When President Obama signed the Patient Protection and Affordable Care Act (ACA) into law in March 2010, he was met with cheers and whistles. There was a sense that the bitter fighting over the president’s landmark health care reform would calm, at least a little bit.
But the partisan fighting continued, (remember death panels?) and in January 2011, the State of Florida sued the U.S. Department of Health and Human Services, challenging the constitutionality of the law.
The case eventually made its way to the Supreme Court, which, after much nail biting among advocates of reform, ruled that the ACA was mostly legal. But while the court ruled that the government could require most citizens to have health insurance, it said that the government could not force states to expand Medicaid, the federal insurance program for the poor.
Part of the act’s complete, and complex, puzzle is the Medicaid Expansion. Expanding Medicaid for citizens too poor to buy private health insurance (those making less than 133 percent of the federal poverty line) was also supposed to mean that fewer uninsured Americans would end up in the emergency room. The ER has for years acted as the nation’s makeshift universal health catch-all, and it’s very expensive.
Historically, hospitals have received supplemental funds from the government to help cover the costs of treating people who can’t pay. One of the ways they make up that money is with Disproportionate Share Payments (DSH, pronounced “dish”). Pennsylvania hospitals currently receive $1.9 billion in DSH payments, according to the Hospital and Healthsystem Association of Pennsylvania.
But those payments will be phased out under the ACA, since they should have become obsolete as everyone became insured. Since the Supreme Court ruling made the Medicaid Expansion optional, however, hospitals are poised to continue providing uncompensated care — without the DSH payments to make up for their losses.
Hospitals in Philadelphia are now facing that very possibility. When Gov. Tom Corbett announced his budget in early February, he released a letter to Secretary of Health and Human Services Kathleen Sebelius, in which he declined the Medicaid expansion, at least for now.
Corbett wrote that the expansion would be too costly for Pennsylvania taxpayers and that there must be more “independence and flexibility” at the state level for him to accept it. Advocates and lobbyists are still working behind the scenes on the issue, but for the moment it looks like Pennsylvania will be one of the handful of states that refuse the expansion. Even Florida, the state that filed the Supreme Court case questioning the legality of the ACA, signed on for the expansion last week.
Expanding Medicaid will cost the state money in the long run, but the federal government is subsidizing 100 percent of the expansion for three years, until 2016, and then phasing down to 90 percent. The Corbett administration estimates the expansion will bring an additional 800,000 people onto the Medicaid rolls and cost Pennsylvania $4.1 billion by 2021. The Kaiser Family Foundation (KFF), a nonpartisan think tank that used models developed by the Urban Institute, estimates the expansion will cost the state $2.8 billion.
Rachel Garfield, a senior researcher at KFF, said the estimate was conservative and that the cost could actually be lower, because the KFF estimate didn’t include certain economic benefits to the state like added employment, and cost saving from other state-subsidized health programs that would become obsolete if more people were on Medicaid. One report by the Pennsylvania Health Access Network estimates the Medicaid expansion will create 41,200 new jobs in 2016.
Part of the estimated 800,000 enrollees are people who are already eligible for Medicaid, but aren’t signed up because they don’t know they are eligible or they don’t know how to navigate the complicated paperwork. The Corbett administration calls this group “woodwork” (as in “all the already eligible Medicaid enrollees will come out of the woodwork”).
“Our coalition calls it the ‘welcome mat’ effect,” retorted Alyssa Goodin, associate director at the Philadelphia Alliance and a member of the Cover the Commonwealth Coalition. The federal government will subsidize those already eligible for Medicaid at the old match rate of 54 percent; only enrollees who are newly eligible will be covered by at the new, higher rate.
“Currently if you are a childless non-disabled adult in Pennsylvania, you do not qualify for Medicaid no matter how poor you are,” explained Goodin, an optimistic advocate for Medicaid Expansion. She said if the expansion does not go through, “there are going to be a great deal of fiscal implications.” She listed potential layoffs at hospitals and the ticking clock on the 100 percent federal subsidies which will expire in 2016 regardless when the state expands Medicaid.
Even worse is that there’s nowhere in the ACA for the very poor (100 percent FPL and under) besides the Medicaid expansion. Subsidies on health insurance have only been designed for people making 100-400 percent FPL.
“It is a moral travesty,” Goodin said. “I feel that it is reprehensible that we as a state would opt out of the expansion and leave people below 100 percent of the poverty line with no place to go for health insurance.”
With nowhere to go for insurance, Pennsylvania’s very poor will likely go where they’ve always had care: Hospital emergency rooms. Except hospitals will be operating without the financial support they’d had for the uninsured before. “The costs don’t go away just because somebody doesn’t have insurance,” said Priscilla Koutsouradis, communications director of the Delaware Valley Healthcare Council at HAP.
Pennsylvania hospitals are already struggling to balance their budgets, with huge numbers of uninsured patients and low reimbursement rates for Medicare and Medicaid patients. In fiscal year 2010-2011, hospitals in the state provided $990 million in uncompensated care, according to HAP.
“Ever since the era of health reform has been ushered in, there are huge challenges that hospitals face,” said Koutsouradis. “There’s no question that every hospital and health system has to look at the needs of its community and the services it provides and make the best equation that can be made.”
And hospitals have been making calculations that end in service cuts to patients, such as the closure of 18 maternity units in Philadelphia since 1997.
These issues are especially pressing in Philadelphia, as urban areas house the highest numbers of people without insurance. Over the last decade the uninsured population in southeastern Pennsylvania has doubled, reaching 305,000 in 2012. That means hospitals in Philadelphia, already strained, will carry the brunt of the burden if Pennsylvania leaders don’t change their mind on Medicaid.
An earlier version of this article mistakenly reported that under the Medicaid Expansion, the federal government will not subsidize people already eligible for Medicaid.
Allyn Gaestel is currently a Philadelphia Fellow for Next City. Much of her work centers on human rights, inequality and gender. She has worked in Haiti, India, Nepal, Mali, Senegal, Democratic Republic of Congo and the Bahamas for outlets including the Philadelphia Inquirer, the Los Angeles Times, Reuters, CNN and Al Jazeera. She tweets @allyngaestel.