Medicaid Incentive for 12 GOP States Could End Under Senate Plan

Democrats are mulling whether to rescind billions of dollars meant to encourage states to expand their Medicaid programs, in part to pay for a federal Medicaid-like coverage plan in those states.

The debate about whether to rescind the funds divides some Senate and House Democrats. House aides say the incentive money, which Congress provided in March, should remain available instead of being used to offset part of Democrats’ sweeping social spending and tax package. The new legislation’s federal fallback program for non-expansion states isn’t meant to replace state-run Medicaid programs, they say.

Senate supporters of adding new Medicaid coverage in these Republican-controlled states say their state legislatures and governors have shown no amount of money will persuade them to open up eligibility for their public health insurance programs.

“It’s clear to me that their reasons for not expanding are political, shamelessly and utterly political,” Sen. Raphael Warnock (D-Ga.) said.

Photographer: Stefani Reynolds/Bloomberg

Sen. Raphael Warnock (D-Ga.) speaks to members of the media at the U.S. Capitol in Washington, D.C., U.S., on Tuesday, Oct. 5, 2021.

Warnock was among the key supporters of a provision in a $1.9 trillion Covid-19 relief package (Public Law 117-2) to increase the federal government’s share of Medicaid costs in states that newly expand their public health insurance. Under the Affordable Care Act, states can expand eligibility to adults earning up to 138% of the poverty level, with the government paying 90% or more of the costs.

None of the 12 states that have so far declined to expand their Medicaid programs have accepted this offer of more federal funds.

The ACA was originally designed to make this Medicaid expansion mandatory, so it doesn’t include insurance subsidies for people below the poverty line, which is about $17,000 per year for a single adult. The median income limit for families to be eligible for Medicaid in the 12 holdout states is 41% of the poverty line—or an annual income of $8,905 for a family of three in 2020, according to an analysis by the Kaiser Family Foundation. That leaves many families, and individuals, stuck in a coverage gap.

To close that gap, Democrats have proposed as part of their domestic social spending package allowing the federal government to create a Medicaid-like program in non-expansion states starting in 2025 and offering no-cost Obamacare plans to those people from 2022 to 2024.

Democrats Hold Tight to Obamacare, Medicaid in Funding Wish List

Two senior Democratic aides, one in the House and another in the Senate, said Democrats are exploring sunsetting or repealing the Medicaid incentive funds to pay for part of the social spending package. The White House has vowed to pay for all the spending in that package, the House aide noted, and has sought a list of options to do so.

Sen. Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, declined to say if he was planning to rescind the funds. He said he was still discussing how best to close the Medicaid coverage gap.

Triaging Plans

President Joe Biden in recent weeks has signaled his party needs to shrink their once-$3.5 trillion spending proposal down by $1 trillion or more to win the support of key moderate Democrats. Sen. Joe Manchin (D-W.Va.), one of those moderates, has said he wants the package closer to $1.5 trillion and doesn’t want new entitlement programs included.

Warnock said he’s “open to how we get there” in terms of designing a policy to grow Georgia’s Medicaid program and extend coverage to people in his state left without assistance.

The key for Warnock is setting up a coverage program, even a temporary one.

“Once states see the benefit, the net effect on their people, and once the people see it, then it’s hard to go back,” he said. “It’s unwise to go back. I’m focused on trying to find for us a ramp forward.”

Oklahoma, Missouri

Another House Democratic aide familiar with the discussions said Democrats want states to expand their own Medicaid programs using federal dollars, as opposed to using the proposed federal fallback programs. That aide noted that Oklahoma and Missouri’s expansions went into effect this year, making them eligible for the added incentive dollars.

If lawmakers rescind the incentive funds and set up a temporary program for covering Americans caught in the Medicaid coverage gap, people in non-expansion states could be left without hope for coverage in just a few years.

Democrats Eye Time Limit on Medicaid Expansion in Quest for Cuts

The expanded incentive funds cost $16.4 billion, according to a report from the nonpartisan Congressional Budget Office.

To contact the reporter on this story: Alex Ruoff in Washington at aruoff@bgov.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Sarah Babbage at sbabbage@bgov.com