Medicaid Eligibility Capped at 100 FPL: The Logical Outcome of the SCOTUS ACA Ruling


When (if) the Affordable Care Act (ACA) is put into effect, states will be free to disenroll beneficiaries to the federal minimums (in many cases < 30 FPL), expand to (or beyond) the ACA’s original target of 138 FPL, or anything in between

Despite this range of options, we expect most states to adopt 100 FPL as their upper limit of Medicaid eligibility (for non-dually eligible, non-pregnant adults), for a very simple reason: the closer states bring their eligibility thresholds to 100 FPL, the better off they are; conversely the further (above or below) they move from 100 FPL, the worse off they are

A state with current eligibility < 100 FPL who disenrolls the marginal beneficiary saves $0.43 in budgetary terms, but in economic terms loses the $0.57 federal match (and associated multiplier effects) and incurs costs for uncompensated care. If instead the state enrolls the marginal beneficiary who lies above the current eligibility standard (but < 100 FPL), the state spends $0.10 for a $0.90 (plus multiplier effects) gain. In budgetary terms it’s easier to go backward, but in economic terms it’s far better to go forwards – at least until you hit 100 FPL

Likewise the state with current eligibility > 100 FPL who disenrolls the marginal beneficiary above this limit also saves $0.43 in budgetary terms, and loses the $0.57 federal match. However if that person – who at >= 100 FPL is eligible for federally subsidized coverage on the exchanges – enrolls on the exchange, the gross federal dollars entering the state for that beneficiary increase by 185%. As long as >= 75% of those affected go to the exchanges (the true breakpoint is probably lower), it is to this more generous state’s economic (and budgetary) advantage to lower its eligibility threshold to 100 FPL

In reality most states would have to expand eligibility (for non-dually eligible, non-pregnant adults) to reach 100 FPL, so we expect a net expansion (23% increase in enrollees and 15% in spending v. current eligibility standard), though this is roughly half the size we would have expected if states had all expanded to 138 FPL as originally called for by ACA

Republican states have nearly two-thirds of the enrollees who would be picked up in a nationwide expansion to 100 FPL, though most of these can’t be relied on until after the general election, and also after any attempts at repeal in the event of a Romney presidency. Thus the risks to our sizing of the expansion are to the downside, particularly in the first few years following 2014

100 FPL as a likely equilibrium points to a net expansion, which eases our concerns regarding the Medicaid HMOs. Of these, AGP stands to see the largest enrollment gains, MGLN and MOH the least

Hospitals lose a fair bit of reform-related upside if eligibility stops at 100 FPL; mainly because of collections problems (low income persons covered on the exchanges are less able and less likely to honor out-of-pocket cost obligations) and higher rates of un-insurance, hospital revenue from a low-income beneficiary on the exchange is about 25% less than if that person were covered by Medicaid. UHS is most negatively affected, HCA least affected

Because persons above 100 FPL who might otherwise have been Medicaid beneficiaries can buy federally subsidized coverage on the exchanges, total federal subsidy spending is likely to be much greater than originally forecast – so much so that the ACA’s cap on subsidies as a % of GDP should be breached in or just after the exchanges’ first year of operation

This implies the ACA may immediately need additional budget authority; in light of the House’s power over budgetary matters and the high likelihood the House remains in Republican hands even if President Obama is re-elected, the subsidy cap may be a large but under-appreciated weakness of the Act

For more information, please see the published research archive

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