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Medicaid expansion challenges budgets

September 8, 2016
by Julie Miller, Editor in Chief
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As election season heats up, health executives no doubt are wondering what their future might look like under a new administration. An issue brief released this week from the Kansas Health Institute points to several policies related to Medicaid expansion as variables to watch in 2017.

The Affordable Care Act (ACA) currently provides states additional federal money to expand eligibility for Medicaid enrollment—much of the expansion benefits low-income individuals who have no children and who are unlikely to be eligible for Medicaid otherwise. Thus far, 26 states including the District of Columbia have opted to expand under the ACA model with an additional six states expanding through customized, alternative models. There are 19 states that have not expanded.

Reduced Federal Support: Moving into 2017, the full funding promised under ACA for Medicaid expansion will be reduced, leaving states to foot 5% of the new costs themselves. This reduction is significant because it could cause new budget constraints in expansion states—including those that are already overspending—and it could deter the remaining 19 states without expansion from considering the opportunity. A new administration could point to budget concerns and alter or end the program altogether.

Proposed Incentives: The Obama administration has proposed a policy iteration to provide full funding for three years for new states opting in so they don’t miss out on the support that the expansion states already have taken advantage of. However, costs have been higher than expected, and it stands to reason that a new administration would not be able to justify such an expense.

Potential Caveats for Coverage: The states opting for alternative expansion models must have federal approval for how they deliver their customized Medicaid programs. A new administration could make a shift to permit tighter controls on eligibility—tighter than what has been approved under the Obama administration. For example, the federal health agency has not allowed states to place work requirements on enrollees in order to gain coverage. According to KHI, it remains uncertain as to whether such caveats might be allowed in the coming years.