Experts say states may put partial Medicaid expansion on pause after Utah denial

Utah sign
The Centers for Medicare & Medicaid Services' decision to deny Utah's partial Medicaid expansion waiver could reverberate in other states. (Getty/AndreyKrav)

The Trump administration’s decision to deny a partial Medicaid expansion waiver for Utah is a “wake-up call” for other states debating doing the same thing, experts say.

The Centers for Medicare & Medicaid Services’ (CMS') decision last weekend to deny Utah’s waiver comes as other states such as Georgia and Oklahoma are considering partial expansions.

“That is a very important message for states,” said Jessica Schubel, senior policy analyst for the progressive think tank Center on Budget and Policy Priorities. “It should be a wake-up call to them that instead of wasting taxpayer dollars on studies or spending more to cover less people then they should just move forward with full expansion.”

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The Affordable Care Act expands Medicaid for people earning up to 138% of the federal poverty level (FPL), but only if a state decides to adopt the expansion. If a state does, then the federal government shoulders most of the cost. However, Utah wanted to expand Medicaid to only up to 100% of the FPL and still get the enhanced federal spending.

CMS said Saturday that the waiver would have invited a “continued reliance on a broken and unsustainable Obamacare system.” But states have greater control over how they implement the full expansion.

“The Trump administration does have discretion over alternative proposals that would need to go through the Medicaid waiver pathway but what they don’t have discretion over is full expansion,” Schubel said. “If a state wants to expand, the administration has no choice but to approve it.”

There is also the issue of cost. Utah already started enrolling people in the Medicaid expansion starting April 1, but not at the enhanced rate.

Normally, CMS covers about 50% to 70% of the cost of Medicaid, and the state picks up the rest. But the government covers about 90% of the cost of the expansion and the state handles the remainder. Over time, the state will pick up more of the cost for the expansion.

CMS approved a “bridge” expansion back in March that enabled Utah to start enrolling people in the Medicaid expansion April 1 at 100% of the FPL while it awaited a decision on the full waiver. Under this partial expansion, the federal government covered 70% of the costs and Utah covered 30%.

However, the state could have covered only 10% of the costs if it had done a full expansion back in April, said Joan Alker, executive director of the Georgetown University Center for Children and Families.

“It was a very fiscally reckless decision to go down this path when there was no guarantee that they were going to get the full match,” she said.

It remains unclear what Utah’s next step will be. Republican Gov. Gary Herbert and several state lawmakers said in a statement that they will continue to work with CMS to “ensure that Medicaid expansion is carried out in a way that provides coverage for Utahns in need without creating an unsustainable financial burden on Utah taxpayers.”

But Herbert has also said he will go back to pursuing full expansion if the partial expansion waiver is turned down. Utah was one of three red states where voters in 2018 approved ballot measures to expand Medicaid, with Idaho and Nebraska being the other two.