Medicaid expansion rollbacks could bode an ill omen for hospitals

Medicaid expansion under the Affordable Care Act remains stalled in two dozen states. That has created parallel financial universes for hospitals that operate in nonexpansion states versus those that opted for expansion.

There had been some optimism about statehouse softening regarding expansion after the mid-term elections, but there's now a distinct possibility that two states could end their expanded Medicaid programs altogether due to lack of political support. Those states would be Arkansas and Ohio, both of which have fairly arcane rules requiring the revisiting of Medicaid funding every couple of years. And given they are respectively, red and blue states, their decisions could have a big impact on which direction expansion takes over the next several years.

In Ohio, Gov. John Kasich (R) did an end-run around the state Legislature and found approval to expand Medicaid through the Ohio Controlling Board. There appears to be little support in the statehouse to continue the program, which Kasich has to put in his upcoming budget proposal. "It's going to be interesting to see where they find the votes for it," one Democratic lawmaker commented to the Cleveland Plain Dealer.

That Kasich, a Republican, decided to get creative on Medicaid expansion probably bodes well for his political career. In neighboring blue state Pennsylvania, GOP Gov. Tom Corbett resisted expansion until earlier this year, when it became clear the electorate was turning on him. He got trounced in his reelection bid last week, losing to Democrat Tom Wolf by nearly 10 points.

Arkansas' lawmakers had actually approved Medicaid expansion, obtaining a waiver from the Centers for Medicare & Medicaid Services to allow enrollees to obtain coverage from private insurers. About 211,000 low-income residents enrolled as a result, cutting the rate of uninsured by 10 pecentage points. Charity care costs to hospitals dropped by a prorated $138.4 million a year, according to a recent study by the Arkansas Hospital Association.

But as the New York Times recently reported, a three-quarters majority of votes is required in both chambers of the Legislature to continue funding for the program. And as in Ohio, there may not be enough support to get it done.

Presumably, there is arm twisting going on behind the scenes in both states. And if the Arkansas Hospital Association has the appropriate huevos, it is banking some of the charity care savings from its members and using it to fund candidates for office who support expansion--and whispering in the ears of opponents that their political careers will become much more difficult if they don't have a change of heart.

But if those two states decide to roll back Medicaid expansion, it will be a rare precedent where political ideology is used to roll back working public programs. That's been debated in recent years as the Tea Party wing of the GOP has become ascendant, but it has not really been acted upon as of yet.

Such a precedent could prompt other states that reluctantly expanded Medicaid--such as Arizona--to change their minds. Some of that state's lawmakers are suing to try and get expansion reversed.

What is the public benefit of rolling back healthcare access to the poor? Who knows? But should it happen, it could embolden a portion of this country's political class to take on Medicare and other government programs that fund healthcare services. And if that is the case, the finance executives at the nation's hospitals will have a lot more work to do--and a lot more to worry about. - Ron (@FierceHealth)