Obama uses hospital funds to push Medicaid expansion

MIAMI (AP) – The Obama administration is dialing up the pressure on a handful of states that have resisted expanding Medicaid coverage for their low-income residents under the federal health care overhaul.

The leverage comes from a little-known federal fund that helps states and hospitals recoup some of the cost of caring for uninsured patients. The administration says states can just expand Medicaid, as the health care law provides, and then they wouldn’t need as much extra help with costs for the uninsured.

Two top targets so far are Florida and Texas, with large numbers of uninsured residents. Both have received several billion dollars in recent years from Washington under the so-called low income pool, also known as LIP.

Florida’s hospital funding is the first of the nine states – which include Tennessee, California, Massachusetts, Arizona, Hawaii, Kansas and New Mexico – to expire on June 30. But the hospital funds are an optional program, not entitlement programs like Medicaid, meaning the federal government has broad discretion whether to grant them, experts say.

“There’s no doubt that other states that haven’t expanded Medicaid are watching this,” said Joan Alker, Alker, executive director of the Georgetown University Center for Children and Families.

Hospitals say even with the low-income pool funds, it still doesn’t cover their costs for caring for uninsured and Medicaid patients. Several hospitals have said they would be forced to cut services or shut down without the funding.

Alker said she didn’t think the federal government would immediately drop funding to zero, even for states that don’t expand Medicaid. But the political standoff between some GOP states and the feds has left hospitals anxious.

Federal health officials publicly said for the first time last week that Medicaid expansion should be linked to any discussion on extending the hospital funds.

Spokesman Aaron Albright with the federal Centers for Medicare and Medicaid Services said that the agency sent Florida officials a letter detailing “key principals” the agency will use in considering proposals regarding uncompensated care pool programs in the states.

“Discussions with each state will also take into account state specific circumstances,” he added.

Negotiations are playing out much the same as the rest of the Affordable Care Act, with Republicans crying federal overreach and threatening lawsuits as the Obama administration pursues its goal of getting health insurance to more Americans.

Florida Gov. Rick Scott likened the administration to something out of the fictional TV mobster drama The Sopranos and said last week he plans to file a lawsuit, alleging the federal government is using the federal funds to coerce him into expanding Medicaid.

Texas Gov. Greg Abbott was quick to defend Scott.

“Texas will support Florida in its litigation against the federal government. Medicaid expansion is wrong for Texas. Florida’s approach should be determined by Floridians, not coerced by federal bureaucrats,” Abbott said.

Federal health officials have warned states for more than a year that the low income pool program was ending. But a Supreme Court decision allowing states to decide whether or not to expand Medicaid has complicated the hospital funds issue.

“The federal government is trying to use the LIP money to encourage states to expand. Whether you feel like that’s coercion or that’s encouragement is in the eye of the beholder,” said Dan Mendelson, CEO of the market research firm Avalere Health.

Terms of the agreements between the federal government and the states vary widely, including when they expire and how much funding each state receives.

Florida received about $1 billion last year from the feds. Its arrangement stems from a deal reached under then-Gov. Jeb Bush while his brother was president. Florida, Kansas and Texas received their hospital funding when the feds allowed them to privatize their Medicaid programs; the added federal dollars were another way for hospitals to get on board with managed care.

The demand for health insurance is clear in Florida where 1.6 million signed up for coverage on the federal exchange. But the nearly 1 million Floridians who don’t qualify for a tax credit on the exchange could get covered through an expanded Medicaid program and are impacted by the Legislative standoff.

Texas’ existing five-year, nearly $30 billion Medicaid waiver – which includes the LIP funds – is set to expire in September 2016. In Tennessee, Gov. Bill Haslam has pushed for Medicaid expansion but fellow Republicans in the Legislature have refused. Tennessee’s hospital fund waiver expires in December.

California, with a Medicaid and expanded Medicaid program covering 12 million people, gets $636 million a year in hospital funds under an arrangement set to end in October.

Unlike most of his GOP colleagues, Texas Rep. John Zerwas, an anesthesiologist, supports an alternative to Medicaid expansion that would offer coverage to low-income people. But he doesn’t like the coercive approach he says the feds are taking and he doesn’t think it will change Texas lawmakers’ stance on Medicaid.

“It’s inappropriate for the federal government to try to be holding states hostage to expand Medicaid,” Zerwas said.