Special Report: What happens when a state expands Medicaid? - North Carolina Health News

By Rose Hoban

Medicaid expansion has the potential to add thousands of health care jobs to the North Carolina landscape, expand opportunities for care to hundreds of thousands of North Carolinians, and bolster the fortunes of smaller, rural hospitals.

While at first, providers might be strained by the addition of these new patients to the health care system, according to a review of six years of data and interviews with officials from states across the country that have already expanded the program, most health care systems were flexible enough to meet these additional demands and were also left on stronger financial footing.

“The facts are that we’re running a $3 billion surplus, with covering 600,000 people and we’ve reduced the growth in Medicaid,” said former Ohio governor John Kasich, who was in Raleigh last week to speak at an event convened by the NC Rural Center.

When pressed further about purported problems with the Medicaid expansion he pushed through in 2015 while governor, he retorted, “So then why is Ohio doing so well?”

In recent weeks, NC Health News looked at dozens of medical and economic studies and spoke to officials, providers and academics in primarily Republican-led states that chose to expand Medicaid.

The data are overwhelming. In states that have expanded, the move has been a boon, both for the health of patients, the strength of local economies bolstered by thousands of new health care jobs, and increased stability, in particular, for rural hospitals that have been buffeted by changes rocking the health care system.

“There’s more data that’s showing a link to employment, overall better economic conditions,” said Hemi Tewarson, director of the health division at the National Governors Association. “There have been studies done that show rural hospitals have done better in expansion states compared to non-expansion states, primarily because they have another stream of reimbursement that has kept them more stable.”

And while many of the 36 states (as well as the District of Columbia) have had challenges  implementing all the changes created by Medicaid expansion, according to Tewarson, “We haven’t seen any state reverse its position.”

Partly that’s because of an enhanced payment rate from the federal government. Medicaid is paid for by a mix of state and federal funds. North Carolina receives about 66 cents from federal coffers for every dollar spent on regular Medicaid patients. But for any patients qualifying for the program under the expansion, the federal government will be covering 90 cents of each dollar spent.

At first, strain

“It was about a half million dollars a year in uncompensated care that we were providing from seeing so many uninsured patients,” said Jill Marie Steeley, head of PureView Health Center, a community health center in Montana’s capital, Helena, as well as in rural Lincoln, 60 miles away.

“We were already seeing them,” she said. “We just weren’t getting paid for them.”

Many of Steeley’s patients are the people who have fallen into the so-called coverage gap created by the Affordable Care Act and the lawsuits that subsequently altered the law. Initially, the ACA mandated that all states cover people who made too much for Medicaid, up to about 135 percent of the U.S.’ federal poverty level (about $33,500 for a family of four), which includes many low-income workers such as farmers, ranchers and others whose employers do not provide insurance. At that point, people became eligible for large subsidies to buy health insurance on federal exchanges.

But a 2012 Supreme Court decision upended those plans, instead making the mandatory expansion voluntary, thus leaving the decision of whether to cover millions of low-income workers up to individual states.

Steeley recounted that when Montana passed its Medicaid expansion in January 2016, her clinic initially saw a surge, something that’s typical, according to Greg Tung, a health economist from the University of Colorado.

“It does further strain the system,” Tung said. “Frequently, the state’s Medicaid system is not able to expand as quickly as the number of people who are enrolled.”

But, in many cases, the money that follows those new patients helps deal with the problem.

“We saw an immediate shift in our revenue because of now having a payor for those patients who didn’t have one before,” Steeley said. “I think over the last two years, we’ve seen a steady flow of new Medicaid patients finally being able to access services.”

Last year, Steeley said she had 1,800 patients added to an existing patient population of about 5,200, but only about a third of them were the new Medicaid patients. So Steeley did what businesses do when facing more demand: She hired more people.

“We monitor our wait times very closely and we know that when they get too far out, we know we need to add a provider, so we’ve been successful in doubling in size,” she said.

Because her patients have been doing better too, Steeley’s been getting grants to bring more people into her clinics in the past year. Her experience mirrors the findings of researchers from Boston and Iowa who looked at rural community health clinics in expansion states and found: “Changes in quality and volume were consistently observed in rural [community health centers] in expansion states, which had relative improvements in asthma treatment, body mass index screening and follow-up, and hypertension control.”

Those researchers concluded that “expansion may be particularly important to rural [community health center] patients, who have access to fewer primary care providers, and may serve as a mechanism for reducing disparities that persist between urban and rural regions.”

Unintended consequences for rural hospitals

Initially, Maggie Elehwany had high hopes for the ACA. As the vice president for governmental affairs for the National Rural Health Association, she saw the law as helping stabilize the providers she represents in Washington, D.C.

She explained that prior to the ACA, Congress had passed a bill cutting the amount of bad debt that hospitals could write off on their taxes.

“It sort of made sense at the time, because Congress was saying, ‘Hey hospitals, guess what, we’ve got great news for you, you’re gonna have all paying customers. They’re gonna have to have to buy insurance or they’ll get Medicaid expansion, so you won’t have any more bad debt,’” Elehwany said.

So her people supported that tax bill.

But that same 2012 Supreme Court ruling upended everything.

In the aftermath, when some states didn’t expand Medicaid, rural hospitals faced a double whammy: they still had lots of non-paying patients and no way to write it off.

“What we’re seeing is there’s this weird magnification for rural hospitals and seeing these closures escalate,” especially in non-expansion states, Elehwany said.

Tung, who spends a lot of his time thinking about rural hospitals, confirmed Elehwany’s overall impression.

“Our analysis is based off of data and real hospital financing and closure data,” Tung said. “Clearly, in states that have not expanded Medicaid, their hospital closure rates are significantly higher than in states that have expanded Medicaid.”

Both Tung and Elehwany went further, noting that these closures hamstring surrounding communities. They pointed to research showing that when a rural hospital closes, per capita income in the surrounding county drops, the unemployment rate rises, and the poverty rate climbs.

Elehwany said that she’s worried about North Carolina’s rural hospitals.

Referencing an internal, non-public analysis of rural hospital finances, Elehwany said she could see multiple hospitals operating with negative margins, one that was 13.2 percent in the hole. “Who can survive with that?” she asked.

In contrast, Steeley said that once Montana expanded Medicaid, the rural providers she knew had more financial stability.

“Which I think is why the Republicans [in the Montana legislature] support it, because they have to go back to those small communities, and if they vote on something that’s going to bring down their hospital they’re not going to get elected again,” she said.

‘Having your finances protected’

In contrast to the economic malaise generated by rural hospital closures, an economic analysis done by researchers at Columbia University found that because of additional Medicaid coverage, the country’s overall poverty rate – both rural and urban – dropped.

“Just under one percentage point of the population, or almost 700,000 people,” were lifted out of poverty as a result of attaining coverage, said researcher Naomi Zewde. “And what we also found that it was among those groups that were eligible for the ACA, the effect was concentrated among them.”

She said a large part of the poverty relief came from people being able to save because they weren’t paying so much out of pocket for care.

Also, Zewde said, people benefited by having their finances protected in the event of a medical catastrophe. Financial protection plus access to health services was important, she said.

In addition, it appears that being able to address health problems helped people get jobs if they weren’t already working.

Research from the Kaiser Family Foundation found that about 6-in-10 people in the Medicaid expansion populations across the country were already in the workforce, while 3-in-10 of new Medicaid enrollees were exempted because of caregiving, disability, going to school or being in drug treatment.

Tanya Theriault, a nurse practitioner working in New Orleans, said these are her patients.

“They have a couple of different jobs, like Uber or Lyft, they’re retail and food service and they’re all part-time. Bartenders, you know this city loves its bartenders, and bars are not famous for their benefits,” she said. “Everything that makes the tourism industry run.”

A legislatively mandated study commissioned in Ohio (link to methods here) found that new Medicaid recipients reported having an easier time paying for groceries, housing and being able to pay down debt than before receiving Medicaid benefits. And almost nine in 10 reported that having Medicaid made it easier to keep working.

Former Ohio Governor John Kasich was upbeat about what the program has done for workers in his state.

“If you want people to work, they’ve got to be healthy,” Kasich said. “I think it’s a system that has been very, very effective and efficient.”

In Montana, legislators forged a path for helping out-of-work adults eligible for expansion coverage find work by creating HELP-Link, a job services program that “connects expansion enrollees with workforce training, employment services, and job openings.”

Since 2016, HELP-Link helped more than three-quarters of people using it find work. Out of 96,000 expansion enrollees, Montana had only 4 percent, or 3,600 people, who were not able to find work, or who were exempted from work requirements.

Many of those folks looked for work in the health care sector, which had stronger employment growth than other industries, swelling by 15.3 percent compared to the state’s overall job growth of 6.9 percent in 2016-17. In addition, a number of states — Louisiana, Colorado, Kentucky, Michigan and Pennsylvania — all studied what happened in the wake of expansion and also found that Medicaid expansion added jobs to their economies.

Research confirmed in practice

The Kaiser Family Foundation’s offices in downtown Washington, D.C. have the look of a high-priced attorney’s offices, with wood paneling and recessed lighting. But much of the analysis conducted there focuses on some of the poorest Americans, and KFF has tracked the progress of the Affordable Care Act closely.

“Our mission is to put out information and analysis to inform the debate, and we let the data speak for itself,” said Rachel Garfield, a senior researcher there. “We don’t have any particular position on what a state should or shouldn’t do.”

Last year, Garfield helped compile a literature review of the effects studied in the wake of the ACA that consisted of more than 200 peer-reviewed journal articles. “There have been other types of studies that have been put out by advocacy groups or people with a particular interest, we excluded those from our review of the literature.”

Garfield said that in her research the studies on health effects have been mixed, with some studies showing a big effect on health outcomes, while others showed a weaker correlation.

“Some of those health effects take time to show up,” she said. “So having blood pressure under control as a result of being in regular care that you’re in as a result of getting health insurance coverage, there’s many steps along that pathway that has to happen and that can take time to show up.”

A thousand miles away from Garfield’s comfortable Washington office, nurse practitioner Tanya Theriault says she doesn’t need research to see the difference in health outcomes. Her practice is in the Daughters of Charity clinic tucked under a highway causeway, next to the railroad tracks in Metarie, a suburb of New Orleans.

She recounted the story of one of her many low-income patients from the neighborhood, a mechanic with asthma, who used the emergency room as his “primary care.”

“Just like other chronic conditions, if you leave asthma sort of always coming to crisis, then you deal with this constant inflammatory state [in the lungs], and a near critical experience every time,” she explained.

“For him, it was that he really couldn’t afford the visits. He’d get  a couple of inhalers from the ER and every time they’d say, ‘You really should see a primary care person.’ And he was not going to be able to do that.”

Once he got insurance through expansion, he started coming to her clinic “pretty regularly.”

“He saw me for the first year or two after he got Medicaid, but then he could find a place that was closer to him,” she said. “Once he had Medicaid, other places would take him.”

In a much-touted instance, before implementation of the ACA, Oregon randomly assigned 30,000 additional people to their Medicaid program and 45,000 others missed out. All of them were studied.

Oregon experiment authors concluded “this randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raised rates of diabetes detection and management, lowered rates of depression, and reduced financial strain on patients.”

Theriault said that rings true for her. Sometimes, the weight of years of untreated disease makes it difficult for people to improve once they do get care. She recalled the story of one of her diabetes patients.

“She’s in her early 40s and she’s going to be on dialysis,” she said. “In the two years that I’ve seen her, her diabetes has been great. But before that, it was terrible, and you know the damage is already done, is what her nephrologist recently said to her.”

The good news for that patient is that among kidney disease patients who started renal dialysis, researchers writing in the Journal of the American Medical Association found, “the ACA Medicaid expansion was associated with significant improvements in 1-year survival.”

But once a patient is on dialysis, the cost is covered by a different government-funded program, and patients find it hard to work because the treatment is three days a week for most of the day.

“She’s got young kids, she’s got a job, she’s got to find a way to live around this very time-consuming, now-critical procedure,” Theriault said.

After the state expanded, Louisiana’s Department of Health created an online dashboard to track how much care has been delivered to newly eligible Medicaid recipients. One of the metrics cited is 13,154 newly diagnosed and treated cases of diabetes. The dashboard also tracks rates of breast and colon cancer screenings and the number of people who’ve been able to start treatment for addiction.

All this jives with what researchers publishing in the policy journal Health Affairs found about the same type of preventative care for rural patients, with more people checking their blood sugars and having annual checkups.

Other research has found that expansion states are seeing fewer critically ill patients end up in intensive care, compared to non-expansion states.

“Because critical illness may be less susceptible to patient and provider decision-making than other types of health care utilization, they may be better markers of disease control after a complex policy change such as insurance expansion,” study author Dr. Andrew Admon from the University of Michigan said in a press release accompanying the release of the study.

Positive balance sheets

In many states, more people became eligible for health coverage after Medicaid expansion than was originally estimated. Rachel Garfield from the Kaiser Family Foundation said it’s tricky to talk about what actually happened compared to predictions.

“Predictions are just that, they’re based on an estimate, based on collection of information,” she said. “It’s not a fact, it can be off due to several factors.”

“So the fact that actual costs may have been above the predictions could mean many things, maybe something happened with rollout of enrollment or the predictions had errors in them to begin with.”

(Her organization has predicted North Carolina would see at least 412,000 new beneficiaries on the Medicaid rolls.)

Few state officials were complaining about it though.

Initial demand in Louisiana was higher than expected, but in recent months has begun to tick back down, according to Nick Alberes, a policy advisor for Louisiana governor John Bel Edwards, who expanded the program in 2016.

“I think a big part of that was there has been so much pent up demand for health coverage,” he said, noting that expansion had cut the state’s uninsured rate in half.

Many lawmakers want to know how it will affect their state’s balance sheets. States have taken different paths to expansion, some have paid for it outright, betting on savings outweighing costs. Others created revenue streams to support the cost.

In Montana, revenue generation took the form of some cost-sharing by the newly covered. The state saved money by moving some “traditional” beneficiaries into the populations served by the enhanced federal matching rate, that included $10.5 million saved in the state’s prison system, where some inmate care was moved over to Medicaid.

According to a study done by a national health care consulting firm, the Montana expansion cost the state $29.4 million in outlays, while earning the state more than $36 million in extra federal reimbursement.

In Louisiana, lawmakers imposed a premium tax on the managed care companies that run the state’s Medicaid program.

“We negotiated with them in order to get that in place,” Albares said. “Of course, they see a benefit in providing that revenue as a statutory dedication for the Medicaid expansion program, because, of course, they have a number of new enrollees coming into their insurance program.”

He also pointed out that the prior administration had left the state with deficits, but Alberes said their last session budget resulted in a surplus.

“It saves our state general fund money. It’s brought hundreds of millions of dollars into our state general fund,” Albares said. “We’ve had about a half million people who have accessed health insurance coverage, many of them for the first time in their lives.”

“We’re still spending zero dollars in state general fund for the Medicaid expansion population,” he added.

Similarly, a review in Governing magazine found states using cigarette, liquor, hospital and premium taxes to pay the costs of expansion.

“It was $18 million we saved from the Department of Rehabilitation and the corrections budget,” said Tom Betti, a spokesman for Ohio’s Medicaid program, who ticked off the ways Ohio saved from expansion.

The state paid the extra costs out of its general fund but hired researchers from the University of Ohio to track the ways the state saved.

“$163.1 million in net state match provides $5.1 billion in health care services to almost 700,000 Ohioans,” Betti said. “Spending about $163 million and getting $5.1 billion in health care services back boils down to the state paying about $21 per person per month… about 68 cents per day.”

And Betti’s former governor, John Kasich, said he put a provision in his state’s expansion plan that says if the federal government reneges on paying the higher rate for expansion patients, the state pulls out of it.

“We have reasonable ways to protect the financial integrity of the state,” he told North Carolina Health News.

‘On your own two feet’

People from expanding states said it’s a little harder to calculate exactly how much tax revenue they’ve received as a result of the new jobs created by expanding the program, but all the states reported increases in the workforce.

In Montana, health care employment grew at almost three times the rate of employment in other sectors of the economy, according to the consultants’ study, whereas job growth in that sector lagged before expansion.

Kaiser Family Foundation’s Rachel Garfield noted that people with disabilities were more likely to enter the workforce in states that expanded.

“Before the ACA [people with disabilities] would have to keep their income very low in order to qualify for Medicaid,” she explained, but now they could earn more income and retain their coverage.

Albares said they commissioned a study from Louisiana State University economists who estimated expansion had created or retained more than 19,000 jobs, about half of them in health care, and generated $3.5 billion dollars in economic activity.

“There are also substantial ripple effects across the economy, you know, you need people to serve the meals for people… restaurants and basic services that support those health care jobs,” Albares said.

In Ohio, Betti pointed to their research indicating many people have cycled off of Medicaid once they get a better paying job. “We have four years of evidence pointing to the fact that it’s working.”

“When you’re sick, who wants to go look for a job? Or if you’re worried about being sick, you have diabetes or whatever ailment you may have, that’s not being treated properly?”

With expansion, he said, workers are “going to doctors, if you have substance abuse problems, there’s help for that, you can get on your own two feet.”