By David K. Jones, PhD, and Jonathan Oberlander, PhD
Congressional Republicans have taken the first steps to repealing the Affordable Care Act (ACA), despite lack of a clear consensus on a replacement plan. Attention is now focused on what happens in Washington; however, whatever Congress does will reverberate far beyond the nation’s capital. Many of the ACA’s major benefits are delivered at the state level through health insurance exchanges and Medicaid, and states have received substantial federal money from the ACA. What could the ACA’s repeal and Republican policy initiatives mean for states?
Health Insurance Exchanges
The concept of health insurance exchanges as purchasing pools for the uninsured and small businesses was once a popular idea for conservatives drawn to the model of consumers choosing among competing private plans. But as the debate over the ACA’s implementation heated up, exchanges became a controversial partisan issue. Many GOP-led states ultimately refused to implement them, both in protest against Obamacare and in the hopes of undermining it. Consequently, only 16 states and the District of Columbia run their own ACA insurance Marketplaces, with the federal government operating them elsewhere. Eliminating the exchanges would be enormously frustrating to the state leaders who spent considerable time and resources to implement them.
The exchanges are now in their fourth enrollment period; 12.7 million people signed up for coverage through them in 2016. This past year has seen substantial premium increases and declining choice of plans in many state marketplaces, as some insurers struggled with financial losses. However, exchange premiums were lower than projected on average until this year. Enrollment in the ACA Marketplaces remains robust, with more than 11.5 million persons already signed up for coverage in this enrollment period. Affordable Care Act insurance marketplaces have functioned well in some states and offer a crucial source of coverage for individuals who otherwise don’t have access to coverage.
Absent an adequate replacement plan, millions of people who had gained coverage through the exchanges could once again become uninsured if Republicans repeal the exchanges outright or end the federal subsidies that have enabled previously uninsured individuals to afford coverage and medical care. Moreover, if Congress passes a repeal bill in 2017 that declares a date 1 or 2 years down the road when ACA provisions will end, it could throw state insurance markets into disarray. The nongroup insurance market could become highly unstable if insurers pull out immediately, leading to higher premiums and more people losing coverage.
The insurance industry is currently in discussions with GOP leaders regarding policies that could help stabilize the market during such an interim period, yet it is unclear whether agreement can be reached and if such policies will succeed. Some states may want to continue insurance exchanges even after the ACA’s demise. But without federal subsidies to make premiums affordable it will be hard for states to keep exchanges alive and maintain the progress the ACA has made in reducing the uninsured population.
Congressional Republicans also are considering repeal of the ACA’s Medicaid expansion. Thirty-two states have expanded Medicaid eligibility under the ACA through generous federal financing. Medicaid enrollment has grown by approximately 15 million people since October 2013, with expansion states seeing a 9-percentage-point reduction in the number of uninsured adults.
In 2014, Medicaid expansion reduced the amount of uncompensated hospital care by $6 billion. One estimate projects that repeal will cost hospitals nearly $400 billion in lost revenue by 2026. States with expanded Medicaid coverage have experienced boosts in economic activity and tax revenues. This partly explains why Medicaid expansion has been a less partisan issue in states than exchanges.
Repealing the Medicaid expansion would substantially increase the low-income uninsured population and make certain demographic categories of low-income individuals (such as childless adults) ineligible for Medicaid (as they are in states without the expansion). Such a rollback additionally could imperil the finances of many hospitals. And it would take substantial federal revenue away from states—including those governed by Republicans. One estimate projects states spending increasing by $68.5 billion between 2017 and 2026 due to increases in uncompensated care if Medicaid expansion is rescinded.
Indeed, GOP governors in New Mexico, Ohio, and Michigan are speaking out in defense of Medicaid expansion. Seven states that will be led by a Republican governor in 2017 expanded Medicaid through waivers they negotiated with the Obama administration. Such waivers allow states to make changes to Medicaid that politically made it possible for leaders to defend accepting the ACA’s money. Republican leaders may oppose Washington cancelling arrangements they spent years working on. Policy makers in Democratic states such as Massachusetts are also nervous about the future of waivers approved by the Obama administration.
Republicans in Washington thus could encounter significant state resistance to eliminating Medicaid expansion. The Trump administration could permit states that have already expanded Medicaid the option of maintaining that expansion. It may also grant waivers to states giving unprecedented flexibility—allowing states, for example, to charge Medicaid enrollees premiums, to require contributions to health savings accounts, or to impose work requirements on Medicaid beneficiaries. However, policies that compel low-income Medicaid enrollees to pay more could erode their access to insurance and medical care.
Some Congressional Republicans, led by Speaker Paul Ryan (R, Wisconsin), want to go beyond repealing the Medicaid expansion to fundamentally alter the program by converting federal funding for Medicaid into a block grant or per-person allotment. Such a transformation would be welcomed by some GOP governors in exchange for Washington granting states additional flexibility in administering the program.
But block grants also would mean less federal money for state Medicaid programs over the long term, creating pressures to cut benefits and eligibility. States could pay a steep political price for enhanced flexibility: the federal government would effectively pass on accountability to state leaders. Blame will be shifted to the state if people lose coverage or benefits as a result of these changes. This could be particularly problematic if federal payments under a block grant do not keep up with the growth in health costs over time.
The prospect of the ACA’s repeal is unsettling for states. The expiration of federal funding for the Children’s Health Insurance Program in September 2017 is yet another source of uncertainty.
Unless Congressional Republicans and the Trump administration can simultaneously agree on a replacement plan to accompany repeal legislation, states will face certain loss of the ACA’s major coverage provisions without knowing which new policies will established. The ACA’s enactment enabled states to make substantial progress in expanding access to health insurance. Its demise threatens to reverse those gains.
About the authors:
David K. Jones, PhD, is an assistant professor in the Department of Health Law, Policy and Management at Boston University’s School of Public Health. He is editor-in-chief of http://www.publichealthpost.org, an online forum for debate about public health policy launched in November 2016. His research examines the politics of health reform and the social determinants of health. He also studies Medicaid, the Children’s Health Insurance Program, and health reform in France. (Image: Boston University)
Jonathan Oberlander, PhD, is chair and professor of social medicine at the UNC School of Medicine and Professor of Health Policy and Management at the Gillings School of Global Public Health at the University of North Carolina-Chapel Hill. (Image: University of North-Carolina-Chapel Hill)
About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.