Partial Medicaid expansion could be the next big healthcare policy issue

With all eyes now trained on how the Trump administration might alter the Affordable Care Act through regulation, it’s particularly worth watching how it handles one lesser-known option for states: partial Medicaid expansion.

Under regular Medicaid expansion, the program’s eligibility parameters include everyone with an income of up to 138% of the federal poverty level. But some states that declined that option and applied for a twist on expansion—which would have had Medicaid cover those with incomes up to 100% of the FPL, but not those between 100% and 138%. Those in the 100% to 138% range would instead be shifted to the ACA exchanges.

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The Obama administration denied those requests, but its legal grounds to do so were rather flimsy, according to a perspective piece from The New England Journal of Medicine. In reality, the ACA leaves considerable room for states to tinker with Medicaid eligibility.

Enter Arkansas, which has applied for a federal waiver to allow it to enact a partial Medicaid expansion. If the Trump administration decides to grant that request, the article argues, it will “set a precedent with extraordinary practical, budgetary and political consequences.”

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Not all the implications of partial Medicaid expansion are negative, the authors note. For example, it would at least open the door to having holdout states expand Medicaid up to 100% of the federal poverty level. In addition, healthcare providers would likely support the idea of partial expansion, as private insurers pay them more than Medicaid.

The potential costs of allowing partial Medicaid expansion, though, could be significant. For one, research suggests that adding people in the 100%-138% FPL range could worsen the risk pool in the individual marketplaces. That, in turn, could ratchet up premiums and further destabilize the already shaky marketplaces.

Moving more people onto the exchanges could also shift more of the costs of covering them onto the federal government—and increase that cost burden overall. And Medicaid recipients who get moved to private plans could also face higher out-of-pocket costs.

Ultimately, whatever position the Trump administration decides to take on Arkansas’ request for partial Medicaid expansion, it should be “cautious,” the authors argue, as granting one state’s waiver means it will also have to approve others’.

Though Arkansas is the only state seeking a partial Medicaid expansion so far, other states are also pursuing conservative tweaks to their Medicaid programs.

Wisconsin, for example, wants to screen some recipients of BadgerCare Medicaid coverage for drugs. And Maine recently applied (PDF) for a waiver that includes that includes work requirements and mandatory premiums for Medicaid beneficiaries.