2.07 million people
without insurance, and Ohio has close to 1.26 million people without insurance.
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As stated earlier in the paper, because four of the six states have accepted the Medicaid
expansion, it is difficult to determine how each state has been impacted by the increased
Medicaid rolls and the significant funding that is provided by the federal government.
Because the figures are not easily separable, it is difficult to analyze how states would have
fared without the expansion. However, because states can choose to opt in or out of the
expansion, people in the uninsured population can be separated into those who would
qualify under the new Medicaid eligibility criteria, and the older requirements as dictated
by the state’s own specific criteria. These individuals can be counted as a separate metric.
Because of the variances in statistical reporting between national and state figures,
complete and workable datasets up to 2013 are available, while 2014 is available in a more
piecemeal fashion. The determination for the number of adults within the coverage gap are
determined based on the 2014 Population Survey by the US Census Bureau and the 2014
Medicaid eligibility guidelines.
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The data show that Mississippi and Missouri have 107,000 and 147,000 people who are
currently within the Medicaid Coverage Gap. That translates to 21% and 19% of the total
uninsured state populations, respectively. If states were compelled to expand Medicaid
under the new Expansion guidelines, those numbers would then be tallied into the Insured
column.
Under the Medicaid expansion for All States scenario, Mississippi would reduce their
uninsured population to 392,840, while Missouri would reduce their uninsured population
to 625,833. Their percentage of the uninsured would drop to 13% and 11%, respectively.
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ConclusionThe findings suggest that opt-out states maintain an uninsured population percentage that
is on par with more populated opt-in states. If Missouri and Mississippi choose to
participate in the Medicaid expansion, then they can reduce those percentages to reflect
those of Ohio and New York. Those states would be able to provide meaningful insurance
to 254,000 low-income individuals who qualify under the new federal Medicaid guidelines.
These findings demonstrate that within this testing sample, there is direct causal
relationship between opting out of the Medicaid expansion and producing a new
population of individuals who fall into the coverage gap. Because of the wording of the law,
these individuals cannot participate in state exchanges because they are not qualified to
receive federal subsidies to offset the costs of private health insurance. Expanding
coverage to these individuals would bring them into compliance with the individual
mandate, and the costs associated with providing coverage to these individuals would be
significantly covered by the Federal Government (100% of all initial new Medicaid
spending, decreasing to 90% by 2020).
Further research should be conducted to look at all 50 states within the country, and to do
repeat the separation analysis based on state’s Medicaid expansion status, number of
uninsured individuals residing in the state, and the rate of uninsurance as part of the states’
total population figures. Once data becomes robust enough to evaluate figures for 2014
and 2015, data should be analyzed to determine how many new beneficiaries are produced
by states who have opted into the expansion, and use that figure to determine who would
have fallen into the coverage gap had they chosen differently. If data permits, per-capita
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spending for the uninsured should be determined based on state levels for uncompensated
care, and DSH funding and other governmental funding sources. Lastly, Medicaid figures
should be compiled to determine a cost-per-capita rate that allows for comparisons
between Medicaid and Uninsured care provisions.
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Notes on Research and Analysis
There are significant considerations when evaluating this analysis. First, the data used to
determine the percentage of individuals lacking insurance were compiled for 2013. As
such, these figures do not represent state figures after the introduction of state exchanges
and the Medicaid expansion. Robust datasets for 2014 and 2015 are not currently
available, making calculations for state figures relating to new Medicaid enrollments, total
insurance rates, and previously-ineligible enrollment unavailable for analysis. Secondly,
information on the Coverage Gap is taken from the 2014 Current Population Survey,
conducted by the US Census Bureau. Because the compiled data were collected from
various sets across a two-year period, the findings may not reflect the numbers of people
who currently fall within the Coverage Gap. Finally, a causal relationship is not necessarily
proved by the data, although a relational demonstration is presented graphically. The
cause is directly rooted in both the structure of federal funding from the language of the
Patient Accountability and Affordable Care Act language, and the outcome of the NFIB v.
Sebelius Supreme Court Decision. States were initially compelled to expand their eligibility
requirements on pain of forfeiting the previous existing contract with Centers for Medicare
and Medicaid, but gained the reprieve after SCOTUS found the expansion to be unlawful.
The Coverage Gap that exists varies from state-to-state. States like Mississippi have very
stringent eligibility requirements to access the public insurance, while states like
Wisconsin were among the most generous with Medicaid benefits. So while both states are
examples of states that have opted out of the Medicaid expansion, they will both have
varying Coverage Gap rates, as they have differing starting positions of generosity.
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Additionally, certain states have higher concentrations of immigrant populations, with a
significant percentage of that segment being comprised of undocumented immigrants.
When evaluating the coverage gap, undocumented immigrants and legal immigrants that
have been in the country for under five years are filtered out of the analysis, because they
are not eligible for federal subsidies or participation in the state exchanges. Some states
have varying degrees of eligibility for these segments of the population, but previous CMS
agreements stipulated that states had to spend their own monies to insure them.
While this paper demonstrates how insuring those under the Coverage Gap would lead to
decreasing rates of the uninsured for states, it is unable to make any argument towards the
cost effectiveness of insuring these individuals. People who lack insurance have
traditionally sought care from emergency rooms, with hospitals being the primary source
for care. The reasons are numerous, but can be reduced to sick uninsured individuals
holding off on seeking care until their condition necessitates it, and because consistent care
necessary to maintain ongoing conditions is unaffordable to those who lack insurance
coverage. Reporting on the costs associated with providing care to these individuals are
disparate and incomplete, often being compiled based on trade association reports,
surveys, and government funding allocation. The best available data on funding to
hospitals for uncompensated care are the annual reporting figures on Disproportionate
Share Hospital allotments, which are funded through a combination of Medicare and
Medicaid funds. DSH datasets are robust enough to break down allotments based on
individual hospitals and geographic locations, but because qualified hospitals often target
specific populations and specialties (substance abuse, psychiatric, HIV/AIDs, immigrant
patients etc.), it is difficult to diffuse the data down to a cost-per-capita variable. In
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addition, Medicaid expenditures for 2014 and beyond are not available, and the existing
data does not distinguish between Medicaid funds allotted to states based on the previous
CMS agreement and those allotted based on the conditions of the expansion. Because the
generous federal funding levels are only available to newly eligible populations, states are
still responsible for dollars spent on grandfathered segments of the population (e.g.: the
disabled, children, the poor elderly, expectant and young mothers etc.). Dividing up the
expenditures is important to accurately gauge the cost-per-capita figures for insuring
newly eligible Medicaid recipients, and to determine state’s responsibility for those new
expenditures.
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ReferencesBodenheimer, T., & Grumbach, K. (2012). Conflict and Change in America's Health Care System. In T.
Bodenheimer, & K. Grumbach, Understanding Health Policy: A Clinical Approach, 6th Edition (pp. 201-212). San Francisco: McGraw Hill Medical.
Bragdon, T. (2013, April 17). Health Care Report from the States: Florida Medicaid Expansion. Retrieved from The Daily Signal (The Heritage Foundation): http://dailysignal.com/2013/04/17/health-care-report-from-the-states-florida-medicaid-expansion/
Brook, R. H., Ware, Jr., J. E., Rogers, W. H., Emmett, K. B., Davies, A. R., Sherbourne, C. A., . . . Newhouse, J. P. (1984). The Effect of Coinsurance on the Health of Adults. Santa Monica: The Rand Corporation.
Centers for Medicare and Medicaid. (n.d.). Financing & Reimbursement. Retrieved June 10, 2015, from Medicaid.gov: http://www.medicaid.gov/medicaid-chip-program-information/by-topics/financing-and-reimbursement/financing-and-reimbursement.html
Cutler, D. M. (2000). Walking the Tightrope on Medicare Reform. The Journal of Economic Perspectives, 14(2), 45-56.
Cutler, D. M., & Zeckhauser, R. J. (1997). Adverse Selection in Health Insurance. Cambridge: National Bureau of Economic Research.
Fishman, L. E., & Bentley, J. D. (1997). The Evolution of Support for Safety-Net Hospitals. Health Affairs, 30-47.
Gruber, J., & Simon, K. (n.d.). Crowd-out Ten Years Later: Have Recent Public Insurance Expansions Crowded out Private Health Insurance? Cambridge: National Bureau of Economic Research.
Herrick, D. (2010, October 25). Medicaid Expansion will Bankrupt the States. National Center for Policy Analysis(729). Dallas, Texas, United States: National Center for Policy Analysis.
National Health Policy Forum. (2000). Managed Medicaid: Arizona's AHCCCS Experience. Washington DC: George Washington University.
Padilla, A. (2014, February 19). What Health Care Coverage Do Immigrants Get?: A Conversation with Angel Padilla. (D. Introcaso, Interviewer) Retrieved June 14, 2015, from http://www.thehealthcarepolicypodcast.com/2015/02/what-health-care-coverage-do-immigrants-get-a-conversation-with-angel-padilla-february-19th.html
Roy, A. (2012). The Medicaid Mess: How Obamacare Makes it Worse. The Manhattan Institute, New York.
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Wagner, K. L. (2014). Medicaid Expansions for the working age disabled; Revisting the crowd-out of private health insurance. Journal of Health Economics, 69-82.
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Appendix: Dataset and GraphsCompiled data from US Census Bureau’s Community Population Survey (CPS), via Kaiser Family Foundation
LocationMarketplace
TypeMedicaid
Status Insured Uninsured TotalUninsured Percentage
Rate
Number of Adults
in Coverage
Gap (2015
figures)
As a Share (%) of All
Uninsured Nonelderly
in State
Uninsured Numbers if
MA Exp. was
Universal
Uninsured Percentage Rate if MA Exp. Was Universal
California State-based Marketplace
Opt-In 31,331,374.00 6,500,179.00
37,831,553.00 17% 0 0% 6,500,179.00
17%
IllinoisState-
Partnership Marketplace
Opt-In 11,086,412.001,618,204.0
0 12,704,616.00 13% 0 0%1,618,204.0
0 13%
MississippiFederally-facilitated
MarketplaceOpt-Out 2,425,362.00 499,849.00 2,925,211.00 17% 107,000 21% 392,849.00 13%
MissouriFederally-facilitated
MarketplaceOpt-Out 5,157,844.00 772,833.00 5,930,677.00 13% 147,000 19% 625,833.00 11%
New York State-based Marketplace
Opt-In 17,330,548.00 2,069,521.00
19,400,069.00 11% 0 0% 2,069,521.00
11%
OhioFederally-facilitated
MarketplaceOpt-In 10,140,742.00
1,257,556.00 11,398,298.00 11% 0 0%
1,257,556.00 11%
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Graphs
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