The Medicaid Coverage Gap – a Look at Six States

Francis Secada

AbstractAn evaluation of six states, and their choices regarding whether to expand Medicaid for

their poor populations or not.

ContentsExecutive Summary.....................................................................................................................................2

Topic............................................................................................................................................................4

Policy.......................................................................................................................................................4

Organization............................................................................................................................................5

Question..................................................................................................................................................5

Policy Network........................................................................................................................................6

Hypothesis/Claim....................................................................................................................................6

Literature Review........................................................................................................................................7

Private Health Care Market Failures: An Overview..................................................................................8

Insurance Failures................................................................................................................................8

Government Involvement with Health Market Failures........................................................................10

Medicaid before the Affordable Care Act: State/Federal Partnerships.............................................12

Contrasting Views on Health Care.........................................................................................................14

Medicaid expansion as a Drain on State Economies..........................................................................14

In support of restructuring the Health Markets Nationally...............................................................16

Research....................................................................................................................................................20

Research Frame + Selection...................................................................................................................20

The Data................................................................................................................................................22

Conclusion.................................................................................................................................................25

Notes on Research and Analysis................................................................................................................27

References.................................................................................................................................................30

Appendix: Dataset and Graphs....................................................................................................................0

Compiled data from US Census Bureau’s Community Population Survey (CPS), via Kaiser Family Foundation..............................................................................................................................................0

Graphs.....................................................................................................................................................1

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Executive SummaryThis capstone paper evaluates the consequences of the National Federation of Independent

Business v. Sebelius Supreme Court Decision in 2012. Specifically, the ruling on the

Medicaid expansion resulted in states being able to choose between opting in or out of the

public insurance expansion, resulting in the emergence of a “Coverage Gap.” This gap is

defined as the number of people who are excluded from having health insurance, who

would otherwise qualify under the new federal guidelines. The review of surrounding

literature will detail the circumstances that led to the need for the legislation of the

Affordable Care Act, and how the Individual Mandate and the Medicaid expansion were

designed to work together towards addressing market failures related to adverse selection

and Death Spirals of insurance risk pools.

A comparative view for addressing concerns with promoting health insurance participation

seeks to weigh the merits of promoting private insurance coverage capacities by

diminishing Medicaid’s supposed crowding-out effect against the need for a stronger

regulatory approach for promoting insurance participation. The opposing sides can be best

simplified by the competing rhetoric of emphasizing private insurance over Medicaid, and

the need to expand insurance participation with both private insurance and Medicaid, and

the need for regulatory mechanisms to facilitate this.

Data analysis on a sample of six US states demonstrates how states that do not opt into the

Medicaid expansion artificially inflate their number and rates of uninsurance among their

vulnerable populations. Modeling a scenario in which the two treatment states expand

Medicaid results in the treatment group lowering the number of uninsured significantly.

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TopicThe topic of this paper is about The Patient Protection and Affordable Care Act (PPACA) of

2010, known colloquially as The Affordable Care Act or Obamacare. This act changed the

national landscape of healthcare for all citizens within the United States, by mandating

individual coverage for all qualified adults through various mechanisms that are

administered on the state level. Individuals must buy qualified health insurance policies

under penalty of a fine/tax that is collected by the IRS during federal filing season.

Individuals who are not able to bear the full burden of obtaining private insurance are able

to qualify for federal subsidies that offset monthly premium costs. Individuals who earn

under 138% of the Federal Poverty Level (FPL) would qualify for Medicaid. However, due

to the decision of National Federation of Independent Business v. Sebelius in 2012, states

are able to choose whether to opt into the new Medicaid agreement with Centers for

Medicare & Medicaid (CMS) or to remain with their previous contract. Because eligibility

levels for Medicaid vary across state lines, this court decision introduces fragmentation

within the federal framework of the law. Therefore, achieving full insurance rates while

lowering the rate of the uninsured is complicated

PolicyThe specific policy that will be evaluated will be the Medicaid expansion component of the

Affordable Care Act. Specifically, this law simplified eligibility for Medicaid insurance by

removing most categories, and expanding the insurance to most individuals who earn

below 138% of the federal poverty level. States who accepted this Medicaid expansion

component of the law were able to provide insurance to the impoverished while also

receiving sizeable assistance from the federal government. In regards to new Medicaid

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Spending, the federal government provided scaled financing, covering 100% of initial costs

of Medicaid spending in the first three years, then reducing funding until achieving a 90%

funding rate by 2020. Within a time horizon from 2010 to 2020, states can potentially

achieve a 10:1 match of Medicaid spending.

Because of the NFIB v. Sebelius, SCOTUS decision, states are not obligated to enroll in the

new federal Medicaid program. Therefore, there is a research opportunity to draw

comparisons between states that have opted into participation with the new Medicaid

provisions, and states that have opted out of the new arrangement.

OrganizationThe organizations that will be covered within this research paper will be six states within

the United States of America. Those states will be California, Illinois, Mississippi, Missouri,

New York and Ohio. They will be grouped according to the kind of state exchanges they

have (federally-facilitated state exchanges, state partnership exchanges, and state-based

exchanges). These states will also be grouped according to whether they have opted in or

out of the Medicaid expansion.

QuestionThe question that will be addressed in this research paper is: Do states that opt out of the

Medicaid expansion cause people, who would have been newly qualified for Medicaid, to be

pushed out of insurance participation? This will be gauged with federally reported figures

on a selection of variables, such as total population, numbers of those insured and

uninsured, uninsurance percentage, and number of people who may fall into the new

coverage gap.

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Policy NetworkThe audience for this paper will include a variety of non-partisan and left-leaning think

tanks, non-profit care organizations that have been impacted by the law, and various

governmental agencies and stakeholders that have an acute interest in a state’s decision to

participate in the Medicaid expansion.

Hypothesis/ClaimI hypothesize that the states that choose to opt out of the Medicaid expansion create

coverage gaps for their lower-income citizenry. Specifically, because the Medicaid

expansion was a significant component for reducing the number of uninsured individuals,

federal subsidies for private insurance options within state exchanges were capped at

above 138% of the Federal Poverty Level. Therefore, those who would qualify for Medicaid

are not qualified for federal subsidies to purchase private insurance options within state

exchanges. Consequently, states that opt out of the expansion expose otherwise qualified

citizens to continued lack of insurance, despite federal dollars being available to provide

coverage at no expense to states at the initial stage.

Because states can opt in and out of the Medicaid expansion, a natural experiment can be

observed in regards to evaluating 1) the number of people who could be left out of

insurance pools from the larger uninsured population; and 2) the percentage of overall

uninsured populations that coverage-gap individuals comprise.

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Literature ReviewThe Affordable Care Act is a wide-ranging piece of legislation that seeks to address the

various gaps and inefficiencies that pervade in the healthcare system. The “three-stool”

approach to healthcare policy focuses on issues related to insurance coverage, access to

care, and quality of care. Insurance coverage prior to the law was largely left to self-

regulation, in that health insurance policy options were sold and managed in accordance to

what the market allowed. The insurance market functioned on the principle of actuarially

fair market value, in which individuals with a specific risk rating would pay the cost to

insurance against the possibility of entering an adverse state. Therefore, if an individual

who is predisposed to Diabetes due to family history seeks insurance to protect against

health costs associated with that condition, the insurance rate would have to reflect that

increased probability. Access to care, too, was ultimately left to market forces, where

hospitals and medical practices emerged based on need. Primary and Secondary Care

physicians practiced medicine in either individual or group practices, or part of larger

health care or hospital networks. Private hospitals developed from community care

centers that treated the sickest to non-profit or for-profit facilities that provide wide

swaths of medical services, addressing the secondary, tertiary, and long-term needs of

patients. Care was typically compensated through a variety of pay schedules, but the

predominant fee schedules were fee-for-service or Diagnosis-Related-Group billing. In the

former payment scheme, providers were paid according to the services they provided,

while in the latter, a bulk reimbursement rate that is pre-determined is set aside for the

hospital or group practice.

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Private Health Care Market Failures: An OverviewInefficiencies that were present in the health care infrastructure were related to

weaknesses in the market’s ability to self-regulate. By this, the three aspects of health care

were impacted by market failures.

Insurance FailuresPrivate sale of insurance policy options contained a variety of perverse incentives that

affected the exchange between insurance firms and individuals. To begin, information

asymmetry between firms and buyers prevented each from operating with full information

(and some have argued that consumers of health insurance and health services lack

meaningful understanding of their own health and body). People are more aware of their

family history than firms are of them, while firms may have a better understanding of

community and global trends in health costs, spending, research, and availability of

providers. Additionally (and consequentially), people with a variety of risk factors and

probabilities of needing care attempt to purchase insurance at the same price, which

negatively impacts healthier or more risk-averse individuals, while subsidizing sicker or

risk-tolerant individuals. Because people do not pay the actuarially fair price for insuring

themselves against adverse states, insurers are at risk of exposure to financial losses. As a

result, insurers resort to a variety of categorization techniques to have people either self-

select themselves into appropriate insurance levels or engage in individual risk

assessments to underwrite one’s insurance policy. The result of this was that individuals

with greater need for health insurance (in order to secure access to health) ended up

paying increasing rates for insurance coverage (as healthier people opted out for more

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cost-effective options) while individuals with a statistical probability of becoming sick

ended up being priced out of individual insurance policy options1.

The only true means of obtaining meaningful insurance coverage was through group

policies, which were mostly concentrated within large companies that had the necessary

negotiating power to obtain a generous policy rate (or have enough money and resources

to self-insure their employees).

Upon the publication of the Health Insurance Experiment by the RAND Corporation in the

1980s, health insurance companies began experimenting with new co-insurance schemes.

Instead of providing full insurance for a monthly fee, insurers started to provide coverage

with a variety of cost-sharing mechanisms, including deductibles (what one pays before the

insurance takes effect), co-pays (what one pays upon accessing care), and premiums.

Additionally, insurers could opt to force providers either to absorb costs from

uncompensated care or to pass it onto the patient. So if a patient is covered for Neurology

appointments, but only 80% of the fee schedule, then a $75 visit could end up costing a

patient $44.60 if the schedule price is $38 per visit with a coinsurance rate of 80% (or

$75.00 – [$38 X .80] = $75-$30.40 = $44.60). With patients taking on more of the burden of

health care costs, new concerns emerged for populations that could not effectively access

primary or secondary care due to inability to shoulder those cost burdens.

As insurance became the preferred fringe benefit for employees by employers, so did the

solidification of health insurance and health services being a prominent component of the

national economy.

1 (Cutler & Zeckhauser, Adverse Selection in Health Insurance, 1997)

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The evolution of health insurance formats from pure indemnity insurance to Health

Maintenance Organization (HMO) insurance options to Approved Plan Provider Networks

(or Plan Provider Organizations or Exclusive Provider Organizations) failed to successful

control spending by health providers; rather, these plans progressively shifted the costs of

care from insurers onto individuals. Furthermore, attempts by insurers to control costs

may have triggered the ongoing competition between insurers and medical providers to

gain dominance in negotiating annual contracts. Throughout the 1990s, medical groups

and hospitals began merging into larger entities in order to create competitive

organizations and alliances, leading to the proliferation of large care networks. Insurers

have also merged with other firms in order to gain prominence in the health care sector,

while also staving off the dominant positioning of health organizations2. While these

dominance behaviors have occurred prior to the 90s, it had proliferated to a tipping point.

Traditional reimbursement was provided on a fee-for-service basis, in which one service

was billed at one rate, while another service was billed on another. As this incentivized

physicians to provide as much services as possible, insurers sought a better method for

compensating care. A significant development was the emergence of the Diagnosis-Related

Group fee schedule. Within this reimbursement scheme, hospitals and physicians would be

compensated a set amount for the expected care needed to treat a diagnosis. Any care

above what was needed would be uncompensated, and the health firm would absorb those

costs. While this sought to bundle related services under one rate, it also encouraged

medical providers to render care in accordance to diagnoses.

2 (Conflict and Change in America's Health Care System, 2012)

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Government Involvement with Health Market FailuresThe seeming absence of talking about social insurance programs and government’s role in

regulating healthcare is not a means of dismissing its impact or its importance. It is to

signify that healthcare in the United States is a result of piecemeal legislation. Pathways

towards insuring and compensating for care are obfuscated by variances in insurance

schemes, stakeholders, and government involvement with addresses failures. As a result,

there is robust policy and implementation of social insurance programs across federal and

state governments, but no platform to put forth a unifying national health insurance

framework prior to the Affordable Care Act.

The variety of pre-existing social insurance programs that address market failures through

intervention and regulation. Germane to this paper are the programs that affect health

care and health insurance for vulnerable populations. Medicare and Medicaid, for example,

are insurance programs designed to provide affordable and equitable insurance coverage

for people who were effectively priced out of private insurance markets. Medicare

accomplishes this by using dedicated tax dollars to fund insurance trusts that then pay for

medical services. Medicaid is provided through federal allocations to state governments

through block grants. Other public insurance options like Veteran’s Affairs Insurance,

Children’s Health Insurance Plan (CHIP) and so forth provide coverage according to

categorical eligibility (e.g.: VA for veterans, CHIP for vulnerable children etc.).

Social insurance programs are effective in fulfilling their mission, which is to provide for

vulnerable populations through redistributive means. However, these social programs do

not address issues related to access of care and quality of care completely. What can be

accomplished is only done so in piecemeal, and not as part of a more comprehensive

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attempt to address the structural inefficiencies of the market. Medicaid and Medicaid

dollars go to states, who then pay hospitals for all the charity care that is provided. So

rather than insuring vulnerable demographics from adverse health events, it is paying

hospitals who treat patients in inpatient settings. All the while, those who are insured via

Medicare have received varying levels of care from participating providers, but without

clear indications as to the optimal levels of care. Succinctly, individuals living across high

and low-yielding areas can largely achieve similar health outcomes, regardless of the

spending amounts3.

While these insurance programs may be successful in fulfilling their missions (to protect

vulnerable populations), they do not address the larger concerns of the total healthcare

market. They promote socially optimal levels of care, but they do not address causes for

health disparities or ensure provider choice for patients. They protect vulnerable

populations from suffering long-term health effects from prolonged lack of insurance, but

they do not address erosion of coverage from the general health insurance market. They

help expand access to care, but they do not address deficits in efficiencies and efficacies of

health care. Simply, these programs inject federal dollars into a growing health insurance

market, while failing to address the structural issues that cause prolonged instability.

Medicaid before the Affordable Care Act: State/Federal PartnershipsMedicaid is a federal health insurance program specifically targeted for vulnerable

populations. While mostly inclusive, it is geared towards helping those in poverty. People

who have incomes in proximity to the Federal Poverty Level (FPL) can be eligible for

coverage, providing meaningful relief when being priced out of the private market.

3 (Cutler, Walking the Tightrope on Medicare Reform, 2000)

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However, this federal program is administered by each state, with their own levels of

participation. Medicaid was initially treated as an opt-in program for states, where the

federal government provided a 1-for-1 spending ratio for those looking to provide care for

the impoverished. Requirement for participation was to accept minimal categorizations for

eligibility, but left additional levels optional to states. Arizona became the last state to

enter into agreement with CMS in 1982 to form the Arizona Health Care Cost Containment

System (AHCCCS)4. Since then, states have been largely left with the option and incentive

to operate their own programs.

While this level of flexibility provided states the opportunity to construct public insurance

to match their own specific needs, the minimum requirements only covered vulnerable

populations based on specific categories. For example, states must provide coverage for

pregnant mothers, children, and the disabled. They do not have to provide insurance to

single men or women who live below the federal poverty level. Most states opt to provide

some kind of coverage for these individuals, but median percentage of federal poverty level

is roughly 44%. This kind of variance in the categorical qualifications for Medicaid creates

a porous safety net program, where many individuals in need pass through because they do

not qualify. Furthermore, individuals that actually qualify for Medicaid may end up not

enrolling or accessing the entitlement.

4 (National Health Policy Forum, 2000)

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Contrasting Views on Health CareMedicaid expansion as a Drain on State EconomiesConservative perspectives on the Medicaid expansion are specific to a central theme. This

theme is the crowding out of private insurance options for low-income patients while

exacerbating clinical outcomes of patients. Medicaid is the lowest-paying insurance

provider of all other insurance programs in the United States, as it attempts to be the

provider of lowest costs. Much is this is attributed to federal contribution rates being

determined by the Federal Medical Assistance Percentage (FMAP), which is done through a

methodology that incorporates variables like income-per-capita5. States can choose their

level of participation or their generosity rate, depending on whether they can demonstrate

that they can cover their share of all state Medicaid expenses. That being said, Medicaid’s

reimbursement rate is often measured as a percentage of Medicare’s established rates for a

given year, although there is wide variability across states. For example, Rhode Island’s

rate reflects the national average of 58% while Alaska had a Medicaid rate that was 242%

of Medicare’s6. For a significant number of states, the lower reimbursement rates

contribute to the systemic weaknesses in access to care and quality of care metrics. This is

reflected in research by Avik Roy of the Manhattan Institute7, in which Chapin White’s

study on the formation of Children’s Health Insurance Program’s Program yielded results

that demonstrates quality of services and access to care being chiefly determined by

provider payment rates8.

5 (Centers for Medicare and Medicaid, n.d.)6 (How Much Will Medicaid Physician Fees for Primary Care RIse in 2013? Evidence from a 2012 Survey of Medcaid Physician Fees, 2012, p. 1)7 (The Medicaid Mess: How Obamacare Makes it Worse, 2012)8 (A Comparison of Two Approaches to Increasing Access to Care: Expanding Coverage versus Increasing Physician Fees, 2012)

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The reported crowding out of private-insurance enrollees for public insurance9 introduces

concerns that Medicaid recipients will end up suffering in health outcomes as compared to

private insurance recipients. Less physicians accept Medicaid due to its low

reimbursement rates, and more Medicaid patients experience higher incidences their

insurance not being accepted, of physicians declining to take them on as new patients, and

die more often than private insurance recipients when receiving the same care (Herrick,

2010). This is conjoined with the concern that the cuts to the Disproportionate Hospital

Payments over the decade will erode states’ abilities to provide needed hospital care to the

very sick (and the impoverished)10.

With these factors working in confluence, Medicaid recipients end up having to use

services more often, creating bigger costs to the state and federal government, and achieve

poorer outcomes than private insurance recipients achieve. Bureaucracies and

infrastructure considerations also come into play, as states would have to adapt to the

increased demand from Medicaid recipients to accommodate the demand surge. As most

non-Medicaid expansion participating states demonstrate, they have a significant

uninsurance rate that would lead to additional expenditures. Furthermore, with a

significant percentage of Medicaid recipients being individuals who had qualified under the

previous categorical requirements but did not enroll, they would add notable expenses, as

the federal government would provide funding under the old Medicaid agreement.

Alternative proposals have been made in response to these concerns. First, states can

request additional federal funding, but to have the monies be directed towards increasing

9 (Crowd-out Ten Years Later: Have Recent Public Insurance Expansions Crowded out Private Health Insurance?)10 (Medicaid Expansion will Bankrupt the States, 2010)

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reimbursement rates. Second, Medicaid recipients should be allowed to participate in the

state exchanges, and purchase their own insurance through it, similar to how Arkansas is

implementing the Medicaid expansion. Finally, states can request block grants to make

changes to state Medicaid programs, much like with the Welfare Reform movement of

199611. These separate proposals seek to encourage participation in achieving insurance

coverage while subsidizing private plans through federal subsidies.

It is worth noting that conservative arguments against the Medicaid expansion (and the

Affordable Care Act in general) do not necessarily argue against the existence of a health

insurance coverage gap. However, within the provided framework, the solution towards

addressing gaps in coverage is purported to be found through private insurance

mechanisms that bumps up the starting positions of low-income individuals. In Florida, for

example, the drafting of the Florida Health Choice Plus (FHCP) as an alternative towards

the Medicaid expansion would promote participation by providing subsidies in a $2,000

annual grant, plus a $25 monthly subsidy for the purchasing of health services and

insurance12. The idea is that subsidizes low-income individuals through a voucher-like

system will lower health costs, although this option does not address the cause of the

Coverage Gap (i.e.: the state’s refusal to expand Medicaid).

In support of restructuring the Health Markets NationallyGovernment insurance options have been traditionally been crafted as a responsive to

failures in private markets. What this means is that these interventions are definitively

reactive. This is because governments do not necessarily have to intervene with markets

via regulatory routes, but can effectively induce change by entering the market themselves.

11 (The Medicaid Mess: How Obamacare Makes it Worse, 2012, p. 5)12 (Bragdon, 2013)

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Medicare, for example, competes with other private insurance options for enrollees.

Because the target demographics for this insurance are the elderly and the formerly

working disabled, the actuarially fair market price for insuring against related conditions

may be beyond what many individuals can afford. Medicare is able to provide meaningful

insurance to these demographics for a significantly lower price than what can be provided

privately. CMS does not institute regulations for private insurance markets, so the impact

of the Medicare and Medicaid are observed by their effectiveness in improving health

outcomes as insurer providers. However, government participation as a providing firm in a

market place does not necessarily address the true market failures of the health care

system.

Comparisons between public and private insurance options may invite false equivalencies

because of the different types of customers that are treated. Private insurance options on

average may provide more generous payments to providers for care, but they also contain

coinsurance schemes and associated costs. Additionally, private insurance options are

most utilized through employee-based insurance, where individuals are insured via group

policies. Employers may be motivated to reduce healthcare costs to their employees by

offering various insurance plans, which would result in employees self-selecting into

appropriate risk pools. However, those in need of health care can end up experiencing

increasing annual premiums and deductibles if healthier people continuously opt out of

policies that are more generous and into more affordable options. In this way, healthier

people benefit from private insurance options while sicker people are at greater risk of

being priced out of coverage.

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Individuals who opt into public insurance programs can gain meaningful insurance

coverage while avoiding increasing cost-sharing. These individuals, because of their needs

and preferences, are typically sicker and in greater need of services. People who are sicker

typically are in greater need of healthcare services than those who are healthy. People who

must bear greater shares of healthcare costs for receiving medical and clinical care are

more likely to ration the utilization of care, and will likely forego care until their needs

become urgent or emergent. It can then be presumed that people who are priced out of

private insurance tend to be poorer, and those who are poorer are most likely to also be

sicker than those who can maintain private insurance. The RAND Corporation released a

major study on health insurance in 1984 that demonstrates this point. Individuals who

have established needs for ongoing therapeutic care or has a well-established diagnosis

benefitted most from receiving free care (i.e.: having no cost-sharing for their insurance)13.

With this consideration, the accusation of public insurance crowding out private insurance

may be exaggerated. Individuals who may end up benefitting the most from Medicaid

expansion are childless adults and disabled adults. Of disabled adults, it is possible for the

newly eligible Medicaid beneficiaries to be less expensive in terms of risk factor and

projected costs than the previously qualified disabled who receive Supplemental Security

Income (SSI) from Social Security14.

By removing categorical eligibility requirements, the poor uninsured can achieve insurance

coverage by verifying their income levels. With a push to provide state funding to remove

barriers to applying, as well as checking eligibility through health exchange web portals,

13 (Brook, et al., 1984)14 (Medicaid Expansions for the working age disabled; Revisting the crowd-out of private health insurance, 2014, p. 79)

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individuals who fulfill their obligation to obtain insurance may find themselves fully

eligible for insurance free of coinsurance charges. Individuals who earn between 139%

and 400% of FPL can qualify federal subsidies to offset the costs of their health insurance

plans. By instituting regulatory requirements on insurers to drop Experience Rating

practices for individuals and to discriminate against policyholders based on pre-existing

medical conditions no longer, people who were previously priced out of private insurance

can now achieve insurance coverage.

While Medicaid payment rates vary across states, long-term medical costs can be managed

and ultimately controlled through mechanisms of the Affordable Care Act. What is integral

is facilitating access to care, by both ensuring that insurance allows for continuous

coverage for individuals, and by encouraging preventative care services through reducing

coinsurance for annual visits. Promoting Preventative Care would reduce costs by

facilitating earlier detection of health conditions, with consistent screening and provision

of resources to engage in health maintenance behaviors. Promoting insurance rates and

preventative care would help reduce costs associated with emergency care and increases in

charitable care. Consequentially, Disproportionate Share Hospital payments by Medicaid

would be reduced because of the number of indigent populations would decrease through

the state exchange and the Medicaid expansions15.

15 (The Evolution of Support for Safety-Net Hospitals, 1997)

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ResearchResearch Frame + SelectionThis paper will evaluate the relationship between the independent variable of Medicaid

Option status, and the dependent variable of the number of people who exist within the

ACA Coverage Gap. Other variables to be evaluated include a state’s marketplace type, the

number of those insured, the number of those uninsured, total state population, the

Uninsured Percentage Rate, 2015 figure for Adults in Coverage Gap, and the Uninsured

Rate if the Medicaid expansion were to be universally applied across states. Information

was obtained by the Community Population Survey via the US Census Bureau. Information

was cross-referenced by the Kaiser Family Foundation’s State Health facts database.

The following states are being evaluated.

California : the most populated state in the union, home to a significant immigration

population. California is one of the handful of states that opted in at the beginning of

the Affordable Care Act’s expansion. Because the Affordable Care Act limits

undocumented immigrants from being eligible for both the Medicaid expansion and

federal subsidy funds for the state exchange.

Illinois : the fifth most populated state in the union, with a significant low-income

population. Illinois is one of the handful of states that opted in at the beginning of

the Affordable Care Act’s expansion.

Mississippi : the 31st most populated state in the union, with a significant number of

individuals who live at or below the Federal Poverty Level. It is one of the handful

of states that have opted out after the NFIB v. Sebelius SCOTUS decision.

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Missouri : the 28th most populated state in the union. Despite having a Democratic

governor, the state has chosen to opt out after the outcome of NFIB v. Sebelius.

New York : the third most populated state in the union, with a significant

undocumented immigration population. The state is known for being among the

most generous in terms of providing Medicaid benefits as part of its agreement with

Centers for Medicare and Medicaid. It is among the handful of states that opted in at

the beginning of the Affordable Care Act’s expansion.

Ohio : the seventh most populated state in the union. Despite having a Republican

governor, the state opted to opt in at the beginning of the Affordable Care Act’s

expansion.

Out of the selected six states, two states have decided to opt out of the expansion.

California and New York have state-based Marketplaces for their exchanges, Illinois has a

state-partnership marketplace, and Missouri, Mississippi an Ohio have federally-facilitated

marketplaces. States Exchanges that are not state-based have systems and digital

information filtered through the healthcare.gov website.

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The Data

Of the chosen six states, California and Mississippi have the highest percentage of

uninsured population, at 17%. Illinois and Missouri have a 13% uninsured population rate,

and Ohio and New York have 11%. Among the highest percentage states, California has

over 6.5 million people without insurance, while Mississippi has just shy of 500,000 people

without insurance. Illinois has 1.6 million people without insurance, and Missouri has

close to 773,000 people without insurance. New York has close to 2.07 million people

without insurance, and Ohio has close to 1.26 million people without insurance.

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As stated earlier in the paper, because four of the six states have accepted the Medicaid

expansion, it is difficult to determine how each state has been impacted by the increased

Medicaid rolls and the significant funding that is provided by the federal government.

Because the figures are not easily separable, it is difficult to analyze how states would have

fared without the expansion. However, because states can choose to opt in or out of the

expansion, people in the uninsured population can be separated into those who would

qualify under the new Medicaid eligibility criteria, and the older requirements as dictated

by the state’s own specific criteria. These individuals can be counted as a separate metric.

Because of the variances in statistical reporting between national and state figures,

complete and workable datasets up to 2013 are available, while 2014 is available in a more

piecemeal fashion. The determination for the number of adults within the coverage gap are

determined based on the 2014 Population Survey by the US Census Bureau and the 2014

Medicaid eligibility guidelines.

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The data show that Mississippi and Missouri have 107,000 and 147,000 people who are

currently within the Medicaid Coverage Gap. That translates to 21% and 19% of the total

uninsured state populations, respectively. If states were compelled to expand Medicaid

under the new Expansion guidelines, those numbers would then be tallied into the Insured

column.

Under the Medicaid expansion for All States scenario, Mississippi would reduce their

uninsured population to 392,840, while Missouri would reduce their uninsured population

to 625,833. Their percentage of the uninsured would drop to 13% and 11%, respectively.

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ConclusionThe findings suggest that opt-out states maintain an uninsured population percentage that

is on par with more populated opt-in states. If Missouri and Mississippi choose to

participate in the Medicaid expansion, then they can reduce those percentages to reflect

those of Ohio and New York. Those states would be able to provide meaningful insurance

to 254,000 low-income individuals who qualify under the new federal Medicaid guidelines.

These findings demonstrate that within this testing sample, there is direct causal

relationship between opting out of the Medicaid expansion and producing a new

population of individuals who fall into the coverage gap. Because of the wording of the law,

these individuals cannot participate in state exchanges because they are not qualified to

receive federal subsidies to offset the costs of private health insurance. Expanding

coverage to these individuals would bring them into compliance with the individual

mandate, and the costs associated with providing coverage to these individuals would be

significantly covered by the Federal Government (100% of all initial new Medicaid

spending, decreasing to 90% by 2020).

Further research should be conducted to look at all 50 states within the country, and to do

repeat the separation analysis based on state’s Medicaid expansion status, number of

uninsured individuals residing in the state, and the rate of uninsurance as part of the states’

total population figures. Once data becomes robust enough to evaluate figures for 2014

and 2015, data should be analyzed to determine how many new beneficiaries are produced

by states who have opted into the expansion, and use that figure to determine who would

have fallen into the coverage gap had they chosen differently. If data permits, per-capita

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spending for the uninsured should be determined based on state levels for uncompensated

care, and DSH funding and other governmental funding sources. Lastly, Medicaid figures

should be compiled to determine a cost-per-capita rate that allows for comparisons

between Medicaid and Uninsured care provisions.

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Notes on Research and Analysis

There are significant considerations when evaluating this analysis. First, the data used to

determine the percentage of individuals lacking insurance were compiled for 2013. As

such, these figures do not represent state figures after the introduction of state exchanges

and the Medicaid expansion. Robust datasets for 2014 and 2015 are not currently

available, making calculations for state figures relating to new Medicaid enrollments, total

insurance rates, and previously-ineligible enrollment unavailable for analysis. Secondly,

information on the Coverage Gap is taken from the 2014 Current Population Survey,

conducted by the US Census Bureau. Because the compiled data were collected from

various sets across a two-year period, the findings may not reflect the numbers of people

who currently fall within the Coverage Gap. Finally, a causal relationship is not necessarily

proved by the data, although a relational demonstration is presented graphically. The

cause is directly rooted in both the structure of federal funding from the language of the

Patient Accountability and Affordable Care Act language, and the outcome of the NFIB v.

Sebelius Supreme Court Decision. States were initially compelled to expand their eligibility

requirements on pain of forfeiting the previous existing contract with Centers for Medicare

and Medicaid, but gained the reprieve after SCOTUS found the expansion to be unlawful.

The Coverage Gap that exists varies from state-to-state. States like Mississippi have very

stringent eligibility requirements to access the public insurance, while states like

Wisconsin were among the most generous with Medicaid benefits. So while both states are

examples of states that have opted out of the Medicaid expansion, they will both have

varying Coverage Gap rates, as they have differing starting positions of generosity.

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Additionally, certain states have higher concentrations of immigrant populations, with a

significant percentage of that segment being comprised of undocumented immigrants.

When evaluating the coverage gap, undocumented immigrants and legal immigrants that

have been in the country for under five years are filtered out of the analysis, because they

are not eligible for federal subsidies or participation in the state exchanges. Some states

have varying degrees of eligibility for these segments of the population, but previous CMS

agreements stipulated that states had to spend their own monies to insure them.

While this paper demonstrates how insuring those under the Coverage Gap would lead to

decreasing rates of the uninsured for states, it is unable to make any argument towards the

cost effectiveness of insuring these individuals. People who lack insurance have

traditionally sought care from emergency rooms, with hospitals being the primary source

for care. The reasons are numerous, but can be reduced to sick uninsured individuals

holding off on seeking care until their condition necessitates it, and because consistent care

necessary to maintain ongoing conditions is unaffordable to those who lack insurance

coverage. Reporting on the costs associated with providing care to these individuals are

disparate and incomplete, often being compiled based on trade association reports,

surveys, and government funding allocation. The best available data on funding to

hospitals for uncompensated care are the annual reporting figures on Disproportionate

Share Hospital allotments, which are funded through a combination of Medicare and

Medicaid funds. DSH datasets are robust enough to break down allotments based on

individual hospitals and geographic locations, but because qualified hospitals often target

specific populations and specialties (substance abuse, psychiatric, HIV/AIDs, immigrant

patients etc.), it is difficult to diffuse the data down to a cost-per-capita variable. In

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addition, Medicaid expenditures for 2014 and beyond are not available, and the existing

data does not distinguish between Medicaid funds allotted to states based on the previous

CMS agreement and those allotted based on the conditions of the expansion. Because the

generous federal funding levels are only available to newly eligible populations, states are

still responsible for dollars spent on grandfathered segments of the population (e.g.: the

disabled, children, the poor elderly, expectant and young mothers etc.). Dividing up the

expenditures is important to accurately gauge the cost-per-capita figures for insuring

newly eligible Medicaid recipients, and to determine state’s responsibility for those new

expenditures.

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ReferencesBodenheimer, T., & Grumbach, K. (2012). Conflict and Change in America's Health Care System. In T.

Bodenheimer, & K. Grumbach, Understanding Health Policy: A Clinical Approach, 6th Edition (pp. 201-212). San Francisco: McGraw Hill Medical.

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Brook, R. H., Ware, Jr., J. E., Rogers, W. H., Emmett, K. B., Davies, A. R., Sherbourne, C. A., . . . Newhouse, J. P. (1984). The Effect of Coinsurance on the Health of Adults. Santa Monica: The Rand Corporation.

Centers for Medicare and Medicaid. (n.d.). Financing & Reimbursement. Retrieved June 10, 2015, from Medicaid.gov: http://www.medicaid.gov/medicaid-chip-program-information/by-topics/financing-and-reimbursement/financing-and-reimbursement.html

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Padilla, A. (2014, February 19). What Health Care Coverage Do Immigrants Get?: A Conversation with Angel Padilla. (D. Introcaso, Interviewer) Retrieved June 14, 2015, from http://www.thehealthcarepolicypodcast.com/2015/02/what-health-care-coverage-do-immigrants-get-a-conversation-with-angel-padilla-february-19th.html

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Wagner, K. L. (2014). Medicaid Expansions for the working age disabled; Revisting the crowd-out of private health insurance. Journal of Health Economics, 69-82.

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Appendix: Dataset and GraphsCompiled data from US Census Bureau’s Community Population Survey (CPS), via Kaiser Family Foundation

LocationMarketplace

TypeMedicaid

Status Insured Uninsured TotalUninsured Percentage

Rate

Number of Adults

in Coverage

Gap (2015

figures)

As a Share (%) of All

Uninsured Nonelderly

in State

Uninsured Numbers if

MA Exp. was

Universal

Uninsured Percentage Rate if MA Exp. Was Universal

California State-based Marketplace

Opt-In 31,331,374.00 6,500,179.00

37,831,553.00 17% 0 0% 6,500,179.00

17%

IllinoisState-

Partnership Marketplace

Opt-In 11,086,412.001,618,204.0

0 12,704,616.00 13% 0 0%1,618,204.0

0 13%

MississippiFederally-facilitated

MarketplaceOpt-Out 2,425,362.00 499,849.00 2,925,211.00 17% 107,000 21% 392,849.00 13%

MissouriFederally-facilitated

MarketplaceOpt-Out 5,157,844.00 772,833.00 5,930,677.00 13% 147,000 19% 625,833.00 11%

New York State-based Marketplace

Opt-In 17,330,548.00 2,069,521.00

19,400,069.00 11% 0 0% 2,069,521.00

11%

OhioFederally-facilitated

MarketplaceOpt-In 10,140,742.00

1,257,556.00 11,398,298.00 11% 0 0%

1,257,556.00 11%

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Graphs

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