Across the U.S., Republican governors and legislatures are embracing an expansion of the health care program for the poor, disabled and elderly that would be paid for mostly by the federal government. So why is North Carolina resisting?

By Rose Hoban

Last Thursday, health care advocates gathered outside the old state capitol building in Raleigh to ask Gov. Pat McCrory to expand Medicaid, the state and federal program that provides health care for about 1.8 million poor, disabled and elderly North Carolinians.

Under President Barack Obama’s signature Affordable Care Act, states can choose to expand the Medicaid program to cover people whose incomes fall below 133 percent of the federal poverty level but are not currently eligible for the program. Estimates put the number of people in North Carolina that would apply at between 318,000 and 500,000.

Joan Alker from the Georgetown Center for Children and Families speaks at the Medicaid expansion rally last Thursday on the grounds of the old state capitol.
Joan Alker from the Georgetown Center for Children and Families speaks at the Medicaid expansion rally last Thursday on the grounds of the old state capitol. Photo credit: Rose Hoban

Standing in the shade of old oak trees on the capitol grounds, under a statue of George Washington, a knot of about 30 people held signs reading “Where is the Plan?” and “500,000 North Carolinians Can’t Wait.”

On the same afternoon, health economist Don Taylor from Duke University’s Sanford School of Public Policy told a group of attorneys from the Federal Bar Association that declining the expansion was tantamount to “economic suicide.”

In the past few months, one rural hospital has closed and Novant Health, a hospital chain with 13 facilities in North Carolina, announced layoffs of hundreds of people.

Doctors’ groups, the N.C. Hospital Association and respondents to polls conducted by survey groups across the political spectrum think the state should expand. During his Senatorial campaign, former House Speaker Thom Tillis (R-NC) said the legislature should consider it once the program has achieved financial stability.

The state Department of Health and Human Services recently announced the program finished the fiscal year with cash on hand.

In several Republican-run states, conservative governors and legislatures are embracing expansion.

But in North Carolina, McCrory and Republican legislators aren’t biting. Leaders in the General Assembly, particularly the Senate, are openly opposed to the idea.

“You’re the first person today that has mentioned Medicaid expansion to me,” quipped Senate leader Phil Berger (R-Eden) when asked about it as he walked out of a Thursday meeting with McCrory on budget issues.

The politics of Medicaid expansion in North Carolina are tangled up in an argument about spending, the future shape of the program and the fallout from the toxic partisan politics that divide the country.

Shifting goalposts

When asked about expansion in the past, McCrory has said he’s requested that the federal government allow North Carolina to tie Medicaid expansion to a job-search stipulation, which would require a federal waiver.

NCHN graphic

But according to Pam Silberman, a Medicaid policy expert at UNC-Chapel Hill’s Gillings School of Global Public Health, federal rules prohibit tying Medicaid eligibility to job-search efforts.

“[Federal officials] have been giving a lot of flexibility around a lot of aspects of Medicaid expansion waivers, but requiring job search is not allowed,” Silberman said. “The position is that Medicaid is a health insurance program, not a work program.”

Even so, the stipulation may be largely beside the point, according to recent numbers crunched by the Georgetown University Center for Children and Families. The report found that almost two-thirds of the people who fall into the gap work already.

“These are … families who are already vulnerable, low-wage workers,” Georgetown’s Joan Alker said at Thursday’s Medicaid expansion rally. “And most commonly, they have one to two children, and they are school aged.”

The report found that another 20 percent are not in the labor force, such as students, homemakers or retired workers. Alker’s’ study, which used U.S. Census data among other sources, found that only 16 percent of those in the Medicaid gap are currently unemployed.

McCrory and state Health and Human Services Sec. Aldona Wos have said in the past they would consider expansion once they saw the outcome of the King v. Burwell case, which was heard in the Supreme Court earlier this year. Last month, the high court decided in favor of the Obama Administration.

But when asked if the goalpost had been moved in the wake of the decision, McCrory spokesman Josh Ellis said no.

“The whole time, the governor has said we need to wait for King v. Burwell, we need to get the current system reformed, and we also need to get a waiver,” Ellis said. “He’s said those three things all along, and one of those things has happened.”

‘Can’t afford it’

Also last Thursday, Alaska Gov. Bill Walker said he would unilaterally accept Medicaid expansion over the wishes of his legislature, and his legislative opponents have said they won’t fight his move.

That makes Alaska the 13th state to take dollars to expand the program.

Each beneficiary added will be paid for entirely by the federal government until the end of 2016, racheting down to a floor of 90 percent in 2019 onwards.

Leaders of the state Senate Health Care committee say, however, they don’t trust the federal government to keep that high reimbursement rate for the expansion beneficiaries.

“We don’t know what Congress plans to do in the future,” said committee Co-chair Tommy Tucker (R-Waxhaw). “We have seen in other states where the federal government is backing up on some of their funding.”

When asked where that was happening, Tucker cited Connecticut.

“They’ve expanded, and they can’t afford it. If you go looking in Connecticut, they put 34,000 people off the Medicaid rolls because they can no longer afford it and fund it,” Tucker argued.

Connecticut did have some issues in 2013 with higher-than-expected enrollment. But analysis done by the Urban Institute and published in March of this year found Connecticut had seen overall savings in its state budget, specifically from savings in behavioral health, less uncompensated care and lower public health costs.

North Carolina’s Medicaid spending in 2013 is at 14.1 percent of state revenue, up from 10.9 percent in 2000.  Compared to the rest of the nation, NC’s Medicaid growth has been slower: on average, states now spend 16.9 percent on Medicaid, up from 12.2 percent in 2000.
State Medicaid Spending as a Share of Own-Source Revenue, 2000–13. North Carolina’s Medicaid spending (orange line) in 2013 is at 14.1 percent of state revenue, up from 10.9 percent in 2000. Compared to the rest of the nation (blue line), N.C.’s Medicaid growth has been slower: on average. States now spend 16.9 percent on Medicaid, up from 12.2 percent in 2000. Data and graphic courtesy Pew Charitable Trusts/ Stateline. Click graphic for more information.

The state has been able to book some of these savings back to its general fund, the report said, even as expansion created some “limited initial costs for states in these early years of the expansion.”

“It is true that we are reducing our parents’ eligibility for Medicaid somewhat from 185 percent of [the federal poverty level] to 150 percent, so we are cutting off about 23,000 of our 750,000 enrollees, on the theory they can get health insurance on the exchange instead,” wrote Connecticut attorney Sheldon Toubman, who represents Medicaid patients at the New Haven Legal Assistance Association. “Of course, every other state requires such individuals to go to the exchange.”

Duke’s Don Taylor dismissed the idea of the federal government backing off of its Medicaid commitments.

“Other than when the Medicaid match rate was raised under [the stimulus, in 2009], when they explicitly said they were going to raise it now and then it’d drop back, there’s no other example of the federal match rate going backwards,” Taylor said.

Caught in reform debate

The whole issue of Medicaid expansion in North Carolina remains caught up in a political tussle over how to update the program, something that’s controversial in itself.

McCrory and the state House of Representatives have been pushing for a plan that emphasizes state-based providers assuming control as well as financial risk.

On the other side, Berger has made no bones about his desire to move Medicaid to a regimen run by established managed care companies. The two camps have been deadlocked for more than a year , when Senate leaders dissented from a plan created by the Medicaid Reform Advisory Group in early 2014.

But Taylor said if Berger wants managed care, he’d be wise to accept Medicaid expansion.

“The Obama Administration is desperate to say yes to almost anything to Southern states that go ahead and do it,” he said. He also said doctors and hospitals would swallow hard and say yes to managed care – which they don’t want – if expansion were part of the package.

Another health economist, UNC-Chapel Hill’s Mark Holmes, concurred that the federal government is eager to make deals with states to get them to expand.

“They’re approving stuff I never thought they would,” Holmes said. “Like in Arkansas, I thought, ‘There’s no way they’ll approve that,’ but they did.”

Federal officials green-lighted an Arkansas plan that allows the state to use Medicaid dollars as assistance for Medicaid beneficiaries to buy insurance from private insurance companies.

In the end, Medicaid expansion is more about politics than economics, said Georgetown’s Joan Alker.

“It’s all a fight within the Republican Party, between the more pragmatic members who look at the numbers and the more ideological part of the party who want to oppose the ACA at all costs,” she said.

“The most controversial part of Obamacare has always been the Obama part,” agreed Taylor.

At the Federal Bar Association panel last Thursday, Rich Saver, a UNC-Chapel Hill law professor, said he thought Medicaid expansion was “inevitable,” in part because the deal the Obama administration is offering states is so good.

“There’s an analogy to be made to [the Children’s Health Insurance Program], which also gave a generous match to states that voluntarily elected to get into it,” Saver said. “When it first came out, you had vociferous opposition from red states, and now … they’re in CHIP.

“So maybe people will need to wait this out a little bit longer.”

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