Medicaid expansion effort in Florida could get sunnier in 2015

Winter has just started, but the heat could be rising soon on Florida to expand its Medicaid program under Obamacare.

Florida so far has resisted calls and significant financial incentives to expand Medicaid eligibility for nearly all poor adults—a move that could offer health coverage to 670,000 or more currently uninsured people in the state.

Florida and Texas, which itself has a million or so people who could potentially benefit from such a step, are the biggest of the 16 remaining states that have yet to either expand or be in active discussions to adopt expanded Medicaid benefits.

But the Sunshine State may be more inclined than it has been to expand Medicaid in 2015 because of several factors. Not the least of those is the risk of losing or seeing a reduction in more than $2 billion in federal health funding, and the guarantee of having about $5 billion in other federal money pumped into the state to pay for new benefits each year.

There is also a new signal from a major business organization that the time is right for Florida to join the growing trend of states expanding Medicaid.

If Florida flips, "it would be a big deal," said Joan Alker, executive director at the Center for Children and Families and research associate professor at Georgetown University's Health Policy Institute.

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"I think it's possible, and I would not have said that last year," said Bruce Rueben, president of the Florida Hospital Association, when asked about that happening next year. "I think there's clearly growing support for it, and the business community has figured out that it only makes sense for Florida."

The association is part of a coalition of more than 700 businesses and groups called "A Healthy Florida Works" pushing for such an expansion, albeit one that would add features such as premiums for some newly eligible beneficiaries.

The Affordable Care Act originally mandated that all states would have to expand their jointly run state-federal Medicaid programs to provide health coverage to adults earning below 138 percent of the federal poverty level, or about $16,100 annually.

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In return for this expansion, which would encompass millions more people beyond those already eligible for traditional Medicaid, the federal government said it would pay 100 percent of the costs of insuring the newly eligible for the first three years, and then would gradually reduce that amount to no less than 90 percent. But a 2012 Supreme Court decision left expansion up to individual states.

Spurred by opposition to Obamacare generally, and by a reluctance in a number of states to give health benefits to working age adults as well as a concerns about added costs to state budgets, more than half the states at first did not expand.

However, in the past year, there has been added momentum toward expansion. Pennsylvania's newly expanded program starts next week, and in the past two months governors in Wyoming, Tennessee and Alaska have moved to expand Medicaid.

Spurring that trend has been a desire to tap billions in federal funds to cover the costs of providing care to currently uninsured people. There also has been concern that millions of poor adults, many of them with jobs, don't earn enough to qualify for financial assistance to buy private Obamacare plans, which is available to those who make between 100 and 400 percent of the federal poverty level.

Georgetown's Alker said she expects that all states will eventually follow suit because of those factors. But she admitted to be "a little bit surprised" by how quickly the pace has picked up in 2014.

Florida might be another surprise next year, although it will require action from a legislature that has opposed such a move in the past.

The Florida Chamber of Commerce told CNBC it its taking "a fresh look" at Medicaid expansion and is moving to change its current position on the issue.

Chamber spokeswoman Edie Ousley said the group has always supported the idea of expanding Medicaid benefits as a way to ease insurance premiums on businesses and individuals. But that support has been tied to a list of prerequisites such as limits on medical malpractice suits and other conditions dear to the business community.

But in a pivot, the chamber could soon remove those conditions that the legislature already hasn't already addressed, Ousley said.

"Our members will be voting on their official position in the coming weeks," she said. "We're moving toward a clear support."

And in a letter last week to Health and Human Services Secretary Sylvia Burwell, chamber President and CEO Mark Wilson wrote, "We believe the time is right to reopen the conversation with elected leaders and work toward providing coverage to approximately 800,000 Floridians by incorporating flexible solutions."

The "flexible solutions" refer to several states, among them Pennsylvania, that have been allowed to add some features to their Medicaid expansion program that were not originally part of the federal government's plan. Such features include the design of benefits and cost structures, including imposing modest premiums and co-payments on some program enrollees and buying coverage for beneficiaries from insurers.

Those "solutions" have been especially popular among Republican governors who want to avoid seeming as if they are embracing Obamacare, while at the same time accessing the additional federal funding that comes from expanding Medicaid.

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The chamber's Wilson, in his letter to Burwell cited the "hidden tax of $1.4 billion" that Floridians pay in higher health insurance premiums "to cover those who see care without insurance," equating to $1,700 to $2,200 for every insured admission to the hospital. He also mentioned the estimated $50 billion in federal funding that would flow into the state through 2021 if it expanded Medicaid.

"The Florida Chamber encourage[s] you to send the proper signals to the Florida legislature that you are willing to entertain flexible solutions to expanding coverage," Wilson wrote.

Wilson's letter also contains an entire paragraph about the more than $2 billion that the federal government currently provides to hospitals as a "low-income pool" that compensates them for treating uninsured people. Wilson's letter noted that the low-income pool payment is due to expire on July 1.

Last year, Florida had asked that the federal government to more than double that funding to $4.5 billion. But the Centers for Medicare and Medicaid Services granted the state only $2.17 billion. CMS also told the state that the authority for that payment was only being extended into 2015, not the three years sought by the state.

CMS, in a letter to the state, said the one-year extension would give hospitals "stability" as Florida transitions its statewide Medicaid program to "managed care, while allowing the state to move toward a significantly reformed Medicaid payment system." Managed care organizations provide benefits to Medicaid enrollees.

While Florida will ask for another extension of the funding authority, Alker said she believes that CMS' refusal in 2014 to extend the funding authority for more than a year "was a signal by the federal government that they're not going to extend this [program] in its current form when there is Medicaid expansion on the table, and your state is rejecting it."

But the Florida Hospital Association's Reuben said, "I don't see this as the federal government trying to push Florida toward Medicaid expansion."

However, Reuben also said that the fact that the funding expires next summer, after the legislature meets to set the budget in March, introduces uncertainty into those budget calculations because legislators won't know whether that $2 billion will be replaced by CMS next year.

"Leaving that hole in the budget is a problem," Reuben said.

Even with that funding, there is another $3 billion in uncompensated care provided by hospitals that could be offset by expanding Medicaid, he said.

Josh Archambault, a senior fellow at the Foundation for Government Accountability, was highly skeptical that Florida would join the ranks of 27 states and the District of Columbia that have expanded Medicaid.

"Florida would not be in my top third of states that I would expect to expand next year," Archambault said. "In Florida, everything has to go through the legislature."

In the recent fall elections, Gov. Rick Scott won re-election and Republicans retained control of both houses in the legislature, which in the past has refused to adopt Medicaid expansion.

Scott, who originally opposed expansion, later nominally supported it, but hasn't lobbied the legislature to adopt it. When asked for his current position on Medicaid expansion, a Scott spokeswoman, Jeri Bustamante, said only, "We are proud that we already have historic Medicaid reforms in Florida. We received a waiver from the federal government to make our systems more accessible and affordable to low-income people who most need access to high-quality medical care."

Archambault, whose foundation is based in Florida, said legislators there have told him they want to protect beneficiaries already covered by Medicaid, and oppose expanding the program to able-bodied, working age adults.

He also said legislators are "closely watching" the actions of the Republicans in Congress to see if they move to reduce the federal government's funding for the newly eligible under Medicaid, which would reduce the incentive to adopt expansion.

Archambault said, "I don't think that all of a sudden a wild swing is going to happen" in Florida.