Medicaid expansion poses a familiar face-off

Texas Gov. Rick Perry declared Monday that his state would not participate in the health-care law’s Medicaid expansion, becoming the sixth Republican governor to do so. If they follow through, those six states alone could shrink the insurance expansion by nearly 4 million people.

While the stakes are high for the White House, the territory is by no means uncharted. Washington has twice faced off with states over federal health-care expansions, when Medicaid was created in 1965 and with the Children’s Health Insurance Program in 1997. Both times, all 50 states ultimately signed on — but not without some wrangling.

Senior officials look to that history with optimism. “States are now in a position where the federal government is saying we will pay 100 percent of the cost,” White House Chief of Staff Jack Lew said on ABC’s “This Week.”

Some Medicaid experts, how­ever, see a different history lesson: Expanding coverage can be a complicated endeavor. “It may take a little bit of time,” said Charles Brecher, a professor at New York University.

Medicaid got a chilly reception when it began operating in January 1966. It was up to states to decide whether to participate, and only six initially signed up: Hawaii, Illinois, Minnesota, North Dakota, Oklahoma and Pennsylvania. Twenty-seven followed suit that year. Across the country, governors weighed the boon of federal dollars — Washington would foot half of Medicaid’s bill — against the drawback of putting state money into a new program.

Nascent Medicaid programs quickly faced threats: Republican legislators in the New York introduced a bill in 1967 calling for the state to “live within its means” and repeal its Medicaid program.

Doctors, meanwhile, lamented the bureaucracy and griped that payments often arrived late. “Doctors’ complaints tie up our telephone lines all day, every day,” Frederick W. Richmond, chairman of the Citizens Committee for Medicaid, told the New York Times in 1967. Some pharmacists voted to boycott the program.

Over time, however, the lure of federal dollars proved strong enough to win over the holdouts. Eleven joined the program in 1967. Eight more, mostly Southern states, came on board in 1970. Arizona held off until 1982.

“It was pretty ideological for a long time,” said Brecher, who studied the Arizona case. “This was the Arizona of Barry Goldwater, and they didn’t want to participate in a federal program.”

Arizona counties saw indigent health-care costs rising — from $50 million in 1974 to $125 million in 1980 — and petitioned the legislature to accept federal funds. Critics argued that Arizonans paid federal taxes to support the program, and ought to see some benefit from it.

“The counties were operating local hospitals and expenses were going up,” Brecher said. “They said, ‘Why don’t you get federal money for this?’ ”

Some states have considered leaving the program — a handful of Texas lawmakers floated the idea as recently as 2011 — but have never taken meaningful steps toward such action. The federal government now sends states $263 billion in Medicaid funding annually.

States faced a similar question in 1997, when Congress passed the Children’s Health Insurance Program (CHIP) to extend health coverage to low-income children. The federal government once again left states to decide whether to participate.

“It wasn’t clearly known how quickly states would act,” said Nathan Arnold of the Urban Institute, who studied adoption of CHIP.

But CHIP had many factors that worked in its favor. It was launched in the late 1990s, when the economy was booming and many states saw budget surpluses. Some also were eager to expand coverage on their own after President Bill Clinton’s push for more comprehensive insurance failed.

“This was federal financing for something we were already trying to do: Expand health insurance coverage,” said Sandra Shewry, who launched California’s CHIP plan.

There was, however, a catch: States would have to pay in about 35 percent of the program’s bill. That was a better match that Medicaid’s regular contribution of 50 percent, but still left states with some financial responsibility — and a commitment to participate in a government program.

That made CHIP a subject of heated debate in Texas, where the Democratic-controlled legislature clashed with then-Gov. George W. Bush over joining.

“States like Texas sat on the opportunity for a while,” said Jason Cooke, who served as the state’s first CHIP director. “The governor was not interested in calling a special session to get it authorized and, frankly, didn’t want the CHIP program authorized.”

Texas did enroll, with Bush signing legislation authorizing the program in 2000. By that year, all states had adopted CHIP.

But enrollment was lackluster.Clinton, reportedly “dismayed” with the slow uptake, used his 1998 State of the Union address to order agencies to step up efforts. Today, 84 percent of children eligible for CHIP are enrolled.

Some question whether the Medicaid expansion will receive equally widespread adoption. The economic climate, with states staring down recession-squeezed budgets, could prove hostile. The structure of the program could matter, too. While CHIP allowed states to impose waiting lists and limit enrollment to curb costs, Medicaid requires states to cover all eligible residents.

Optimists see it this way: They argue that the Medicaid expansion is even better for the states because the government will cover all costs through 2017. The match drops to 90 percent in 2020.

“I do think that virtually all states ultimately will decide to implement,” said Ron Pollack, head of Families USA, a health reform group. “They would be committing fiscal malpractice if they left all this money on the table.”

 
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