Health-policy experts say there is little basis for Sen. Nelson's concerns about Medicaid expansion

By Alec MacGillis
Washington Post Staff Writer
Saturday, December 19, 2009

Sen. Ben Nelson of Nebraska, the final Democratic holdout on health-care legislation, said Thursday he is concerned not only about the use of federal dollars for abortion coverage, but also about the impact that expanding Medicaid would have on the finances of his home state.

A Medicaid expansion would "create an underfunded federal mandate for the state of Nebraska," Nelson told a Nebraska radio station. He said states should be permitted to "opt out" of the expansion and find other means of covering low-income residents.

But Nelson's concerns have little basis, according to health-care policy experts. In fact, over the next decade, such an expansion could benefit Nebraska more than it would many other states.

States and the federal government share the cost of Medicaid, with the richest states paying half of their costs and poorer states paying a quarter or less. Nebraska pays 40 percent. Medicaid eligibility varies from state to state.

Under the legislation, much of the expansion would be accomplished by setting eligibility a uniform level -- 133 percent of the poverty level in the Senate bill, and 150 percent in the House bill.

To keep this from burdening states, the bills call for the federal government to pick up most of the cost of the newly eligible people -- 91 percent of the cost in the House bill, and slightly more in the Senate bill. The Senate bill would have the federal government cover the entire cost until 2016, when its share would decline by a different degree in each state. In Nebraska's case, it would drop to 92.8 percent in 2019. Many in Congress assume that the federal support would remain high even after that.

To be sure, any added cost for states is a challenge in difficult times, notes Chris Whatley, director of the Council of State Governments. "It's not going to break states, but it's going to be a significant cost factor," he said.

Others note, however, that it is hard to imagine how states could cover lower-income residents in ways that would be more affordable than having 90 percent of the cost picked up by Washington. And they note that other states have more to complain about than Nebraska.

Many states are already covering people to 133 or 150 percent of the poverty threshold, at great cost to their taxpayers. Under the legislation, states that have been stingy -- Nebraska covers parents to 58 percent of poverty, and childless adults not at all -- would be able to cover their low-income residents while picking up less than 10 percent of the cost.

Meanwhile, more-generous states -- mostly in the Northeast and Upper Midwest -- would still be paying as much as 50 percent of the cost to cover people of the same income level.

States such as Nebraska "have to come up with the extra money [for their slight share for the newly eligible] so you can view it as a burden, but on the other hand, a ton of federal dollars are coming in to pay for these people, so it's an economic gain in that sense," said John Holahan of the Urban Institute. "This is a really ridiculous thing for anybody to complain about. . . . The bottom line is, Nebraska comes out great on this."

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