Health and Science

Pennsylvania to expand Medicaid under Obamacare program

Obamacare's continued push to expand Medicaid to nearly all poor adults nationwide got a big boost Thursday as Pennsylvania was formally approved for its version of the program, which will provide health benefits to as many as 600,000 more low-income people.

The Keystone State in 2015 will join 26 other states and the District of Columbia, which already have adopted Medicaid expansion, and which is currently totally funded with federal dollars.

Pennsylvania Gov. Tom Corbett speaks at a news conference in State College, Penn.
Craig Houtz | Reuters

Gov. Tom Corbett also becomes the ninth Republican governor to expand Medicaid benefits beyond traditional recipients such as poor children and pregnant women, and some of the parents of children covered under Obamacare—a step his national party vehemently opposes. The announcement comes as Corbett trails his Democratic challenger Tom Wolf, who would win by 25 percentage points if the election were held today, according to a recent poll.

Corbett cast the announcement as a "historic approval of new program" and a "reform" of the state's existing Medicaid, which will move from offering 14 benefit plans to a "low-risk" and "high-risk" benefit package, with the risk referring to the enrollee's health status.

However, while federal funds will be used to buy health coverage for newly eligible enrollees via the private insurance market in a managed care program, the plans must follow current Medicaid rules.

And while Pennsylvania's program will include the requirement that some enrollees above certain income minimums to pay premiums for their coverage, it will not, as Corbett had wanted, require that enrollees have job.

"From the beginning, I said we needed a plan that was created in Pennsylvania for Pennsylvaniaa plan that would allow us to reform a financially unsustainable Medicaid program and increase access to health care for eligible individuals through the private market," Corbett said after federal officials approved the design of the state's expansion program for a five-year span. His administration estimated that about 600,000 people will be newly eligible for health coverage under the plan.

Pennsylvania adults earning up to 133 percent of the federal poverty level—about $15,500 annually—can get health coverage beginning in January.

Until then, nearly all poor, childless adults are currently ineligible for Medicaid in the state. And poor adults with children or caretakers of kids can only get those benefits now if they earn 33 percent or less of federal poverty level—or a maximum of just $3,851 annually.

"With the agreements announced today, Pennsylvania will become the 28th state, including the District of Columbia, to adopt the Affordable Care Act's Medicaid expansion, helping approximately 500,000 Pennsylvanians get the health-care coverage they need," said Marilyn Tavenner, administrator of the Centers for Medicare and Medicaid Services.

"Like we are doing in Pennsylvania, HHS and CMS are committed to supporting state flexibility and working with states on innovative solutions that work within the confines of the law to expand Medicaid to low-income individuals. But, unfortunately, millions of Americans are still without Medicaid coverage because their state has yet to act."

Indiana, lead by Republican governor Mike Pence, also is moving to expand Medicaid through its own program, but as of now does not have approval by CMS.

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Pennsylvania's version of the expanded program will, beginning in 2016, require recipients who make over 100 percent of the federal poverty level—$11,670 annually for a single adult as of now—to pay premiums for the coverage they receive. But it also will cap those premiums at no more than 2 percent of household income—meaning that the a single person would, at most, have to pay $19.45 per month in premiums.

Officials on Thursday said they did not know how many people would be liable for the premiums.

People who don't pay their premium for more than 90 days will be disenrolled from coverage—"but they may subsequently reenroll without a waiting period," according to a fact sheet released by Tavenner's agency.

The state's version will also rely on a new managed care program along the lines of the current Medicaid option, a managed care program known as Health Choices. That program currently serves about 2.2 million state residents.

State officials said nine insurance companies have applied to be be providers for coverage in the new program dubbed Health Pennsylvania.

Corbett's original bid to include work requirements as a condition for enrolling in the expanded program was not approved by federal officials. However, the state intends to fund and run a separate program to connect people getting coverage to job training and placement, although that will not be a condition for benefits.

State officials said they believe that about 65 percent of the eligible enrollees currently work. They also noted that there will be incentives for people to reduce their premiums both through work and through modifications in their behavior.

As with other states that have agreed to extend Medicaid benefits to nearly all of their poor, the federal government will foot 100 percent of the costs of the newly eligible population through 2016. Their share will decline slightly over time, but is set, by law, to never fall below 90 percent of the costs of the newly eligible.

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In the traditional Medicaid program, the federal government and Pennsylvania split the costs of the benefits for recipients roughly 50-50.

Under the Affordable Care Act, expanded Medicaid benefits for nearly all poor adults was supposed to be available nationwide.

But the Supreme Court in 2012, in a decision upholding other aspects of the ACA, said that individual states would have to decide whether or not they wanted to expand Medicaid.

That decision lead to an odd situation, in some states that have not adopted expansion, of people earning one to four times the federal poverty level being eligible to receive federal subsidies to buy private insurance through health-care exchanges, while adults who earn less than the federal poverty level being ineligible for either those subsidies or Medicaid benefits.

That's because when the ACA was written, subsidies were only issued to people earning more than the federal poverty level due to the assumption that people poorer than that would be newly eligible for Medicaid.

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Those opposing Medicaid's expansion have largely been so-called "red" states lead by Republican governors. But some GOP governors have agreed to expand the program after hospitals and other medical providers in their states argued it would alleviate their costs of caring for the poor.

Josh Archambault, a senior fellow at the Foundation for Government Accountability, was critical of Pennsylvania's move.

"The Pennsylvania plan will also prove to be hugely expensive for state taxpayers," Archambault said. "Facing a large budget deficit in the state, and projections that the Pennsylvania Medicaid program will grow to $41 billion by 2022 without expansion, it is unclear how this is a wise fiscal consideration."

"The Pennsylvania plan will only add a vortex of budget uncertainty in future years," Archambault said.

By CNBC's Dan Mangan