The Medicaid expansion standoff
But President Barack Obama and his congressional allies continued to claim that it was true, and he further promised that Americans would not end up paying higher taxes to support it. To follow up, he sent his lawyers into courts all over the country to deny that the PPACA constituted a new tax, which fooled some of us, but not the U.S. Supreme Court, which concluded that the “shared responsibility payment” was indeed a tax.
The Supreme Court also opined that Medicaid, a program where the responsibility is shared by the federal government and the states, could only be expanded to cover the additional millions of newly eligible people if the states do it voluntarily, to avoid impermissible coercion. Since then, there has been a push on both sides of the Medicaid expansion calculation to settle the question separately for each state.
The hospitals and other providers are clear about what they want. Their argument is that they are going to be furnishing the care for uninsured sick people anyway, as they have been doing. To them, it is only a question of whether they get compensated for this care of the newly eligible by the overwhelmingly generous 100% federal match (literally, 100% can’t be a match, so let us call it the full share) for the first couple of years, or they can provide the care with no compensation. There’s an easy answer for the providers.
The states face a different set of questions. First, how many new patients who were previously eligible for Medicaid, but for whatever reason never enrolled, are there? They are covered by the current Medicaid program, with a less generous federal match rate that was already bursting state budgets before PPACA came along.
Second, what if the feds actually do something about entitlement reform after the election, even though nobody wants to discuss it until then? Well, we have one answer from Health and Human Services Secretary Kathleen Sebelius’ troops, proclaimed for the first time at the National Conference of State Legislatures Summit meeting last week in Chicago. If the states expand their Medicaid program and it appears at some point to overwhelm their resources, they can decide to retreat back to the current commitment. Sure they can. Just tell all the recently covered people with new health care benefits that it didn’t work out because the taxpayers aren’t really as generous as they need to be.
Third, can the states that want to do more, but can’t really afford to go all the way to coverage of anyone the below 138% of the federal poverty level, adopt standards somewhat less than 138%? We don’t have the answer to that one yet. Some states argue that since the court disallowed the mandatory coverage, the states can use any level they want for additional coverage, or do nothing new at all. Others, at least through their state legislators, are wary of trying anything that might be held impermissible by a future HHS regulation.
Perhaps none of this is as interesting as it will be to see how many new Internal Revenue Service agents will have to be hired to handle the 47 new tax-related provisions and to collect all of the additional information which the new law requires of individuals, businesses and insurance companies.
For openers, there currently exist two definitions of income for individuals which the IRS uses to ascertain compliance with federal tax law – “ordinary” income and a parallel regulatory structure which calculates an “alternative minimum tax”, which has different rules, deductions, exemptions, credits and so forth.
Under PPACA, much of the regulation is governed by “household income”, which could really get complicated given today’s family structures. As Dan Pilla, author of 11 books on IRS defense strategies, has pointed out in his recent paper on the subject, “… there are no rules for figuring it and no mechanism for reporting it. The IRS has no means to collect the information or apply it.” But household income will have to be verified somehow to the state exchanges.
It is becoming more clear why many states, even ones that have taken the initial development money, are not in a rush to make this project their own, and are proceeding with caution on Medicaid expansion.
