The Medicaid Elephant in the Supreme Court Room

States’ Medicaid elephants are being dragged into the courts this year.  States had better be careful, or they just might get trampled under the weight of people they’ve failed to enroll.

Last week, CT News Junkie reported the story of a class action lawsuit filed on behalf of almost 7,000 potential Medicaid recipients in Connecticut as of November 2011 whose applications were not processed within the 45 days mandated by federal law.  

And Health News Florida, among others, reported that Florida’s Attorney General Pam Bondi filed a brief with the Supreme Court on behalf of twenty-six states (Connecticut is not one of them) alleging that Congress exceeds its authority when it “coerces states into accepting onerous conditions” of participation in the Medicaid program –even when it pays 90-100% of the costs of those provisions. 

The two battles raise similar questions about how states avoid Medicaid costs today.

The Supreme Court brief is supposed to be an argument against the Affordable Care Act-mandated Medicaid expansion to cover everyone up to 133% of poverty beginning in 2014.

Bondi builds her argument around a simple point.  States depend so heavily on Medicaid money from the federal government that they can’t afford to drop out of the program.

And the ACA-mandated expansion, she argues, will cost Florida almost $1 billion.

But then there’s a stunning revelation in her brief.

Most of the costs she cites have nothing to do with ACA.  They represent the cost of enrolling currently eligible people in the Medicaid program, not those who will become eligible as a result of the Affordable Care Act. 

On page 17 of the brief, she writes that “Florida anticipates spending approximately $351 million on its share of the cost for newly eligible program participants who are presently uninsured and $574 million on the currently eligible but unenrolled.”

In other words, 62% of the costs she’s claiming will result from ACA are actually costs the state should be paying today, but avoids by failing to enroll Medicaid-eligible residents.

The Connecticut class action suit attacks essentially the same issue – failure to enroll currently eligible people.

In paragraph 25 of the complaint, the plaintiffs allege that Connecticut “has set up a system to circumvent the federal timeliness requirements by making it appear that the applicant has failed to provide required documentation.” 

Throughout the nation, these practices result in the avoidance of billions of dollars of costs at the expense of elders, low income children, and people with chronic diseases and conditions – and the health and mental health providers who serve them.

Bondi’s brief suggests that new Medicaid enrollments could cost Indiana about $2 billion over ten years, Arizona and Louisiana over $7 billion, and Texas close to $25 billion.  But these numbers all appear to include the currently eligible populations.

States understandably and justifiably want to contain their Medicaid costs.  But they cross the line when they do it by turning away literally millions of people who already belong on the program.

Bondi works hard to make the currently eligible group relevant to the Affordable Care Act by stretching a silken thread of the individual mandate around them. 

She writes that “the considerable cost for the [currently eligible group] reflects the fact that, unlike for the newly eligible, Congress has not increased federal funding for those newly enrolled (but previously eligible) by virtue of the ACA’s individual mandate.  As a result, the States will continue to pay for up to half of the costs generated by the latter group’s now mandatory enrollment.”

But she stretches the thread to the breaking point.  The individual mandate doesn’t apply to the group of people currently eligible for Medicaid.  Their Medicaid enrollment is “mandatory” by virtue of existing state and federal laws that pre-date ACA.

So what happens when the Supreme Court makes its ruling this spring?

If the Court finds the Medicaid expansion constitutional, then the states will have to implement it in 2014 – and also enroll those currently eligible without further delay. 

But even if it doesn’t, the currently eligible group isn’t going away – and we now know what they will cost.  Florida will still owe at least $574 million and Connecticut will still have to enroll up to 7,000 more eligible people.

That’s the best case scenario.  The worst is that such a ruling could induce the federal government to reduce its role in the Medicaid program to avoid the “coercion” argument in the future.  Then states might have to provide coverage and care to the poor and elderly all by themselves.  

If you have questions about this column, or wish to receive an email notifying you when new Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.