Bazelon Center Guide on Best-Policy Options for Medicaid Expansion

The Affordable Care Act (ACA) contains provisions to ensure that 97% of Americans have health care coverage. In large part, this goal is to be achieved through expansion of state Medicaid programs to cover single adults and families with incomes at or below 133% of the federal poverty level ($14,856 for an individual and $30,657 for a family of four in 2012). However, the Supreme Court's ruling on the ACA made Medicaid expansion an option that states can accept or decline. What should states do?

A new advocacy guide from the Bazelon Center for Mental Health Law lays out a strong case for pursuing Medicaid expansion as it is outlined in the ACA. Take Advantage of New Opportunities to Expand Medicaid Under the Affordable Care Act calls on advocates and providers to be vigilant and active in educating state leaders about the benefits of the ACA Medicaid expansion and provides them with an array of talking points on key issues, particularly as they relate to Americans with serious mental illness.

Many of the childless adults with incomes below 133% of poverty who will be eligible for Medicaid under the ACA expansion are currently uninsured, and they account for substantial state and local expenditures. One in six of these individuals has a severe mental disorder, according to research cited in the 20-page guide. In addition, half of the newly eligible adults have incomes below 50% of poverty. Many in this extremely low-income group are homeless, and approximately one-fourth of them have a serious mental illness. Currently, uninsured individuals with mental illness receive at best only basic, state-funded public mental health services—frequently of limited duration and often only crisis oriented. ACA's Medicaid expansion option will enable states to secure unprecedented levels of federal funding, replacing state and local dollars with federal Medicaid funds while providing a more comprehensive array of services. The federal government will cover 100% of the expansion costs for the first three years. The federal share will then be reduced in steps, but it will remain at 90% starting in 2020. Current estimates show states saving between $19.9 billion and $39.7 billion on mental health services by 2019, depending on state-level circumstances.

States that do not opt for the Medicaid expansion not only will continue to spend substantial funds on public mental health services, but they will also face new costs, such as hospital bills for uninsured individuals. On the expectation that few individuals will remain uninsured in 2014 when the Medicaid expansion and the new health exchange insurance plans are fully implemented, the ACA contains provisions that will significantly cut federal funds to pay hospitals for services to uninsured individuals—disproportionate share hospital (DSH) payments. Beginning in 2014, if a state does not opt for the Medicaid expansion, the loss of DSH funds will be a significant financial blow to hospitals, including psychiatric hospitals.

At the heart of the Bazelon guide is a decision tree that outlines best-policy choices for states once the decision is made to expand the Medicaid program to cover the newly eligible group. The best option is to enroll all newly eligible individuals into the regular state program with full Medicaid coverage, according to the guide. However, the ACA outlines other approaches: providing full coverage to a defined population, such as those with serious mental illness, or creating a limited benchmark plan based on the ACA's Essential Health Benefit (EHB). Despite the best efforts of advocates, some states may opt for a limited plan, and the Bazelon guide outlines steps to ensure adequate—and parity—coverage, for example, by enhancing the EHB plan with wraparound services for children and adults with mental illness. The guide lists community services not explicitly stipulated in the EHB that the enhanced plans should include, such as skills training, assertive community treatment, peer support services, and therapeutic foster care for children. However, the administrative burden of operating a parallel system for some Medicaid enrollees is likely to outweigh any cost advantage of offering them a more limited package of services, the guide notes.

The guide also addresses the issue of “churning” between Medicaid coverage and a subsidized exchange insurance plan, which occurs when an individual's or family's income fluctuates between less than 133% of the poverty level and more than that level. Options include guaranteeing a specific period of continuous Medicaid eligibility (a year, for example) or requiring at least one health plan to be available through both Medicaid and the exchange.

“States are well aware of their important role in implementing the ACA,” the guide concludes, “and most are working either openly or behind the scenes to make the policy decisions that will lead to Medicaid reforms by 2014. Now is the time for those concerned with public mental health policy to act at the state level to ensure that these policies support the needs of children and adults with mental illness.”

The guide is available on the Bazelon Center site at www.bazelon.org/LinkClick.aspx?fileticket=cwAuDZLEmQI%3d&abid=627.