Federal Medicaid workaround called short-term substitute for Georgia expansion

A Medicaid workaround proposal has made it into the Biden administration’s $1.75 trillion social spending and climate bill, potentially providing health care coverage to hundreds of thousands of low-income Georgians.

But health care advocates and analysts say the plan, which targets the dozen GOP-led states that have rejected Medicaid expansion, is a temporary substitute for state action.

A long-awaited draft of the Democrats’ bill was unveiled last week, drawing praise from Georgia Democrats who pressed hard for the inclusion of some form of health care coverage for uninsured poor Georgians that would side-step Republican state leaders.

Georgia GOP leaders have long dismissed expansion under the Affordable Care Act as too costly in the long run. Gov. Brian Kemp has proposed a scaled-down version that would add as many as 50,000 people to the Medicaid rolls if they satisfy a work or activity requirement. Kemp’s plan has not taken effect and is still under review by the Biden administration.

Under the current version of the Democrats’ bill, low-income Georgians could use subsidies to purchase coverage through the federal marketplace starting in January through 2025.

But there’s a catch. Georgia lawmakers object to a provision that would cut funding for hospitals in states that continue to pass up Medicaid expansion. Under the proposal, hospitals serving large numbers of Medicaid and uninsured patients would see a 12.5% reduction in funding.

Georgia’s two Democratic U.S. senators and six congressional representatives sent a letter to House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer this week asking them to nix the proposed cut for hospitals.

“The last thing Georgia hospitals and patients need right now is a reduction in federal funding, especially as they’re working overtime to keep our families and communities safe and healthy during this pandemic,” U.S. Senator Raphael Warnock said in a statement.

“I vehemently oppose this provision, and I’m working as hard as I can to remove it from the economic package and make sure Georgia hospitals are getting the full federal resources they rely on. In the richest nation in the world, we should be able to close the coverage gap without sacrificing critical support for our hospitals.”

Hospitals have been puzzling over whether the gains from the newly insured would offset this lost funding for uncompensated care. That will depend largely on how many people sign up for coverage and what their exchange plans pay the hospitals.

“The hospitals want patients to have coverage,” Anna Adams, senior vice president of external affairs for the Georgia Hospital Association said. “Under that model, patients are seeking primary care at the appropriate time and they’re not waiting until they have to come to the emergency department for something that’s very serious.

“We want them to be covered. The question is just going to come down to the offset between the (funding) cuts and the newly covered population,” she said.

It’s unclear right now how many people in Georgia would gain coverage, but estimates range from 275,000 to as many as 646,000 on the high end. Many of them are people of color.

These newly eligible low-income adults are also people who may not have had insurance since they were children, so signing them up for coverage may prove a challenge. Additional funding has also been proposed for outreach.

“It will do monumental things for people who get covered and can go to the doctor and get prescriptions filled and have some peace of mind that they can take care of their health and their family’s health if something happens while they have this coverage,” said Laura Colbert, executive director of the patient advocacy group Georgians for a Healthy Future.

But even so, Colbert called the plan “a four-year coverage gap fix.”

“There is no certainty about who our elected officials will be in four years and whether there will be an appetite to extend this program,” she said.

Democrats have also added another incentive to their safety net bill – a 3% increase in funding for three years, bringing the federal cost share up to 93% – for any state that has expanded Medicaid by 2023 as a way of trying to incentivize holdout states while also encouraging those that have already expanded Medicaid to continue their program. That’s in addition to a federal sweetener that was added in the American Rescue Plan Act earlier this year, which has had no takers.

This all means if the Democrats’ spending bill makes it to the president’s desk, the temporary federal workaround is not likely to end the decade-long push for full Medicaid expansion in Georgia.

The proposed funding cut could help motivate states to expand coverage to ensure they are making up for the lost funding intended to offset uncompensated care costs, said Laura Harker, a senior health care policy analyst at the Center on Budget and Policy Priorities in Washington DC.

“I think that will also be potentially an incentive for states to really consider full expansion of Medicaid, so that they are ensuring that people are getting covered to make up for the fact they’re losing some of this uncompensated care pool money,” Harker said. “But the idea is that the uninsured rate would be dropping pretty significantly with this workaround so hospitals should see less uncompensated care as a result.”