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Medicaid Crunch

David P. Lind BenchmarkUnder the Affordable Care Act (ACA), Iowa (and all other states) will be making key decisions on whether to expand Medicaid to those who fall within the 100 percent to 133 percent of the federal poverty level (FPL). Currently, Iowa covers about 104,000 Iowans (aged 18-64) under the Medicaid program who qualify up to 100 percent of FPL.

Prior to the Supreme Court decision in June, each state would need to expand Medicaid from 100 percent FPL to 133 FPL, with the federal government paying the entire cost of this expansion from 2014 through 2016 (federal funding will then eventually drop to 90%). The assumption made in the law was that those who were included in the Medicaid expansion would not receive federal tax credits for health insurance because they would be eligible for Medicaid. Only those who fall between 133 – 400 FPL would receive some form of federal subsidy to help pay for health insurance coverage if purchased through a qualified state-based exchange.

However, after the Supreme Court decision, each state can now decide whether to expand Medicaid coverage to those who qualify up to 133 percent FPL. Should Iowa elect to not expand Medicaid coverage, there could be approximately 134,000 residents who are caught between the 100 and 133 percent FPL – who would not be eligible for Medicaid coverage, but presumably receive federal subidies to purchase health insurance through an approved state-based exchange. These numbers are very fluid, by the way, requiring additional analysis:

 David P. Lind Benchmark

By not expanding Medicaid, Iowa health care providers could have more uncompensated care than anticipated, resulting in cost-shifting to those who have private coverage (employer provided plans).  The Supreme Court ruling has caused a hiccup for those residents who fall within the 100 – 133 percent FPL – especially if Iowa elects to not expand Medicaid coverage. This hiccup may affect employers too. Here’s how:

Under the health care law, employers with over 50 employees would pay a $3,000 penalty for flunking the 9.5% affordability test – but only if affected employees are eligible for federal premium subsidies to buy health coverage in a state-based health exchange. The health law indicates if the employee is eligible for Medicaid, the employee is not eligible to receive the federal subsidy to buy health coverage through the exchange. The employer in this case would not be liable to pay the $3,000 penalty. However, should the state not expand Medicaid, the employer would need to make sure the employee in the 100 – 133 percent FPL does not pay a premium above 9.5% of their income to qualify for a subsidy. Somewhat confusing, but this is a potential unintended consequence of the state refusing to expand Medicaid eligibility.

Even though we now have the ACA, two age old questions remain:  1) Who pays?, and 2) How much?

 

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