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Utah’s Medicaid model could solve NC impasse

Rev. William Barber, head of the NC NAACP, standing, prays over 13 protesters who participated in a die-in at under the rotunda of the NC Legislature in February 2015 to protest the state’s continued denial of Medicaid expansion for hundreds of thousands of North Carolinians. The protesters were from the NC NAACP and the Forward Together Moral Movement.
Rev. William Barber, head of the NC NAACP, standing, prays over 13 protesters who participated in a die-in at under the rotunda of the NC Legislature in February 2015 to protest the state’s continued denial of Medicaid expansion for hundreds of thousands of North Carolinians. The protesters were from the NC NAACP and the Forward Together Moral Movement. N&O file photo

North Carolina is currently in a stalemate over its budget because of Republican legislative leaders’ disagreement with Governor Cooper over expanding Medicaid. Last week, however, Senate leader Phil Berger indicated interest in finding a way to help people below poverty who are in the “coverage gap” (those who are not eligible for either Medicaid or subsidized private insurance).

Importantly, Berger said that Utah offers an approach to Medicaid expansion that is “less harmful” than in other states. Berger’s potential interest in a form of expansion that works for North Carolina is encouraging, and so I write to explain what Utah is proposing and whether it is a good fit for us.

Traditional Medicaid covers poor people only if they are children, pregnant, elderly, disabled, or parents, and the federal government pays two thirds of these costs (67%). The Affordable Care Act (ACA), however, will pay 90 percent of costs for states that expand to cover all people below or near poverty, regardless of their health or family condition. Full expansion covers people who earn as much as 38 percent above the poverty level.

Utah’s approach, which Georgia is also pursuing, is known as a “partial expansion” because it covers only people who are below the poverty level, but not people who are nearly poor. The logic is that, above poverty, people are eligible for highly subsidized private insurance through the ACA’s “marketplace” insurance exchanges. For those people, the federal government pays the full subsidy, whereas if they were on Medicaid, the state has to pick up 10 percent of their costs. Even though private insurance is not as comprehensive as Medicaid, partial expansion that costs the state less can potentially benefit just as many people.

So far, the federal government has not approved partial expansion, in part because that approach might cost the federal government more. Initially, Utah avoided federal disapproval by going ahead with a partial expansion under its traditional program, which requires it to pay much more of the costs. However, Utah has requested that the federal government increase its share to 90 percent. To improve chances of approval, though, Utah controversially proposed capping the number of Medicaid enrollees and capping the costs per enrollee. If federal approval is denied, Utah will instead adopt full expansion.

Partial Medicaid expansion, with a full expansion as a fallback, has real potential as a middle ground for political compromise. Expanding Medicaid to cover everyone who is poor could close the coverage gap at a cost to the state that is roughly 40 percent less than full expansion.

However, this compromise should not be reached at the sacrifice of capping Medicaid. Utah has unique reasons to propose caps, reasons that do not fit North Carolina. Principally, its Medicaid program pays many providers on an open-ended fee-for-service basis, whereas North Carolina’s Medicaid is transitioning to managed care. Our newly transformed Medicaid will have built in caps that Utah lacks.

Medicaid caps are a bad idea because they severely limit the state’s ability to meet greatly increased need from a serious recession, or from the natural disasters. Caps force the state to meet unexpected needs entirely from its own funds, rather than with the help of 90 percent federal contribution. And, when that big burden hits us, North Carolina, unlike Utah, is constitutionally prohibited from incurring a budget deficit. Caps foolishly cut out the federal safety net just when the state is most stressed.

If some cost-control measure is needed for federal approval of partial expansion, a much better idea than caps is to seek a federal waiver that offers Medicaid enrollment as a “public/private option” for lower-income people on the subsidized insurance exchange. People who opt for Medicaid would cost the federal government several thousand dollars less per year than if they select private insurance. Therefore, a Medicaid option on the exchange, for people just above poverty, would much more directly address federal concerns about increased costs than would Medicaid caps for people below the poverty level.

Whatever the best solution might be, it is encouraging that Berger has finally indicated willingness to look to other expansion states for constructive approaches to closing the coverage gap.

Mark A. Hall is a professor of Law and Public Health at Wake Forest University.

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