What is Medicaid Expansion? And What Does it Have to Do With Virginia’s Budget? Here's a Primer

Apr 10, 2018

 

A sign during a rally at the capitol in Richmond to support Medicaid expansion.
Credit Mallory Noe-Payne / RADIO IQ

 

When the Affordable Care Act became law eight years ago the premise was simple: healthcare for everyone.

But for years that premise hasn’t become reality. In part because Virginia, along with 16 other states, opted not to expand Medicaid. Now state lawmakers are headed back to Richmond for a special session that could reverse that course.

 

What exactly does it mean to not have expanded Medicaid?

When the ACA was passed Americans were essentially divided into three categories: high-income, middle-income and low income. Different strategies were developed to deliver healthcare to the different groups.

Americans that could afford insurance could get it through an employer, or buy it themselves on the newly created marketplaces. But for middle and low income Americans the process was slightly more complicated.

 

Low-Income

 

Victoria Napky is a Virginian. She doesn’t have health insurance. But she wants to.

When she had insurance through her parents she used to take medication for mood disorders and anxiety. Now she doesn’t. She’s avoiding having four teeth pulled despite the threat of severe infection. Because, as she puts it, the cost is the same as a used car.

Napky has tried to get health insurance. For a few years she’s gone online to the ACA Marketplace and shopped around. Two year ago, she was working full-time at a cafe and part time in retail.  

“And with those two incomes combined I was making a total of about $11,000 -- just under that. Neither of the two workplaces offered insurance through the workplace,” Napky recalls.

 

I was in this no-man's zone between not having the means to pay for the low cost healthcare and not being able to get the subsidies to make it affordable.

Remember those categories? $11,000 put Napky into the low-income category. Under the original vision of the ACA, low-income Americans were supposed to get free healthcare through an already existing program called Medicaid.

Until that point Medicaid had been primarily for kids or people with disabilities.  But the federal government suggested states expand the program to include poor adults. In exchange, Congress offered to pay most of the cost.

But Virginia, along with 16 other states, chose not to. Some state lawmakers said it would cost too much. Others opposed the expansion of a welfare program on conservative principle.

For Napky that meant no free healthcare.  

 

Middle-Income

At $11,000 a year, Napky was just shy of being considered middle-income. If she had made about a grand more she probably could have afforded insurance on the marketplace.

That’s because middle-income Americans qualify for subsidies. The subsidies are on a sliding scale based on income, lowering the monthly deductible. That $500 dollar a month plan could have cost Napky less than $100 a month.

Virginia State Sen. Emmett Hanger, R-Augusta, left, talks with Sen. Thomas Norment, R-James City County.
Credit Steve Helber / AP

But because she was in the low-income category, the government assumed she’d have Medicaid.  So no subsidies.

“I was in this no-man’s zone between not having the means to pay for the low cost healthcare and not being able to get the subsidies to make it affordable,” she says.

Napky even knew it at the time. Friends suggested she fudge her income. But that felt wrong.

“Lying on tax paperworks is never a cool idea,” Napky says. “And I would much rather go uninsured, as I’m used to doing, than facing the unknown beast of the tax agency.”

The Gap

Jill Hanken with the Virginia Poverty Law Center calls that no-man’s zone the “coverage gap.”

“And someone with that very low income cannot afford to pay for the insurance that’s offered (on the marketplace). So that’s why Virginia still has hundreds of thousands of uninsured people,” Hanken explains.  

It means an able-bodied adult who doesn’t have children and makes below $12,000 a year has no affordable comprehensive health insurance option.

In Virginia, that applies to about 400,000 people.

And that’s been the state of healthcare in Virginia since the Affordable Care Act passed. The vision for high-income and middle income Americans played out, but the plan for low-income Americans never did.

“Part of the reason that the system as it is right now is so confusing is because it’s not how it was designed to be,” says Massey Whorley, senior policy advisor to the Governor.  

The Budget

Five years ago Whorley worked for The Commonwealth Institute, a group that analyzes state spending. At that time he created a policy paper explaining how Medicaid expansion would save the state hundreds of millions of dollars.

Half a decade later and Whorley is still using that same document, patiently explaining why the expansion of a massively expensive government benefit would actually help Virginia’s bottom line.

A sign extolling the views on the issue of Medicaid expansion is displayed along a roadway in Center Cross, Va.. Virginia Republicans are at war with each other on the issue.
Credit Steve Helber / AP

  “One of the major misconceptions is that these folks are not getting healthcare right now. And that’s simply not true,” Whorley says.

In fact, the uninsured are getting a fair amount of healthcare. Hospitals in Virginia estimate they lose more than one billion dollars a year in uncompensated care.

But hospitals don’t just let that money slip away. In exchange for taking on the uninsured, they’ve cut a deal with the state. Each year Virginia pays hospital systems like VCU and UVA hundreds of millions of dollars in “disproportionate share” funding, named because those hospitals take on more than their fair share of uninsured patients.

The state also has a patchworked network of other healthcare services for the poor. Virginia pays for breast and cervical cancer screenings, treatment for some with serious mental illness, and care for inmates that wind up on in the hospital.

“These programs are great but they’re largely funded with half federal, half state dollars. And some of them are funded exclusively with state dollars,” explains Whorley.

Instead, they could be funded almost entirely with federal dollars.

 

To encourage states to expand Medicaid, Congress agreed to pick up most of the tab. The funding relationship would go from 50-50, to 90-10.

 

If Virginia expanded Medicaid, payment for many of those services would no longer be deducted from the state treasury, but instead they would come out of the federal treasury. The Governor’s office predicts $400 million in savings over the next two years.  

 

But some Republicans who resist expansion argue that while it may be savings for the state, it's not for the taxpayers. They'll still be on the hook for the bill, just at the federal level.

 This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.