By RICARDO ALONSO-ZALDIVAR
Associated Press
WASHINGTON (AP) -- Rejecting the Medicaid expansion in the
federal health care law could have unexpected consequences for states where
Republican lawmakers remain steadfastly opposed to what they scorn as
"Obamacare."
It could mean exposing businesses to Internal Revenue
Service penalties and leaving low-income citizens unable to afford coverage
even as legal immigrants get financial aid for their premiums. For the poorest
people, it could virtually guarantee they remain uninsured and dependent on the
emergency room at local hospitals that already face federal cutbacks.
Concern about such consequences helped forge a deal in
Arkansas last week. The Republican-controlled Legislature endorsed a plan by
Democratic Gov. Mike Beebe to accept additional Medicaid money under the
federal law, but use the new dollars to buy private insurance for eligible
residents.
One of the main arguments for the private option was that it
would help businesses avoid tax penalties.
The Obama administration hasn't signed off on the Arkansas
deal, and it's unclear how many other states will use it as a model. But it
reflects a pragmatic streak in American politics that's still the exception in
the polarized health care debate.
"The biggest lesson out of Arkansas is not so much the
exact structure of what they are doing," said Alan Weil, executive
director of the nonpartisan National Academy for State Health Policy.
"Part of it is just a message of creativity, that they can look at it and
say, `How can we do this in a way that works for us?'"
About half the nearly 30 million uninsured people expected
to gain coverage under President Barack Obama's health care overhaul would do
so through Medicaid. Its expansion would cover low-income people making up to
138 percent of the federal poverty level, about $15,860 for an individual.
Middle-class people who don't have coverage at their jobs
will be able to purchase private insurance in new state markets, helped by new
federal tax credits. The big push to sign up the uninsured starts this fall,
and coverage takes effect Jan. 1.
As originally written, the Affordable Care Act required
states to accept the Medicaid expansion as a condition of staying in the
program. Last summer's Supreme Court decision gave each state the right to
decide. While that pleased many governors, it also created complications by
opening the door to unintended consequences.
So far, 20 mostly blue states, plus the District of
Columbia, have accepted the expansion.
Thirteen GOP-led states have declined. They say Medicaid
already is too costly, and they don't trust Washington to keep its promise of
generous funding for the expansion, which would mainly help low-income adults
with no children at home.
Concerns about unintended consequences could make the most
difference in 17 states still weighing options.
A look at some potential side effects:
-The Employer Glitch
States that don't expand Medicaid leave more businesses
exposed to tax penalties, according to a recent study by Brian Haile, Jackson
Hewitt's senior vice president for tax policy. He estimates the fines could top
$1 billion a year in states refusing.
Under the law, employers with 50 or more workers that don't
offer coverage face penalties if just one of their workers gets subsidized
private insurance through the new state markets. But employers generally do not
face fines under the law for workers who enroll in Medicaid.
In states that don't expand Medicaid, some low-income
workers who would otherwise have been eligible have a fallback option. They can
instead get subsidized private insurance in the law's new markets. But that
would trigger a penalty for their employer.
"It highlights how complicated the Affordable Care Act
is," said Haile.
-The Immigrant Quirk
Arizona Gov. Jan Brewer, a Republican, called attention this
year to this politically awkward problem when she proposed that her state
accept the Medicaid expansion.
Under the health law, U.S. citizens below the poverty line -
$11,490 for an individual, $23,550 for a family of four - can only get coverage
through the Medicaid expansion. But lawfully present immigrants who are also
below the poverty level are eligible for subsidized private insurance.
Congress wrote the legislation that way to avoid controversy
associated with trying to change previous laws that require legal immigrants to
wait five years before they can qualify for Medicaid. Instead of dragging
immigration politics into the health care debate, lawmakers devised a detour.
Before the Supreme Court ruling, it was a legislative patch.
Now it could turn into an issue in states with lots of
immigrants, such as Texas and Florida, creating the perception that citizens
are being disadvantaged versus immigrants.
-The Fairness Argument
Under the law, U.S. citizens below the poverty line can only
get taxpayer-subsidized coverage by going into Medicaid. But other low-income
people making just enough to put them over the poverty line can get subsidized
private insurance through the new state markets.
An individual making $11,700 a year would be able to get a
policy. But someone making $300 less would be out of luck, dependent on charity
care.
"Americans have very strong feelings about
fairness," said Weil.
Medicare and Medicaid chief Marilyn Tavenner, also
overseeing the health overhaul, told the Senate recently that cost is a key
question as the administration considers the Arkansas deal. Private insurance
is more expensive than Medicaid.
But Tavenner said the Arkansas approach may be
cost-effective if it reduces the number of low-income people cycling back and
forth between Medicaid and private coverage, saving administrative expenses.
"We are willing to look at it," she said.
--- Associated Press
reporter Andrew DeMillo in Little Rock, Ark., contributed to this report.
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